April 20, 2024

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[THE INVESTOR] Two online-only banks -- K-bank and Kakao Bank -- were launched last year in Korea’s financial market that is dominated by traditional lenders. But their first-quarter earnings have highlighted a widening gap between them.

K-bank, the country’s first internet-only bank launched in April last year, logged a net loss of 18.8 billion won (US$17.40 million) during the first three months this year. It was an improvement from the previous quarter’s 23.7 billion won, but not as good as its rival Kakao Bank, which dramatically narrowed its net loss to 5.3 billion won from 37.6 billion won.

The gap is more meaningful considering that latecomer Kakao Bank’s annual net loss last year stood at 104.5 billion won, much higher than the 83.7 billion won posted by K-bank. 

During the first quarter, Kakao Bank also extended 1.24 trillion won more of loans -- its main product -- while K-bank’s loans rose by just 180 billion won. 

Analysts believe Kakao Bank, with 5.5 million users, has the potential to hits its break-even point faster than K-bank, which has 680,000 users.

“Considering the fast pace of loan growth, we estimate that Kakao Bank can reach the break-even point this year when its loans extend to 11 trillion won which is expected to be reached this year,” Kim Jae-woo, an analyst with Samsung Securities, said in a report last month. 

As of March, Kakao Bank had extended 5.86 trillion won of loans, while K-bank disbursed 1.3 trillion won.

Their total capital also shows a big gap, with Kakao Bank having 1.3 trillion won, while K-bank has 350 billion won despite undergoing a capital increase last year, just months after its launch.

Analysts say the hurdles in raising capital is one reason why the country’s first internet-only bank is struggling. 

K bank CEO Shim Sung-hoon

K-bank CEO Shim Sung-hoon had pledged another increase worth 150 billion won in April, but the plans were delayed due to the complex shareholding structure, under which around 20 stakeholders including Woori Bank and KT hold different amounts of stake. 

Kakao Bank, on the other hand, has Korea Investment Holdings as its controlling shareholder with a 58 percent stake. Kakao Corp. and KB Kookmin Bank each hold 10 percent.

“There may be too many shareholders, but they also may be changing their mind on just how profitable K-bank can be,” said an industry source on the condition of anonymity.

Kakao’s hugely popular platform and brand is another advantage for Kakao Bank, analysts say. KakaoTalk, Korea’s most popular social messenger, has more than 43 million users in the country with a population of 50 million.

By Park Ga-young (gypark@heraldcorp.com)