[Click eStock] Three Key Success Points of K-Bank IPO

[Asia Economy Reporter Junho Hwang] Korea Investment & Securities identified three key points for the successful IPO of K-Bank, which sent out bidding proposals for its initial public offering to major securities firms on the 7th, on the 10th.

First, K-Bank's business indicators are improving. K-Bank, which turned profitable in the second quarter of last year, is expected to record a net profit of over 20 billion KRW for the entire year. From the fourth quarter of 2018 to the second quarter of 2020, K-Bank's capital remained stagnant at around 500 billion KRW and equity capital at around 200 billion KRW, failing to exceed the 9 trillion KRW benchmark required for turning its loan business profitable, resulting in continued losses. However, in the third quarter of last year, it succeeded in raising approximately 400 billion KRW through a paid-in capital increase. Additionally, by exclusively providing Upbit’s real-name verification account service, it created a turning point for expanding its customer base, monthly active users (MAU), and deposits and loans. As a result, the number of customers grew from 1.35 million, deposits of 1.8 trillion KRW, and loans of 1.3 trillion KRW as of the end of June 2020 to 7.17 million customers, 11.3 trillion KRW in deposits, and 7.1 trillion KRW in loans as of the end of December last year.

Furthermore, the increase in customer traffic has formed a virtuous cycle leading to improved cash flow, which directly translates into profit growth through enhanced product and service capabilities, increased customer acquisition, and new product launches. Profitability relative to risk (RoRWA) has also improved through increased apartment mortgage loans (refinancing and living stabilization funds) and jeonse (key money deposit) loans. Expansion of credit loans for middle- and low-credit borrowers has been pursued simultaneously through the advancement of credit scoring models (CSS) using shareholder and partner data and strengthened product promotions.

Additionally, further improvements in profitability are possible. In December last year, the interest rate on fixed deposits (1 year) was raised from 1.5% to 2.0%, and the volatility of deposits related to Upbit customers stabilized compared to early last year. The loan-to-deposit ratio is expected to increase from 63% at the end of last year to between 70% and 80% this year.

Baek Doosan, a researcher at Korea Investment & Securities, predicted, "The corporate value will be re-emphasized by effectively overcoming two constraints ? the total household debt regulation and the target ratio of credit loans for middle- and low-credit borrowers ? through strengthening the lineup and promotions of mortgage loans (including refinancing and jeonse loans), mid-interest rate loans, and expanding securities and insurance-related partnership services."