K Bank, South Korea’s pioneering internet-only bank under the aegis of KT Corp, is poised for a transformative journey as it plans to evolve into an AI-driven investment platform.
Chief Executive Choi Woo-hyung made this clear during a press conference on 15 October 2024, where he outlined the bank's strategic vision ahead of its much-anticipated initial public offering (IPO) on 30 October 2024.
Choi Woo-hyung, the CEO of K Bank, spoke at a press conference regarding the upcoming IPO of the internet bank.
Historically reliant on household loans, K Bank is now charting a course towards corporate banking and platform-based financial services.
Choi emphasised the shift, stating,
“Household loans have led our growth strategy. From now on, we will make corporate banking and the platform business as well as household loans our key growth drivers.”
This strategic pivot aims to broaden the bank's portfolio and minimise risks associated with over-dependence on traditional lending models.
To actualise this vision, K Bank is investing significantly in AI technologies.
The CEO revealed plans to enhance their mobile application, transforming it into a comprehensive financial platform that facilitates investments in various asset classes, including stocks, virtual assets, artwork, and luxury goods.
This broadens the horizons for users, allowing them to diversify their investments seamlessly.
In a move that reflects its commitment to supporting small and medium-sized enterprises (SMEs), K Bank launched a non-face-to-face real estate-backed loan specifically designed for individual entrepreneurs in August 2024.
This marks a first among South Korean internet banks, reflecting the bank's agility in responding to market demands.
Choi elaborated on the future of this initiative, stating,
“We will diversify collateral options for contactless loans to individual entrepreneurs by 2026 and introduce Korea's first fully non-face-to-face loan product for SMEs by the first half of 2027.”
With over 1,000 applications received daily for property-backed SME loans, Choi confirmed that proceeds from the IPO would primarily fund this innovative loan product, emphasising its potential to drive substantial growth in K Bank's business model.
Despite K Bank's success, concerns have arisen regarding its relationship with UPbit, Korea’s leading cryptocurrency exchange.
Some lawmakers, including Lee Kang-il from the Democratic Party of Korea, have voiced apprehensions that UPbit’s dominance in the market might foster a monopoly, given that the partnership between K Bank and UPbit enables the cryptocurrency platform to hold a significant share of the banking sector.
During the pandemic, UPbit’s exclusive ability to offer non-face-to-face account openings gave it a stronghold, helping the bank-exchange duo capture over 80% of the domestic market.
Lee warned of potential risks, arguing,
“If Upbit transactions are cut off, it will result in a bank run at K Bank. […] The [relationship] between Upbit and K Bank goes against the principle of the separation of finance and industry.”
However, Choi dismissed these concerns, stating that K Bank’s reliance on UPbit for revenue growth has diminished.
While UPbit deposits accounted for 52.9% of K Bank’s total deposits in 2021, this figure has dropped to 16.9% by June 2024.
He assured,
“Not a single penny of UPbit's deposits is used as loan funds. We manage such money in highly liquid money market funds (MMFs) or government bonds. Even if UPbit's deposits were to be withdrawn all at once, there would be no liquidity problems.”
This confidence reassures stakeholders, despite regulatory concerns regarding the crypto exchange's influence.
After a previous attempt to debut on the Kospi market in 2022 faltered due to lacklustre investor interest, K Bank is making a renewed effort to secure funding for its expansion plans.
The bank has set a target IPO price range between 9,500 and 12,000 won per share, translating to a market capitalisation between 4 trillion won and 5 trillion won (approximately $2.9 billion to $3.7 billion).
This valuation, however, raises eyebrows among analysts, particularly when compared to its main rival, KakaoBank Corp., which boasts a price-to-book ratio of 1.62.
Choi's confidence in the upcoming IPO is evident as the demand forecast runs from 10 to 16 October 2024, with retail and institutional subscriptions scheduled for 21 and 22 October 2024.
The bank plans to float 82 million shares, aiming to gather substantial capital to support its ambitious transformation.
As the IPO approaches, Choi has remained resolute in addressing lawmakers’ apprehensions regarding K Bank's ties to UPbit.
He emphasised the longevity and stability of their partnership, stating,
“The proportion of total Upbit deposits has decreased on our platform. And increased interest rates [on fiat deposits] are being well compensated for by our other business interests.”
He noted the ongoing collaboration with Upbit to develop new financial products that integrate payment services from BC Card, reinforcing the interconnectedness of their services while ensuring regulatory compliance.
As K Bank prepares for its IPO and embarks on this new chapter, its focus on innovation, risk management, and strategic partnerships positions it uniquely within the competitive landscape of South Korea's digital banking sector.
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