KB in dilemma over Kakao Bank’s growth
As Kakao Bank’s scheduled initial public offering (IPO) gets closer, KB is expected to garner more than 1 trillion won ($882.71 million) in profits from its early investment into the internet-only bank.
Kakao Bank passed a preliminary review by the Korea Exchange (KRX) for the IPO, the listing of Kakao’s mobile banking affiliate on the benchmark KOSPI is slated for July or August.
The bank’s private shares are traded at around 95,000 won each, making the firm’s market cap on the over-the-counter market stand at nearly 39 trillion won.
KB made an early investment, acquiring a significant portion of Kakao Bank — even some of its employees were dispatched to the mobile bank to help it take firm root in the banking industry.
Now KB is Kakao Bank’s third-largest shareholder with 9.35 percent, following only Kakao, which holds 31.78 percent, and Korea Investment Value Asset Management at 27.1 percent.
Even if Kakao Bank’s current market cap of 38 trillion won on the OTC market is somewhat exaggerated, market analysts view that the bank’s corporate value could be as much as 20 trillion won. This means KB could reap at least 1 trillion won from its investment. Even when the corporate value was estimated to be 8.5 trillion won, KB’s profit was already estimated at over 732 billion won.
However, a dilemma lies ahead for KB. From an investment-wise perspective, it was a huge success, yet in turn it helped the exponential growth of the mobile-based bank, that has now become a game changer in the digital banking industry.
In Korea’s limited banking market, Kakao Bank is now a potential competitor, overshadowing KB’s further growth, not only in the digital fintech area, but also in more traditional banking sectors such as retail loans and mortgages.
While the aggregate of major banks’ household loans stands at around 270 trillion won, Kakao Bank’s still lags behind at 21.6 trillion won. Yet its growth rate is fast overtaking the market, and watchers expect the internet bank’s entire loans could exceed 50 trillion won in five years.