KakaoBank's Growth Slows, Needs Tools Beyond Lending [Click e-Stock]

No Change in Net Profit Scale for Nine Consecutive Quarters

Low Likelihood of Easing Loan Regulations

"Asset Management Yield Must Improve"

The growth of KakaoBank, the internet-only bank, has slowed down. Analysts suggest that in order to continue steadily increasing its profits, the bank needs tools beyond lending.

On May 7, Hanwha Securities maintained its target price for KakaoBank at KRW 26,000 and its investment rating at ‘neutral,’ citing this background. The previous day’s closing price was KRW 25,000, indicating that there is little room for further gains.

In the first quarter of this year, KakaoBank posted a net profit of KRW 187.3 billion, up 36.3% from the same period last year. This figure is in line with the market consensus of KRW 183.3 billion.

Both deposit and loan balances increased by around 2% from the previous quarter. In terms of loans, growth was mainly driven by lending to self-employed individuals and mortgage loans, as was the case in the previous quarter. For deposits, it is estimated that most of the increase came from group savings accounts.

The net interest margin (NIM) rose by 6 basis points (bp; 1bp=0.01%), marking two consecutive quarters of growth. Both interest income yield and funding cost rate turned upward compared to the previous quarter, with the spread estimated to have widened by 3bp.

The credit cost ratio (CCR) was 0.55%, down 5bp from the previous quarter. The delinquency rate for households remained unchanged compared to the previous quarter, while it increased by 10bp among self-employed borrowers.

The issue is that growth momentum has slowed. KakaoBank’s pre-provision operating profit has stagnated in the range of KRW 200 billion to 250 billion for nine consecutive quarters since the first quarter of 2024. Household loans, which had been driving profit growth, managed to grow only 1.6% per quarter on average due to government regulations. This is significantly lower than the 6.5% average in the previous nine quarters. The yield on asset management also remained in the 200bp range, indicating that overall profitability has stagnated.

Doha Kim, a researcher at Hanwha Investment & Securities, commented, “For profitability to recover, at least one of the following is necessary: easing of household debt regulations, improvement in asset management yields, or successful overseas expansion. However, the likelihood of regulatory easing is low and overseas expansion should be approached with a mid- to long-term perspective, so ultimately a recovery in the yields of bond-type managed assets will be essential.”

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