Kakao Bank Becomes South Korea’s Largest Lender By Market Value In Successful Debut
- Kakao Bank is the first purely digital lender in Asia to go public
- Rise 79% above IPO price to $ 29 billion market value
- Gained $ 25 billion in assets in four years
- “It’s a platform, not just a bank” – analyst
SEOUL / HONG KONG, Aug.6 (Reuters) – Digital lender Kakao Bank Corp (323410.KS) got off to a flying start on Friday, jumping 79% from its IPO price to become the world’s largest company in South Korean financial services in market value.
It is the first Asian-only online bank to go public, according to a person who worked on the deal – a step that has sparked frantic demand, especially as Chinese quotes have fallen out of favor with the following regulatory repression.
Kakao Bank, which counts the country’s largest operator of chat applications as its largest shareholder, is expected to capitalize on the scarce growth opportunities for a financial company offered by an unusual South Korean regulatory framework.
Due to its large user base, it is able to recommend and collect fees on products offered by other financial companies on a much larger scale than many traditional lenders, and also owns an advertising business. .
“Shareholders are optimistic because this is a platform, not just a bank,” said Seo Young-soo, analyst at Kiwoom Securities.
Its shares closed at 69,800 won on Friday, against an IPO price of 39,000 won and a valuation of around $ 29 billion.
In contrast, KB Financial Group Inc (105560.KS), South Korea’s largest traditional financial group, was worth $ 19 billion.
“The high demand was due to local institutions not getting as much as they wanted when setting up books and foreign companies with money meant for FinTech investments. On top of that, it looks like some funds have been rerouted here due to the cancellation of Ant Financial’s IPO and other major offerings from China amid the recent tech crackdown, ”Kim Ji-young said, analyst at Kyobo Securities.
Kakao Bank became profitable in 2019 after less than two years in business and has 13.35 million monthly active users, making it the largest financial app in the country.
“It’s the world’s only purely mobile digital bank that has grown into a major bank with 28.6 trillion won ($ 25 billion) in assets in just four years,” Seo said.
Some market participants, however, said that Kakao Bank’s early valuations were difficult to justify given its earnings, noting that KB Financial is expected to post around 3 trillion won in net profit this year, more than ten times what Kakao Bank is. is likely to achieve.
Kakao Bank raised some $ 2.2 billion during its IPO and plans to use the proceeds to expand its platform-related business, which still only accounts for 6% of its revenue.
Three-quarters of the 804.2 billion won made last year was interest income.
It offers unsecured personal loans and now holds 6% of this market. It also provides loans for lump sums Koreans must provide upfront when renting a property and plans to expand mortgages and small business loans.
Although Kakao Bank has to compete with the digital services of traditional banks, there is only one other pure online lender in South Korea, K Bank. K Bank, owned by BC Card and other domestic firms, reported an operating loss last year and has yet to announce plans to sign up.
The IPO was the nation’s fourth largest and most underwritten of all time with institutional demand reaching $ 2.2 trillion, marking another high point in what is shaping up to be a record year for floats. of the South Korean stock market, although some valuations have been cut in recent offers. . Read more
Kakao Corp (035720.KS), Kakao Bank’s largest shareholder with a 27.3% stake, is also planning to go public with its payments subsidiary.
But Kakao Pay, which is also backed by China’s Ant Financial, has been asked by financial authorities to resubmit its IPO registration statement. Prior to this request, it was looking to raise up to $ 1.4 billion for a market value of up to $ 10.5 billion.
($ 1 = 1,142,3400 won)
Reporting by Joyce Lee and Scott Murdoch; Additional reporting by Heekyong Yang and Jihoon Lee; Editing by Edwina Gibbs
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