Kakao Bank to discuss capital raise at board meeting

South Korea’s internet-only lender Kakao Bank will discuss an upcoming capital increase at its board meeting, the firm’s spokesperson said Tuesday, as it seeks to improve its fiscal soundness, while resolving issues surrounding its shareholder structure.

“We will discuss an upcoming capital increase at the board meeting scheduled Wednesday,” Kakao Bank spokesperson Hwang Eun-jae told The Korea Herald.

“We believe the issue of raising capital is important now considering our financial situation.”
 

Though the company’s spokesperson did not disclose more details, such as the size and timeframe of the capital increase, industry insiders expect it to raise up to 500 billion ($422.4 million) by issuing new shares.

But its plans to raise capital by selling shares is likely to face hurdles due to its current shareholding structure.

The Financial Services Commission’s decision on whether to approve the bank’s plan to make its parent firm its largest shareholder has been stalled for months now.

The plan is to raise the stake owned by its parent firm Kakao to 34 percent from the current 10 percent, while reducing its largest shareholder Korea Investment Holdings’ stake to 34 percent minus one share from 50 percent.

Under the current situation, KIH will have to pay additional money for the capital increase despite the existing plans to reduce its stake in Kakao Bank.

According to Hwang, the bank hopes to improve its capital adequacy ratio which plummeted to 11.74 percent in June.

This is the second-lowest among Korean banks, as local commercial banks have managed to maintain an average CAR of 13 percent.

K bank, the nation’s first and only other internet-only bank has the lowest BIS ratio which fell to 9.89 percent in the cited period.

By Jung Min-kyung (mkjung@heraldcorp.com)