Divergent Paths for Kakao Financial... KakaoBank Records 'All-Time High Operating Profit', KakaoPay Turns 'Into the Red'

Kakao Bank Approaches Record High 1Q Net Profit
Interest Income Growth and Platform & Fee Business Expansion
Kakao Pay Continues Deficit... Operating Costs Rise Due to Labor Expenses

[Asia Economy Reporter Minwoo Lee] KakaoBank recorded its highest quarterly operating profit ever in the first quarter of this year. The increase in interest income, along with growth in platform and fee-based business sectors, contributed to improved profitability. On the other hand, KakaoPay turned to a loss compared to the first quarter of last year due to increased labor costs from salary raises and stock compensation expenses.

◆KakaoBank achieves highest quarterly operating profit ever= On the 3rd, KakaoBank announced its preliminary results for the first quarter of this year, reporting revenue of 338.4 billion KRW and operating profit of 88.4 billion KRW. These figures represent increases of 50.5% and 63.8%, respectively, compared to the same period last year. The operating profit is the highest ever recorded in a single quarter. Net profit for the period was 66.8 billion KRW, up 43.2% from the second quarter of last year. This is the second highest ever, following 69.3 billion KRW in the second quarter of last year. A KakaoBank official explained, "Until last year, there were carryforward losses which lowered the effective corporate tax rate due to deductions, but from this year, there are no carryforward losses. Considering that a normal corporate tax rate is applied from this year, the net profit is effectively the highest ever."

Deposit balances stood at 33.0414 trillion KRW, and loan balances at 25.9651 trillion KRW. These increased by 3.0153 trillion KRW and 103.7 billion KRW, respectively, compared to the end of last year. Although high-credit loans decreased, growth continued due to increases in mid- to low-credit loans and jeonse (key money deposit) loans. Loan balances for mid- to low-credit borrowers in the first quarter increased by 226.9 billion KRW from the end of last year, reaching 2.6912 trillion KRW.

By segment, revenues from platform and fee sectors both increased steadily. Platform revenue was 25.3 billion KRW, up 38.5% year-on-year. Fee revenue was 47.7 billion KRW, increasing 18.8% over the same period.

The number of customers is also steadily rising. As of the first quarter, the customer base was 18.61 million, an increase of 620,000 from the end of last year. Notably, 70% of new customers in the first quarter were aged 40 or older (40s 28%, 50s 27%, 60 and above 14%). This brought the proportion of customers aged 40 and above to 41% of the total. The monthly active users (MAU) of the mobile application stood at 15.03 million, representing about 80% of the total customers.

A KakaoBank official stated, "We plan to expand the regions eligible for mortgage loans in the first half of this year and launch loans for individual business owners and deposit products in the second half. We also intend to actively begin preparations for overseas market entry."

◆KakaoPay returns to loss due to labor cost burden= Meanwhile, KakaoPay posted a consolidated operating loss of 1.1 billion KRW in the first quarter of this year, marking four consecutive quarters of losses since the second quarter of last year. Net profit was 3.8 billion KRW, down 68.4% compared to the same period last year. This is attributed to a 29% increase in operating expenses year-on-year due to rising labor costs and stock compensation expenses.

During the same period, revenue increased by 15.1% to 123.3 billion KRW. Specifically, payment service revenue rose 42% year-on-year to 94.3 billion KRW, supported by securing over 1.51 million online and offline merchants and increased user activity. Financial service revenue declined due to a slowdown in wholesale business revenue from its subsidiary KakaoPay Securities.

Transaction volume continues to grow. In the first quarter of this year, it reached 27.2 trillion KRW, a 20% increase compared to the same period last year. Transaction volumes generating revenue, including service transactions, online and offline payments, billing, and overseas payments, increased by 30% and 42%, respectively, during the same period.