Kakao Bank became South Korea’s largest bank by market value when it debuted by Reuters

Joyce Lee and Scott Murdoch

SEOUL/Hong Kong (Reuters)-Digital bank Kakao Bank Corp made its debut on Friday, soaring 79% from its IPO price, becoming South Korea’s largest financial services company by market value.

According to a person involved in the transaction, it is the first bank in Asia to be listed only online-a milestone that has sparked fanatical demand, especially when Chinese listed companies have fallen out of favor following a regulatory crackdown.

Kakao Bank regards South Korea’s dominant chat application operator as its largest shareholder, and is expected to take advantage of the rare growth opportunities offered by South Korea’s unusual regulatory framework for financial companies.

Due to its large user base, it can recommend and charge fees for products provided by other financial companies, its scale is much larger than many traditional lenders, and it also has an advertising business.

Seo Young-soo, an analyst at Kiwoom Securities, said: “Shareholders are bullish because it is a platform, not just a bank.”

Its stock price closed at 69,800 won on Friday, while its IPO price was 39,000 won, with a valuation of approximately US$29 billion.

In contrast, KB Financial Group Inc, South Korea’s largest traditional financial group, has a market value of US$19 billion.

“The reason for the strong demand is that local institutions did not get as much as they wanted during the bookkeeping period, and foreign companies have funds dedicated to fintech investments. In addition, due to Ant Financial’s IPO cancellation and Kyobo Securities analysts Kim Ji-young said that in the recent technological crackdown, China has provided other major products.

Kakao Bank became profitable in 2019 after less than two years of operation and has 13.35 million monthly active users, making it the country’s largest financial application.

“It is the only pure mobile digital bank in the world that has grown into a large bank with 28.6 trillion won (US$25 billion) in assets in just four years,” Seo said.

However, some market participants stated that Kakao Bank’s initial valuation is difficult to justify given its earnings, and pointed out that KB Financial expects to achieve a net profit of approximately KRW 3 trillion this year, which is more than ten times that of Kakao Bank. .

Expansion plan

Kakao Bank raised approximately US$2.2 billion through an IPO and plans to use the proceeds to expand its platform-related business, which still accounts for only 6% of its revenue.

Its operating profit last year was 804.2 billion won, of which three-quarters was interest income.

It provides unsecured personal credit loans and currently holds 6% of the market. It also provides loans for one-time loans that Koreans must provide in advance when leasing properties, and plans to expand to mortgage loans and loans to small businesses.

Although Kakao Bank must compete with the digital services of traditional banks, there is only one pure online lender K Bank in Korea. Bank K, which is owned by BC Card and other domestic companies, reported operating losses last year and has not announced any plans to go public.

This IPO is the country’s fourth-largest and most subscribed IPO in history, with institutional demand reaching US$2.2 trillion, which marks another high point in the harvest year for South Korea’s stock market, even if some recent valuations are in the recent issuance. Has declined.

Kakao Corp is the largest shareholder of Kakao Bank, with 27.3% of the shares, and plans to list its payment affiliates.

But Kakao Pay, which is also supported by China’s Ant Financial, has been requested by the financial authorities to resubmit https://www.reuters.com/business/finance/skorean-regulator-tells-ant-backed-kakao-pay-revise -ipo- prospectus-2021-07-16 its IPO registration statement. Before this request, it had been seeking to raise up to 1.4 billion U.S. dollars, with a market value of up to 10.5 billion U.S. dollars.

(1 USD = 1,142.3400 KRW)