K bank eyes W5tr IPO to spur growth

K bank, South Korea's first internet-only bank, has announced plans for business expansion, seeking to raise over 1 trillion won ($733.6 million) from its upcoming initial public offering.

"K bank will drive inclusive and innovative finance by using the IPO funds to advance our three core growth strategies — retail, small- and medium-sized enterprises and platforms — along with risk management and technology," said CEO Choi Woo-hyung during a press conference in Seoul on Tuesday, about two weeks ahead of its IPO at the end of this month.

Since launching as the nation’s first internet-only lender in 2017, K bank has led various innovations in the digital banking sector, including introducing Korea's first online mortgage loan.

This IPO will make K bank the second internet-only bank in Korea to go public, following Kakao Bank, a subsidiary of IT giant Kakao, which debuted in August 2021.

K bank plans to issue 8.2 million shares, with a target price range set between 9,500 won and 12,000 won per share. At the highest target price, K bank could raise up to 984 billion won from the offering. Additionally, 725 billion won from previous capital increases will count as equity for calculating the BIS capital adequacy ratio post-listing.

K bank’s market capitalization after the listing is projected to reach 5 trillion won, marking the largest market debut since LG Energy Solution in 2022.

Choi highlighted that the funds from the IPO will primarily be invested in expanding the loan portfolio, particularly in corporate finance for small businesses and self-employed entrepreneurs.

"The recently launched digital mortgage loans for individual entrepreneurs, along with other corporate finance products for small businesses, will drive K bank's future growth," Choi stated, noting the mortgage loan, introduced in August, has seen significant success, with approximately 1,000 new loans issued daily.

Choi anticipated that corporate finance would help reduce K bank's high reliance on housing mortgage loans, which have raised concerns due to the recent tightening of government regulations. Although K bank recently reported strong growth, with net profit reaching a record 85.4 billion won in the first half of this year, net interest income declined in the past quarter, reflecting a slowdown in mortgage loan growth.

In addition to its focus on corporate finance, K bank aims to enhance its customer base in retail banking to expand low-cost deposits, while also pursuing the development of a comprehensive digital financial platform for its platform business.

The CEO also emphasized K bank's reduced dependence on its partnership with digital asset exchange Upbit.

"The proportion of Upbit deposits relative to total deposits has dropped from over 50 percent three years ago to around 17 percent. As K bank's core banking and platform businesses expand, our reliance on Upbit continues to decrease," Choi underscored. He added that the burden of additional interest due to rate hikes could be offset by revenue from its new corporate finance businesses.

K bank and Upbit have partnered since June 2020, with the interest rate on deposits recently increasing from 0.1 percent to 2.1 percent following the implementation of the Virtual Asset User Protection Act in July. On Tuesday, Choi also dismissed concerns about a potential bank run linked to increased risks associated with Upbit deposits, stating that these deposits are not being used as a source of lending for K bank.

With the market listing set for Oct. 30, K bank will finalize the offering price on Friday and conduct its public subscription on Monday and Tuesday of next week.