Smooth Sailing for Internet Banks... K-Bank's First Profit, KakaoBank's Record Net Income

Kabang, Last Year's Net Profit 204.1 Billion KRW... 79.6% Increase YoY
Kebang Records First Surplus... Net Interest Income Soars 327%
Loan Expansion and Upbit Dependency Remain Challenges Respectively

[Asia Economy Reporter Minwoo Lee] Internet-only banks are sailing smoothly after posting strong performances last year. K-Bank recorded a profit for the first time, while KakaoBank also set an all-time high net profit record.

◆ KakaoBank Achieves Record High Net Profit = According to the financial industry on the 10th, KakaoBank announced yesterday that it posted provisional results of KRW 1.0649 trillion in revenue and KRW 256.9 billion in operating profit last year. These figures represent increases of 32.4% and 109.7%, respectively, compared to the previous year. Annual net profit also rose 79.6% to KRW 204.1 billion during the same period. This level is higher than some regional banks. Gwangju Bank under JB Financial Group posted a net profit of KRW 160.2 billion last year, and Jeonbuk Bank recorded KRW 124.1 billion during the same period.

KakaoBank explained that the expansion of interest income due to loan growth and the growth of platform and fee businesses were key to strengthening profitability. Last year, platform revenue was KRW 93.2 billion, and fee revenue was KRW 168.6 billion, increasing by 86.8% and 13%, respectively, compared to the previous year. The proportion of non-interest income in total revenue remained above 25%.

Deposit balances increased by KRW 6.4869 trillion from the previous year to KRW 30.0261 trillion. Among these, low-cost deposits accounted for 58.3%. During the same period, loan balances increased by KRW 5.5481 trillion to KRW 25.8614 trillion.

Jeonse and monthly rent deposit loans and loans to low- and medium-credit customers appear to have driven loan growth. The balance of jeonse and monthly rent deposit loans increased by KRW 4.6587 trillion due to an increase in youth jeonse and monthly rent loans. The loan balance for low- and medium-credit customers handled last year was KRW 2.4643 trillion.

◆ K-Bank Turns Profitable for the First Time = K-Bank also succeeded in turning a profit for the first time in history. On the 3rd, K-Bank announced that it posted a provisional net profit of KRW 22.4 billion last year. This is a significant improvement compared to the KRW 105.4 billion loss recorded the previous year.

Annual net interest income surged about 327% to KRW 198 billion compared to the previous year. It grew sharply, increasing by an average of 46% per quarter last year. The launch of the 100% non-face-to-face apartment mortgage loan, which surpassed KRW 1 trillion in cumulative handling amount in just over a year, was a key factor. The jeonse and youth jeonse loans launched in September last year also exceeded KRW 200 billion within four months. The supply of credit loans to low- and medium-credit customers increased about 2.3 times compared to the previous year. Non-interest income also recorded KRW 19.6 billion due to the activation of partnerships and other factors. The previous year had a loss of KRW 10.2 billion.

◆ Diversifying Loan Structure and Reducing Dependence on Upbit Remain Challenges = However, both companies face challenges. KakaoBank sees diversifying its loan structure this year as a top priority. Yoon Ho-young, CEO of KakaoBank, emphasized during a conference call yesterday, "Expanding the portfolio to include jeonse deposit loans, newly launched mortgage loans, and corporate loans?portfolios held by traditional banks?is important for solidifying the foundation of loan growth going forward."

Concerns have been raised that K-Bank needs to reduce its dependence on deposits (savings and time deposits) from the virtual asset exchange ‘Upbit’. Last year, K-Bank’s customer base grew by about 5 million to 7.17 million in one year. The partnership with Upbit, the industry leader amid the strong virtual asset investment fever, was a key factor. However, since Upbit investors opened K-Bank accounts primarily for using Upbit, there are criticisms that the linkage to inflows into K-Bank products is weak. If Upbit expands partnerships with other banks, this growth trend could slow. Dunamu, the operator of Upbit, recently participated in the sale of remaining shares of Woori Financial Group and secured a 1% stake. Collaboration possibilities with other banks such as Woori Bank cannot be ignored.