K Bank, the digital banking unit of South Korea’s telecom giant KT Corp., is valued at 8 trillion won ($6.9 billion) and could further raise its valuation if it can grow its lending business, Morgan Stanley said.
In its recent research report, the US investment bank said the internet-only bank has come into the limelight following the successful listing of KakaoBank Corp. earlier this month.
“After a sluggish start, K Bank has been able to visibly narrow the gap with Kakao, surpassing 11 trillion won in deposits this quarter,” Morgan Stanley said in the report.
“Its loan balance at 5 trillion won does need to balance out the fast-growing deposits, but the digital bank has been making good progress with unsecured credit and jeonse loans.”
Jeonse refers to a popular rent system in Korea where tenants pay a large amount of lump-sum deposits, instead of paying monthly rent, to lease a house.
KakaoBank INNOVATIVE & DISRUPTIVE
As contactless banks, Korea’s digital lenders have grown rapidly by offering innovative and disruptive business models and services, including Korea’s first non-face-to-face housing loans on the jeonse system.
“To be conservative, we value K Bank at 8 trillion won (implying 2.7 trillion won value for the largest shareholder BC Card’s 34% stake), at 25% of KakaoBank’s latest market cap,” said Morgan Stanley.
KakaoBank, majority-owned by Korea’s top messaging app operator Kakao Corp., became the country’s first listed digital bank and the most valuable lender upon its trading debut on Aug. 6 with its market capitalization of 33 trillion won.
Founded in 2017, KakaoBank is Korea’s largest internet-only bank with over 13.6 million subscribers as of the end of 2020.
K Bank 2023 IPO TO BOOST VALUE
K Bank, which began operations in 2017, aims to list its shares on the Korea Exchange in 2023.
Morgan Stanley said K Bank’s initial public offering is a “component which has yet to be properly reflected in KT’s current share price.”
Reflecting its sold first-half results, Morgan Stanley raised KT’s price target to 43,000 won with an Overweight rating. In early Tuesday trade in Seoul, KT’s shares were up 0.8% at 32,700 won.
Other major shareholders of K Bank include Woori Bank (12.68%), Bain Capital and MBK Partners, which own more than 5% of the digital bank, respectively.
The number of K Bank’s subscribers rose to 6.28 million at the end of July from 2.19 million at the end of 2020, helped by its partnership with Korea’s top cryptocurrency exchange UPbit last year.
Toss Bank K Bank’s deposits increased to 10.62 trillion won at end-July from 3.75 trillion won at end-2020, while its loans grew to 5.51 trillion won from 3 trillion won in the same period.
Last month, the internet bank raised 1.25 trillion won through a rights offering for business expansion and diversification as it strives to overtake rivals such as KakaoBank and Toss Bank, owned by Viva Republica Inc.
Write to Hyun-Woo Lim at tardis@hankyung.com In-Soo Nam edited this article.
