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| KakaoBank CEO Yoon Ho-young speaks during a press conference in Seoul, July 20. Yonhap |
By Lee Min-hyung
KakaoBank's plan to expand its loan portfolio targeting customers with medium and bad credit scores has hit a snag amid toughening market competition and regulatory pressure.
According to data from the Korea Federation of Banks, the portion of the lender's loans provided to those with credit scores below 820 points reached 13.4 percent of its total unsecured loan offerings as of the end of September this year.
This falls far below its earlier target of 20.8 percent which the bank expected to accomplish by the end of this year. The figure inched up by 1.2 percentage points to 14.6 percent as of the end of October, but chances appear slim that the company will be able to achieve its earlier goal within this year.
This was due mainly to escalating competition from existing banks, most of which seek to maximize their earnings from the loan-to-deposit margin by launching more loan products with mid-range interest rates of 6 percent to 10 percent.
Unprecedentedly tough regulations imposed by financial authorities to curb growing household debt also adds pressure on KakaoBank. With the Financial Services Commission setting an upper limit of the annual loan offerings of major banks here, the regulatory hurdle is expected to hold back KakaoBank's drive.
KakaoBank's profit structure is also heavily reliant on the deposit-to-loan margin from its household loans due to its focus on the business-to-consumer sector.
KakaoBank reported an operating profit of 71.2 billion won ($60.23 million) during the third quarter. But more than 90 percent of its annual revenue was generated from the deposit-to-loan margin of its household loan business, according to DB Financial Investment.
The figure for KB Kookmin Bank, the nation's largest bank, also reached 91 percent during the third quarter.
Four major banking groups are on track to reduce their reliance on conventional margins and seek to increase profitability in non-banking sectors. But this is not the case for the Kakao affiliate for the time being, as it has been only about five years since the company made its debut in 2017.
But with financial watchdogs deciding recently to exclude loans for those with medium and bad credit scores next year when regulating the upper limit of household loan offerings, KakaoBank will not face any penalties in its business expansion even if it fails to achieve its target goal.
Investors, however, are still identifying the lingering uncertainty surrounding the expansion of the lender's loan business as a major risk factor blocking its stock growth.
KakaoBank made its KOSPI debut in August and its stock price soared to over 90,000 won per share a few days after its listing on the main bourse. But the stock has since lost luster, failing to recover to its previous high. KakaoBank closed at 63,000 won per share on Tuesday, down 400 won or 0.63 percent, from a day earlier.
"KakaoBank's narrow business portfolio targeting mostly individual customers is one major reason behind the sluggish stock growth," a financial industry official said.
