Among the three internet specialty banks, only Kbank is experiencing negative growth. In terms of net profit comparison, Kbank's gap with KakaoBank has widened, and it has fallen behind Toss Bank, which does not handle housing loans. Kbank, which is in urgent need of an initial public offering (IPO), has recently selected a lead manager, but there are concerns that revenue diversification is desperately needed for the IPO's success.
According to the Financial Supervisory Service’s electronic disclosure system on the 20th, Toss Bank (based on Hana Financial Group's business report) recorded a net profit of 18.7 billion won in the first quarter of this year. Hana Financial holds a 9.5% equity stake in Toss Bank and includes Toss Bank's performance in its business report. Toss Bank, which achieved its first annual profit last year, grew 26.4% in the first quarter compared to the same period last year. During the same period, KakaoBank also achieved its highest-ever quarterly results. The operating profit for the first quarter was 183 billion won, and the net profit was 137.4 billion won, marking an increase of 23.3% and 23.6%, respectively, compared to the same period last year. The total deposits amounted to 60.4 trillion won, surpassing 60 trillion won for the first time in a quarter.
In contrast, Kbank's report card for the first quarter was grim. Kbank recorded a net profit of 16.1 billion won in the first quarter of this year, a 68.2% decrease compared to the same period last year (50 billion won). While non-interest revenue has increased through the expansion of money market fund (MMF) management revenue and the activation of platform advertising sales, the largest issue identified was the rise in interest expenses due to higher deposit usage rates for virtual asset exchanges.
Kbank supports won transactions for Upbit, the top virtual asset exchange in Korea. Until now, Kbank's performance has been backed by high virtual asset deposits through Upbit. As of the first quarter, Dunamu's deposits amounted to 54.994 trillion won, accounting for about 20% of Kbank's total deposit balance (277.979 trillion won). Virtual asset exchanges pay deposit usage fees to customers, and due to competition among exchanges, the usage fee rate for Upbit deposits has risen from 0.1% to 2.1%. Consequently, the interest expenses that Kbank has to pay have also surged.
Amid preparations for its third IPO this year, there are concerns about maintaining profitability for Kbank. While all three internet banks face the same external environment with restricted household loans and declining interest revenue, only Kbank's performance has gone backwards due to its dependence on virtual asset deposits.
Kbank is maintaining high deposit rates while setting relatively low loan rates to acquire customers. In just the first quarter, the number of customers increased by 900,000, representing a 30% rise over the past year. However, this strategy is advantageous for securing short-term liquidity but imposes a significant cost burden and compresses interest margins. In the current situation where interest expenses for Upbit deposits are rising, this strategy will not be beneficial for profitability in the long run.
At the same time, the IPO schedule is tight. In 2021, Kbank set a deadline condition for its IPO after raising over 700 billion won from private equity funds. If the IPO is not completed by July 2026, it will have to sell its equity under the co-sale rights. The largest shareholder, BC Card, must either acquire the equity of financial investors (FIs) or transfer it to a fourth party.
After the expiration of the preliminary IPO review effect in February, Kbank stated, 'We plan to prepare for the IPO by comprehensively considering the market situation,' but with only about a year left until the IPO deadline, time is not sufficient. In fact, it has been reported that Kbank recently sent requests for proposals (RFP) to major large securities firms to select a lead manager for the IPO.