KakaoBank Becomes South Korea’s Largest Retail Lender As Shares Soar

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KakaoBank shares jumped more than 60% on their trading debut in Seoul, making the internet-only lender South Korea’s largest retail bank by market capitalization despite concerns over its high valuation .

The stock’s jump on Friday followed its 2.6 billion won ($ 2.3 billion) IPO and increased its market cap to more than 30 billion won. This is nearly 50% larger than more established financial firms, including KB Financial Group and Shinhan Financial Group.

KakaoBank’s IPO was South Korea’s biggest this year after video game maker Krafton. Tencent-backed Krafton, which produced global hit PlayerUnknown’s Battlegrounds, is set to debut in Seoul on Tuesday after its $ 3.8 billion IPO.

Demand for KakaoBank shares from institutional investors exceeded demand more than 1,700 times, one of the highest rates in the country’s history.

But Kim In, an analyst at BNK Securities, warned the digital lender was overvalued, pointing out that KakaoBank’s assets were less than a tenth of some of the country’s largest retail banks.

“It must increase non-interest income through its platform business and maintain rapid loan growth, and show its risk management capability through a proven credit rating system,” he said. he stated in a recent report. “But these projects are not easy to execute.”

KakaoBank’s subsidiary Kakao Games raised 384 billion won from an IPO in September and its share price has since more than tripled. Kakao Pay, South Korea’s largest online payment service, was scheduled to go public on August 12, but its listing was delayed after regulators asked it to revise its IPO prospectus to due to growing concerns about high valuations.

The Kakao Group is best known for KakaoTalk, the dominant messaging service in South Korea, and is expanding into businesses such as fintech, ridesharing, and entertainment. It has also set its sights on projects abroad, offering its services in Japan.

IPOs of Kakao’s various units have made founder Brian Kim the richest man in the country, with a fortune of around $ 13.5 billion, according to Bloomberg data. This makes him richer than jailed Samsung leader Lee Jae-yong, who has a net worth of $ 12.6 billion.

Kakao’s units performed well during the coronavirus pandemic, which has boosted demand for mobile platform services.

KakaoBank was established in 2016 after obtaining an online banking license from the Korean government. It quickly expanded its user base with KakaoTalk, which is used by 46 million of South Korea’s 52 million people.

However, KakaoBank faces increasing competition in the industry, with fintech Viva Republica set to enter the digital lending industry in September. Rival K Bank also increased its customer base through its cryptocurrency business after raising 1.2 billion won from shareholders, including Bain Capital.