[2023 National Audit] Three Internet Banks' 'Medium and Low Credit Borrowers' Personal Loans' Expected to Reach '10 Trillion Won' Next Year

Kakao, Toss, K, Total 9.0694 Trillion Won by End of July
Need to Increase Credit Loans for Medium and Low Credit Borrowers
But Rising Delinquency Rates Hinder Loan Expansion

The scale of credit loans for middle- and low-credit borrowers by the three internet banks (KakaoBank, K Bank, and Toss Bank) is expected to reach 10 trillion won next year. According to data from the National Assembly's Political Affairs Committee audit on the 11th, as of the end of July, the total outstanding balance of credit loans for middle- and low-credit borrowers at internet banks was 9.0694 trillion won. In order, KakaoBank had 4.0174 trillion won, Toss Bank 3.0865 trillion won, and K Bank 1.9655 trillion won. Middle- and low-credit borrowers refer to borrowers in the lower 50% of credit scores.

An internet bank official predicted, "Considering the annual increase in scale, the outstanding balance of loans for middle- and low-credit borrowers is expected to exceed 10 trillion won combined among the three banks next year." However, the pace of increase in loans to middle- and low-credit borrowers has noticeably slowed this year compared to last year. The performance of loans to middle- and low-credit borrowers has been weaker this year than last year.

Compared to January this year, K Bank's balance actually decreased by 97.9 billion won (2.0634 trillion won → 1.9655 trillion won) as of July. Toss Bank increased by only 93.9 billion won (2.9926 trillion won → 3.0865 trillion won). Only KakaoBank performed well, increasing by 731.7 billion won (3.2857 trillion won → 4.0174 trillion won). Compared to January 2022 and December of the same year, KakaoBank increased by 717.3 billion won (2.5241 trillion won → 3.2414 trillion won), Toss Bank by 2.4329 trillion won (458.6 billion won → 2.8915 trillion won), and K Bank by 1.0229 trillion won (1.0542 trillion won → 2.0771 trillion won).

Internet banks were assigned the role of supplying loans to middle- and low-credit borrowers, who had been neglected by commercial banks since their launch. Accordingly, they must set annual target ratios for loans to middle- and low-credit borrowers and achieve them, but none of the three internet banks have yet reached their targets.

According to the Korea Federation of Banks, as of the end of August, the proportion of credit loans to middle- and low-credit borrowers (based on outstanding balance) was 28.4% for KakaoBank, 25.4% for K Bank, and 35.6% for Toss Bank. All three banks fell short of their year-end targets (30%, 32%, and 44%, respectively).

The problem is that indiscriminately increasing loans to middle- and low-credit borrowers could raise the risk of defaults. Due to the impact of high interest rates, the delinquency rate on credit loans for middle- and low-credit borrowers is at its highest level since the launch of internet banks. According to data submitted last month by the three internet banks to Assemblywoman Yang Kyung-sook of the Democratic Party, as of the end of August, the delinquency rate on middle- and low-credit loans at internet banks reached 2.79%. This is nearly three times higher than a year ago (0.84%).

By bank, K Bank had the highest delinquency rate at 4.13%, followed by Toss Bank at 3.40%, and KakaoBank at 1.68%. Considering that the delinquency rate on credit loans at domestic banks announced by the Financial Supervisory Service in July was 0.71%, the delinquency rate on loans to middle- and low-credit borrowers at internet banks is significantly higher.