Is K bank on track for normalization?

By Kim Bo-eun

K bank CEO Lee Mun-hwan

Attention is growing attention on whether the country's first internet-only bank will be able to normalize operations, as it is set to boost its capital base by around 400 billion won next month.

K bank said its board on Friday approved the issuing of new stocks worth 157.4 billion won. The stocks will be allocated to shareholders according to the percentage of shares they own. Payments for the stocks will be made on July 28.

The bank, however, decided to halve the capital increase plan made in April to 239.2 billion won, which will be allocated to its top three shareholders BC Card, Woori Bank and NH Investment & Securities following the board meeting in July.

This will bring K bank to around 400 billion won in additional capital. Its total amount of capital will come to 900 billion won next month.

With the boost in capital, the internet bank is seeking to normalize operations. K bank suspended issuing loans in April last year, after undergoing difficulties in securing capital.

The telecommunications giant KT that set up the internet bank in 2017 had sought to inject fresh capital into the lender last year by becoming its largest shareholder. However, the plan was barred because KT was investigated over allegations of violating the fair trade act last year. Regulations state an entity seeking to become the largest shareholder of another entity should be free of any record of violating fair trade regulations.

Against this backdrop, BC Card, a subsidiary of KT which owned a 10 percent stake in K bank, decided to buy the KT shares and raise its stake in the lender to 34 percent by purchasing new shares issued by the bank.

With the new capital, the internet bank is planning to launch a new credit loan and mortgage loan. K bank said earlier this month it will launch a new checking account in July. This is the first new product to be launched since operations were virtually suspended last year.

The new capital, however, is less than K bank initially planned to raise. The lender had sought to raise 600 billion won by this month. But shareholders have been slow to act, prompting the bank to reduce the planned scale of increase in capital and defer execution to July. Shareholders are seen to be questioning the lender's competitiveness.

K bank posted 79.7 billion won in deficit in 2018 and 100.8 billion won in deficit last year, widening the gap with the other internet lender Kakao Bank. Kakao Bank recorded 13.7 trillion won in net profit in 2019, after posting deficits in the first two years since its launch.

K bank's customers have grown over the years to 1.2 million customers as of last year. However, this falls largely short of the scale of Kakao Bank's customers at 12 million. Kakao Bank's assets came down to 22.7 trillion won last year.

K bank will likely face heightened competition as financial services platform Toss prepares to launch Korea's third internet bank. Views are that simply securing capital will not be enough to compete with existing and new players.