[Company Insight] K Bank Missed the Optimal Timing for IPO but Has Sufficient Growth Value as a First-Generation Internet Bank

Must Complete Listing by March Next Year
Likely to Proceed After Confirming Q3 Performance
Target Company Valuation Around 6 Trillion KRW
Major FIs Need Successful Stock Market Entry for Fund Recovery

[Asia Economy Reporter Park So-yeon] K-Bank, the first-generation internet-only bank, is challenging an initial public offering (IPO) amid a harsh stock market environment. K-Bank received preliminary review approval from the Korea Exchange just three months after filing for the preliminary review. K-Bank must complete its listing by March next year, within six months of the preliminary review approval. Market analysts suggest that K-Bank has missed the optimal timing for its listing. Due to strong monetary tightening by major central banks, financial market conditions are deteriorating, making it difficult to be optimistic about the future. However, as an early entrant in the internet-only banking sector that combines banking and platform businesses, K-Bank still possesses resilience and growth value, attracting continued attention from market participants.

◆ K-Bank, which sailed in the same boat as KakaoBank, missed the optimal IPO timing? Market insiders say that if K-Bank had proceeded with its listing immediately after KakaoBank’s IPO last year, it could have enjoyed significant halo effects. This year, the IPO market conditions have been unfavorable. Major listings have consecutively failed to attract strong interest, leading to a pessimistic outlook for K-Bank’s listing as well. For example, Socar, considered a major IPO candidate this year, suffered a disastrous demand forecast and subscription, and its current stock price has fallen more than 10,000 KRW below the public offering price of 28,000 KRW. WCP, a secondary battery separator company that had high market expectations, also underperformed in the demand forecast, setting its public offering price below the band. It recorded a weak subscription rate of 7.25 to 1 in the general subscription. KakaoBank, a comparable company in the same industry as K-Bank, has also fallen below its public offering price of 39,000 KRW. Despite expectations as a growth stock, the overall market sentiment is depressed, making it difficult for K-Bank alone to be highly valued. The industry expects K-Bank to pursue its public offering after confirming its third-quarter results. Once the audit of the third-quarter financial statements is completed, which will be around mid-November, and the securities registration statement is submitted immediately after, listing could be possible as early as the end of this year. Some argue that it might have been better if the review approval had been delayed. If the review results had come out later, K-Bank could have used the year-end financial statements for the public offering. Due to the validity period of the preliminary review, it is tight to proceed with the public offering using the year-end financial statements. The audit of the year-end financial statements would be completed by at least mid-February next year, but the review validity expires on March 20 next year, creating scheduling pressure.

◆ How much corporate value will be recognized... Gap between market and investors K-Bank must successfully enter the stock market to enable major financial investors (FIs) to recover their funds. The target corporate value stated in K-Bank’s IPO preliminary review application is known to be around 6 trillion KRW. Currently, BC Card, a KT affiliate, is the largest shareholder with a 34% stake, and Woori Bank is the second-largest shareholder with 12.6%. Private equity firms Bain Capital and MBK Partners participated in last year’s capital increase, becoming joint third-largest shareholders. The issuance price at that time was set at 6,500 KRW, a 30% premium over the par value. The fifth-largest shareholder, Kanye Limited Liability Company, and the sixth-largest shareholder, JS Shinhan Partners Limited Liability Company (5.16%), are also major FIs. Investors who participated in the capital increase at that time, including the Singapore Investment Corporation and Com2uS, currently hold more than 30% of the total issued shares. BC Card, the largest shareholder, has a contract with the FIs to exercise a call option to purchase FI-held shares if the IPO is not completed by 2023. As of the end of the second quarter this year, K-Bank’s total capital was 1.73 trillion KRW, reflecting a corporate value in the low 4 trillion KRW range. The valuation desired by the FIs is much higher than this. When K-Bank selected its underwriter earlier this year, a value exceeding 15 trillion KRW was mentioned. The current value desired by investors is known to be around 7 to 8 trillion KRW. Of course, if market conditions improve and K-Bank leverages its advantages as a platform company, its growth value is sufficient. Being a KT Group affiliate can also serve as a safety net for investors. Meanwhile, K-Bank is aggressively expanding its operations ahead of the IPO. By the third quarter of this year, the number of users surpassed 8 million. Both loan and deposit balances have increased. Deposit balances, which were 12.18 trillion KRW at the end of June, rose to 13.49 trillion KRW by the end of September, an increase of 1.31 trillion KRW. During the same period, loan balances increased from 8.73 trillion KRW to 9.78 trillion KRW, a rise of 1.05 trillion KRW. Both loans and deposits increased by over 1 trillion KRW during the third quarter.