[INTERVIEW] K bank to go into 'expansion mode'

K bank CEO Shim Sung-hoon talks about the future with KT in an interview at his office in Seoul, Nov. 14. Korea Times photo by Shim Hyun-chul

Mobile lender seeks to boost synergy with KT, shareholders

By Park Hyong-ki

K bank may have been operated conservatively since it was launched in April 2017.

"But that's about to change on January 17, 2019," said Shim Sung-hoon, the chief executive of the country's first internet bank, in an interview at his office in Seoul, Nov. 14.

That is when a revised law governing internet banks goes into effect, allowing K bank to issue "a lot of new shares" for KT, the country's largest telecom company, to invest in.

KT can acquire K bank shares as much as it can exercise voting rights of up to 34 percent after the telecom giant gains regulatory approval as the bank's major shareholder.

Previously, the country allowed nonfinancial companies only to own up to a 10 percent stake in a bank with a 4 percent voting right.

Shim said KT has always expressed its commitment to be K bank's largest shareholder and lead the other 19 strategic and financial investors to boost the mobile bank. Woori Bank is currently the lead shareholder with nearly 14 percent, followed by KT at 10 percent.

KT Chief Financial Officer Yoon Kyung-keun said in an earnings call Nov. 2 that KT will "increase its interest in K bank" and is prepared to do whatever it takes to fit the bill as the bank's largest shareholder.

"When that time comes and K bank receives a massive capital injection from KT, we are going to expand with KT and our other shareholders," Shim said.

K bank had no choice but to "play safe" before because it was required to maintain a double-digital BIS capital adequacy ratio, which currently stands at around 12 percent, he noted.

It couldn't risk expanding its mobile lending service without more capital. This is why K bank had to suspend the service from time to time as its BIS ratio would have fallen, prompting the regulator to flag a warning.

"The revised law is about to breathe life into the bank," Shim said, noting KT will help it to increase its equity capital to over 1 trillion won ($900 million).

He said KT is "not chaebol," justifying the telecom firm as its rightful owner that runs a transparent management system.

He also downplayed longstanding concerns on whether KT will misuse K bank as its own piggy bank.

"There are laws banning banks from extending lines of credit to their biggest shareholders. With a high credit rating and financial capacity, KT can get by on its own," he said.

Shim pointed to KT's big pile of cash and assets. The telecom company has 13.7 trillion won in current assets as of Sept. 30, according to its financial statement.

If KT needs to raise capital for business, it will be better off doing it "inexpensively" overseas with low interest rates, he added, noting the telecom giant's issues of yen-denominated Samurai bonds early November.

Maximizing synergy

When all is said and done, K bank will "maximize synergy" not only with KT, but also with other key strategic shareholders, including NH Investment & Securities, KG Inicis, Danal and GS Retail.

"We are looking to move into securities and asset management by connecting our mobile banking platform with NH Investment's application," Shim said.

"This will enable our customers to invest in stocks and manage their assets with a K bank account."

NH Investment has helped K bank "tap" potential investors over the years, he noted.

Shim added the brokerage can also increase its stake in K bank when the revised law becomes effective in January.

NH Investment, which has a 10 percent stake in the internet bank, has been classified as a nonfinancial company because NH's largest shareholder is NongHyup Financial Group, which is wholly owned by the National Agricultural Cooperative Federation.

K bank's other key shareholders include Hanwha Life Insurance with whom K bank is offering digital insurance products.

The bank has set up biometric scanners on automated teller machines inside GS Retail's GS25 convenience stores. Its customers can deposit and withdraw money by placing their palms on the ATM scanners.

With Inicis and Danal, which have a lot of online retailers using their digital payment systems, Shim said they can combine forces linking their systems with the bank.

Also, the K bank CEO said it could seek overseas opportunities with BC Card, whose largest shareholder is KT. The financial services company has been seeking to expand in Southeast Asia, including Indonesia and Vietnam.

KT has many strategic partners abroad, including KDDI, Japan's No.2 telecom company that also has an internet bank established with Bank of Tokyo-Mitsubishi UFJ.

Shim said K bank and KDDI's internet bank are exchanging ideas for a possible future partnership.

"We can maximize synergy with KT by integrating the two's data on bank and telecom customers, and create and provide tailored services," Shim said.

"KT can lead the way globally, while we can provide expertise in financial technology."

K bank could launch an initial public offering (IPO) after 2021-2023 when it achieves positive earnings. Then, its investors could exit via the IPO, he added.

Before joining K bank as its chief executive in September 2016, Shim used to hold various positions at KT. He was a strategist drawing synergy plans for KT and its subsidiaries, including BC Card.