[Catfish KaBank]③ K-Bank and Toss Knock on IPO Market... Will KaBank Benefit?

Kabang, 7th Consecutive Year of Record High Performance... Market Cap 13.5 Trillion
Highly Rated for Growth Potential... Competitors Continue to Challenge
Toss Selected as Lead Manager... K-Bank Also Reattempts

Toss Bank Headquarters, Gangnam-gu, Seoul. Photo by Jinhyung Kang aymsdream@

As of the closing price on the 7th, the market capitalization of KakaoBank, which went public in 2021, stands at 13.5432 trillion KRW. This is about 3.5 trillion KRW larger than Woori Financial Group (10.9033 trillion KRW), one of the major financial holding companies. The price-to-earnings ratio (PER) of KakaoBank is 39.8 times, more than 10 times higher than Woori Financial's 3.6 times. Since its listing on the Korea Exchange, the flood of stock options granted to company executives has raised serious governance issues, drawing public outrage from investors. Nevertheless, KakaoBank is still regarded as a financial company with higher growth potential compared to Woori Financial, as well as Hana Financial, KB Financial, and Shinhan Financial Group.

As KakaoBank has maintained a solid corporate value by setting record-breaking earnings for seven consecutive years through 2023, competing internet-only banks Viva Republica (Toss) and K Bank have also begun procedures to enter the initial public offering (IPO) market. This is interpreted as a result of the stock price stabilizing somewhat after a plunge following the listing, raising expectations that the companies can be valued at the anticipated corporate value. K Bank is in a particularly urgent situation, having postponed its IPO once last year because the market's estimated corporate value did not meet expectations.

Market attention is currently focused on Toss, considered a prospective 'decacorn' (a company valued at over 10 trillion KRW) in the IPO market. According to the investment banking (IB) industry on the 8th, Toss recently selected Korea Investment & Securities and Mirae Asset Securities as lead underwriters, with Samsung Securities as a co-underwriter. The valuation proposed by these underwriters for Toss Bank is reported to be between 15 trillion and 20 trillion KRW. Even applying a discount of around 20-30%, this is significantly higher than the 8.9 trillion KRW valuation recognized during the 2022 pre-IPO.

The high valuation of Toss is partly attributed to the investment indicators of KakaoBank, the only listed internet-only bank. Considering that KakaoBank emphasized its status as a platform company rather than a bank to achieve a high valuation in 2021, Toss is also likely to highlight its application (app), which has accumulated 26 million users and 15.3 million monthly active users. Additionally, as KakaoBank's performance has surpassed that of regional banks, there is speculation that this could partially offset concerns about Toss's profitability, which has never recorded an annual profit since its establishment in 2013.

The 'first-generation' internet-only bank K Bank has also made a renewed attempt. In 2022, K Bank selected NH Investment & Securities, JP Morgan, and Citi Global Markets Securities as lead underwriters, with Samsung Securities as a co-underwriter, but postponed its IPO because the market valuation of 4 trillion KRW fell far short of the expected 7 trillion KRW.

This time, K Bank has lowered its target valuation to over 5 trillion KRW and begun selecting underwriters. In the over-the-counter market, K Bank's share price is around 13,400 KRW per share, which, when reflecting the number of outstanding shares, values the company at approximately 4.7 trillion KRW. If new shares are issued during the IPO process, the valuation is expected to easily exceed 5 to 6 trillion KRW. Especially since newly appointed CEO Choi Woo-hyung declared, "We will thoroughly prepare for the IPO as an opportunity to take another leap forward toward our customers," it is expected that K Bank will not back down easily on its second attempt.

In the financial investment industry, there is an expectation that if KakaoBank's stock price, which plunged sharply compared to its initial listing price, recovers due to its strong performance, the valuations of Toss and K Bank could also be promising. However, some view that the IPO purposes of these two internet-only banks differ somewhat from KakaoBank's, so their corporate values may not necessarily be linked. KB Securities researcher Kang Seung-geon explained, "As KakaoBank grows, the valuations of Toss and K Bank preparing for IPOs may rise accordingly, but KakaoBank is a company trying to secure capital for growth, while Toss and K Bank are companies trying to secure capital, so it is hard to be certain."