Kakao Bank seeks to raise capital next month

Kakao Bank head office in Seongnam, Gyeonggi Province / Yonhap

By Jhoo Dong-chan

Kakao Bank, which has long suffered a decline in cash reserves, is seeking to increase capital next month, sources said Monday.

The internet-only bank had originally planned to increase capital by issuing new stocks after buying back a 50 percent stake owned by Korea Investment Holdings.

According to media reports and sources, however, Kakao Bank decided recently to raise capital by issuing new stocks first since the bank's cash reserve has been deteriorating more rapidly than anticipated.

“We are still reviewing our plan about recapitalization,” a Kakao Bank official said. “Rumor has it we'd like to raise up to 500 billion won next month, but we have yet to decide on the details.”

According to industry sources, Kakao Bank will hold a board meeting this month to conclude its plan to increase up to 500 billion won ($422.4 million) by issuing new stocks next month.

In July, the Financial Services Commission (FSC) approved the bank's plan to reduce the 50 percent stake owned by Korea Investment Holdings to 34 percent minus one share while raising its parent firm Kakao's 10 percent stake to 34 percent.

The plan was, however, in a stalemate for more than three months. In the meantime, its Bank for International Settlement (BIS) capital adequacy ratio dipped below the 12 percent mark. The BIS capital adequacy ratio is the minimum capital adequacy ratio that banks must attain under the Basel III Standards.

Kakao Bank's BIS ratio stood at 11.74 percent, the lowest figure among Korea's commercial banks except K bank, the country's other internet-only bank.