K bank, Kakao Bank concerned over worsening financial health

Concerns are growing over the deteriorating financial health of the nation’s two internet-only banks — K bank and Kakao Bank.

According to the Financial Supervisory Service (FSS), the Switzerland-based Bank for International Settlements (BIS) capital adequacy ratio of two stood at 10.62 percent and 11.74 percent, respectively, at the end of June, down 1.86 percentage points and 1.66 percentage points from the previous month.

The FSS data suggested the average BIS ratio of the nation’s 19 commercial and state-run banks stood at 15.34 percent as of the end of June, down 0.07 percentage points from the previous quarter. The BIS ratio is key barometer of financial soundness measuring the proportion of a bank’s capital to its risk-weighted credit. It requires lenders to maintain a ratio of 8 percent or higher.

“Both banks have aggressively granted loans to customers since they were established. This hurt their financial soundness,” said an FSS official.

“I believe, however, this won’t be a big issue for Kakao Bank. Kakao’s BIS ratio will be improved once they settle their shareholder structures with the bank’s investors.”

Unlike Kakao Bank, K bank is still under mounting pressure in securing enough cash reserves for its loan businesses.

K bank had planned to raise a total of 500 billion won (413 million) by issuing new shares, with mobile carrier KT’s participation.

KT, K bank’s second-largest shareholder with 10 percent, had planned to support the bank by participating in its recapitalization, but hit a snag as the Financial Services Commission announced a halt of its review of KT’s plan to raise its stake due to an anti-trust investigation into the mobile carrier.

KT sought to raise its stake in the internet-only bank to 34 percent after a related law came into force in January. The mobile carrier’s plan was put on hold after the Fair Trade Commission started investigating K bank over a possible antitrust law violation.