K bank reports first-ever quarterly profit

By Lee Kyung-min

K bank is on track to improve its financial fundamentals ahead of its planned initial public offering (IPO) possibly set for 2023 at the earliest. The internet-only bank achieved its first quarterly profit in the April-June period since it was launched in 2017.

In a regulatory filing Tuesday, K bank said that its net profit during the second quarter of this year reached 3.9 billion won ($3.3 million).

Chief among its growth drivers was a sharp increase in the number of customers and a consequent rise in the amount of deposits, which helped the internet-only bank borrow at a lower cost. For the first six months of this year, cumulative net losses were reduced to 8.4 billion won, only a fifth of the 44.9 billion won in net losses it suffered during the same period of 2020.

The number of bank customers exceeded 6.19 million during the January-June period, up over 26 times year-on-year. As of July, the number stood at 6.28 million. During the first half of this year, the bank had a total of 11.29 trillion won in deposit accounts, up by 7.54 trillion won from six months earlier. Its outstanding loans stood at 5.09 trillion won, up by 2.1 trillion won.

Net interest income came to 70.9 billion won in the first half, up 3.8 times from 18.7 billion won the year before.

KakaoBank's 2.6 trillion-won IPO demonstrates growing optimism among investors that internet-only banks will be able to reshape the competitive landscape of the domestic digital banking sector, according to a Tuesday report by Fitch Ratings.

“Kakao and K bank have both expanded their profits and customer bases since their launches in 2017, reaching a combined market share of around 7.2 percent in unsecured personal lending and 3.6 percent in retail deposits, as of the first quarter of this year. Interest rate spreads for new unsecured personal lending over new funding rates have narrowed since their arrival,” Fitch Ratings said.

K bank's assets increased sharply to 700 billion won just around 10 months after it introduced mortgage loans. Money loaned to low- and mid-level credit clients exceeded its previously set targets.

“K bank has diversified its profit portfolio, which encompasses interest and non-interest income based on rapid external growth and improved fundamentals in the second half of the year,” the bank said. “We will continue to grow through digital innovation, as well as strengthen our synergy with key firms, and improve our credit rating model.”

K bank is aiming for an IPO on the local bourse by 2023. Its recent fundraising efforts drew interest from many major investment banks, such as Bain Capital.