Despite Record-Breaking Performance... KakaoBank Hampered by 'Major Shareholder Risk'

Cumulative Operating Profit Exceeds Last Year's Total by Q3
Stock Price Stagnant at 20,000 Won Level for a Year...Major Shareholder Kakao's Business Risks
Target Prices Slashed One After Another...Setbacks in New Businesses Like Credit Cards and MyData

KakaoBank recorded its highest-ever performance this year, but its stock price remains lackluster. This is due to increased uncertainty in the governance structure caused by the judicial risks faced by its major shareholder, Kakao. Despite strong earnings, the securities industry has been lowering target prices for KakaoBank one after another.

On the 8th, KakaoBank announced that it posted a net profit of 95.4 billion KRW in the third quarter, a 21.2% increase compared to the same period last year. On a cumulative basis, the net profit reached 279.25 billion KRW, already surpassing last year's annual net profit of 263.1 billion KRW by a wide margin. It also exceeded market consensus by about 18%, marking the best performance in its history.

However, KakaoBank's stock price has remained stuck in the 20,000 KRW range for a year. At the end of last month, it even dropped to 18,160 KRW. Compared to its initial public offering in August 2021 (IPO price 39,000 KRW), when the stock price soared to around 94,000 KRW, it has lost four-fifths of its value in just 2 years and 2 months. At least this month, the stock price has risen more than 30%, recovering to the 24,000 KRW level.

However, the outlook is not bright. The securities industry has been lowering target prices for KakaoBank one after another. The biggest reason is that the largest shareholder, Kakao, which holds a 27% stake in KakaoBank, has recently been embroiled in judicial risks, increasing uncertainty in the governance structure. Kakao is accused of market manipulation during the acquisition process of SM Entertainment. If Kakao is found guilty and receives a penalty exceeding a fine, it may be forced to dispose of part of its shares (exceeding 10%). Financial authorities conduct semiannual suitability reviews of major shareholders, and major shareholders of financial companies must not have received criminal penalties such as fines or higher for violations of financial laws or the Fair Trade Act in the past five years.

In this case, there is also a scenario where another major shareholder, Korea Investment & Securities (holding 27.12%), becomes the largest shareholder. However, this is also uncertain. Junseop Jeong, a researcher at NH Investment & Securities, explained, "There is a way for Korea Investment & Securities to become the largest shareholder depending on the situation, but in this case, Korea Financial Group would be subject to strengthened regulations as a banking financial holding company, so it is not a comfortable choice."

Considering that even if the punishment is confirmed, it will take at least several years due to administrative lawsuits, the share disposal issue is not a risk that will occur in the near future. The problem is that governance issues could become obstacles to various new business initiatives in the meantime. Kyungwan Eun, a researcher at Shinhan Investment Corp., pointed out, "Putting aside the extreme concerns raised by some, it is undeniable that new businesses such as credit cards and MyData are being delayed."

The government's pressure for 'win-win finance' and regulatory issues related to household loans also increase uncertainty. Jungwook Choi, a researcher at Hana Securities, explained, "The recent issue of curbing household debt inevitably affects individual banks," adding, "Eventually, there is a high probability that a total volume regulation card will be introduced, which means that the growth rate of individual banks could be constrained."

This content was produced with the assistance of AI translation services.