Kbank's headquarters in central Seoul / Courtesy of Kbank

Kbank's second attempt to list on the country's main exchange, KOSPI, is facing numerous challenges, increasing the likelihood that one of the high-profile initial public offerings (IPO), scheduled for the latter half of this year, may not go according to plan following a failed attempt last year.

The unexpected obstacles faced by the nation's first internet-only bank include U.S. recession fears and the recent arrest of Kim Beom-su, the founder of Kakao, the largest shareholder of Kbank's rival, KakaoBank.

The negative stance of financial authorities on internet-only banks in recent months is also expected to have adverse impacts.

In 2022, Kbank attempted to list its shares on the local stock market, but scrapped the plan in February 2023, citing falling corporate value amid a subdued investment environment at the time.

The bank resumed the IPO process this year, applying for a preliminary listing review with the Korea Exchange on June 28. The approval decision is expected to be made at the end of this month at the earliest.

The company has been focusing on improving its profitability to complete its listing by the end of this year, reporting a record-high net profit of 50.7 billion won ($37 million) in the first half of the year.

gettyimagesbank

However, the volatility in stock markets, in and outside the country, has been amplified due to fears of a U.S. recession. Market experts predict that this situation is unlikely to end in the short term.

As seen in past cases like KakaoBank and KakaoPay's listings, the IPO should be conducted during a stock market boom to ensure success. If market sentiment cools, the outcome can be worse than not going public. This has led several companies to withdraw their IPO aspirations, as Kbank itself did last year.

In particular, the fact that KakaoBank's stocks have struggled recently following Kim's arrest could have an adverse impact, as the decline in the value of the comparable company can lead to a sharp decline in investor sentiment in the IPO market.

The Kakao founder was arrested on July 23 over allegations of stock price manipulation in connection with the battle with HYBE to acquire SM Entertainment in February.

KakaoBank's stock price fell to 19,180 won on Monday, down 79.68 percent from its peak of 94,400 won.

Typically, relative valuation methods are used to determine fair stock prices for companies preparing for the IPO. This means that the stock price movements and financial conditions of comparable companies have a significant impact.

The negative stance of financial authorities on internet-only banks in recent months is also expected to work against Kbank's IPO plan.

Initially, the authorities expected internet-only banks to contribute to the innovation of the industry, but now, they view that such banks have followed the practices of traditional banks, citing that firms have aggressively issued mortgages as a method to easily increase profits.

As the rise in mortgages has led to the growth of household loans and is putting pressure on the country's economy, the authorities are currently working to curb the growth of such debt, planning to tighten lending regulations by implementing the second phase of stressed debt service ratio (DSR) rules on Sept. 1.

For Kbank, which needs to improve its performance as much as it can in line with its IPO push, such tightened regulations are inevitably a negative factor.

Some experts, however, said there is still a high expectation for K bank.

"Kbank is expected to experience high loan growth for three years if it is listed," analyst Park Hye-jin of Daishin Securities said. "Since KakaoBank has passed its high-growth phase, comparing Kbank with KakaoBank is not appropriate."