[IPO Spotlight] The CORE of Kakao Financial... Estimated Value of Kakao Bank

[Asia Economy Reporter Park So-yeon] KakaoBank, which has stirred up the banking sector by gathering 12 million members without a single branch, is threatening existing major banks as it pushes for an initial public offering (IPO) this year. The market values KakaoBank at a minimum of 10 trillion KRW, with some estimates reaching as high as 40 trillion KRW. This valuation surpasses that of SK Biopharm (approximately 3.8 trillion KRW based on the IPO price) and Kakao Games (about 1.7 trillion KRW), both of which went public last year, as well as Big Hit Entertainment (4.6 trillion KRW).

According to the unlisted stock trading platform, Securities Plus Unlisted, as of the 12th, KakaoBank's over-the-counter trading price stands at 74,500 KRW per share. Considering the total number of issued shares, the estimated market capitalization reaches 30 trillion KRW.

When selecting IPO underwriters last year, major securities firms participating in the competition estimated an appropriate market capitalization of around 20 trillion KRW, which is 50% lower than the current figure. The estimated corporate value already surpasses that of major commercial banks. KB Financial Group, the top bank stock, has a market capitalization of 18.9193 trillion KRW, followed by Shinhan Financial Group at 17.022 trillion KRW.

KakaoBank started as an internet-only bank but aspires to become a comprehensive financial platform. It is expected to transform the domestic financial landscape by supplying financial products to platform companies. KakaoBank's strategy is to solidify its position as the leading comprehensive financial platform in the domestic financial market through its IPO in the second half of this year. Plans include driving platform growth through partnership-linked loan services and the launch of credit card products.

The partnership-linked loan service has shown steady growth. By adding NH Investment & Securities and KB Securities, the cumulative number of accounts opened reached 2.61 million as of the end of the third quarter last year. The number of credit card applications and issuances through partnerships with four credit card companies reached 400,000.

Synergies with KakaoPay are also being strengthened. KakaoPay provides tech-based mobile financial services such as payments, insurance, and remittances. Although its share of the overall financial market is still small, KakaoBank and KakaoPay are expected to cooperate and expand their market shares, aiming to increase their overall presence.

Last year, KakaoBank recorded an annual net profit of 113.6 billion KRW, surpassing the 100 billion KRW mark just three and a half years after its launch. This is an 8.3-fold increase from 13.7 billion KRW in 2019. Total assets reached 26.65 trillion KRW, an increase of approximately 3.926 trillion KRW compared to the previous year.

The growth in credit loans has driven KakaoBank's performance. Its net interest margin (NIM) reached 1.68%, outperforming general commercial banks (which ranged from 1.33% to 1.67% as of the third quarter last year). As of the end of last year, KakaoBank's loan product balance exceeded 20 trillion KRW (20.3133 trillion KRW), increasing by more than 5 trillion KRW from 14.9 trillion KRW at the end of the previous year. The delinquency rate was 0.22%. KakaoBank's capital stood at 2.797 trillion KRW as of the end of last year, with a BIS ratio of 20.03%.

KakaoBank plans to continue its growth by increasing mid-interest and mid-to-low credit loans as well as corporate loans this year. This is also a strategic move to expand business operations ahead of its IPO in the second half of the year. The minimum interest rate for high-credit borrower credit loans will be raised by 0.34 percentage points (p). Conversely, the interest rate for the private mid-interest loan product 'Mid-Credit Loan,' based on KakaoBank's proprietary credit scoring system (CSS), will be lowered by up to 0.6 p.

A KakaoBank official stated, "We plan to introduce a mid-to-low credit borrower loan product, a small-limit exclusive product with no collateral required, early in the second half of the year." Corporate loan products are also planned for release in the second half. In collaboration with the Ministry of SMEs and Startups and the Korea Credit Guarantee Fund, a loan product for individual business owners is being developed with the goal of launching it in the second half of the year.