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Expectations are growing for K bank, which has been grappling with losses over the past year, to turn around in the near future as the internet-only bank may receive much-needed capital from KT, Korea's second-largest mobile carrier, according to company officials Friday.
The upbeat mood follows the passage of a revised law under which those suspected or convicted of violating the Fair Trade Act will be able to qualify as the largest shareholders of internet-only banks.
This clears way for the suspected antitrust law violator KT to become the largest shareholder of Korea's first internet-only bank, meaning a capital injection of around 50 billion won ($42 million) could soon be in order.
Upon passage of the revision at the National Assembly plenary session following approval from legislation and judiciary committee, KT plans to file an eligibility request with the Financial Services Commission (FSC), seeking to become the largest shareholder of K bank with a 34 percent stake.
"Our view is positive," a K bank official said.
"We halted the lending business in April because we did not have enough capital. But once our business is back on track, we will develop new products to improve customer service. We believe our efforts will translate gradually into profit in the long term."
The cautious optimism comes amid snowballing losses of the nation's first internet-only bank.
K bank reported a net loss of 63.5 billion won in the first nine months of 2019, a steeper fall driven by a net profit of 22.6 billion won in the July-September period.
The poor performance was the continuation of the worse-than-expected earnings from the previous two quarters.
Its first-quarter net loss was 13.9 billion won, followed by a further 27 billion won net loss in the April-June period.
Meanwhile, its major rival Kakao Bank raised 50 billion won through rights offering, Thursday, after Kakao became its largest shareholder with a 34 percent stake.
This came after Kakao, the operator of the nation's most widely used messenger app KakaoTalk, bought the bank's 16 percent stake from Korea Investment Holdings, adding up to an 18 percent stake.
The capital of the nation's second internet-only bank stands at 1.8 trillion won.
Kiwoom Securities senior analyst Seo Young-soo said competition will become fiercer between the two banks once K bank reaches what the market considers an "economy of scale," a certain point beyond which its online-based business model becomes strong and established enough to compete with traditional financial service providers.
"Kakao has passed that point," Seo said. "If K bank touches it, the industry will see a major shakeup. Both Kakao Bank and K bank would have to continue efforts for corporate competitiveness via closer cooperation with fintechs or mergers and acquisition (M&As) to innovate themselves."
Kakao Bank reported a net profit of 15.3 billion won for the first nine months of 2019.