Financial Supervisory Service Governor Lee Bok-hyun speaks during a National Assembly audit of the financial watchdog, Thursday. Yonhap

Kbank has postponed its initial public offering (IPO) due to weaker-than-expected investor interest, as evidenced by underwriters seeking a per-share price of 8,500 won ($6.21), significantly lower than the company's target range of 9,500 won to 12,000 won, market watchers said Friday.

Bookbuilding for institutional investors concluded Tuesday, a week after it began. Many either placed bids at around 9,500 won or lower or declined to bid altogether, citing the firm's inflated value relative to its profit.

Observers have long anticipated that the lender's second attempt to go public would be in vain if the downgraded price of 8,500 won fails to attract investors.

Also at play the financial regulator's pledge to closely monitor the lender's heavy dependence on Upbit, a local cryptocurrency exchange, for funding.

"We decided to delay the IPO to revise our previous plan," the lender said in a statement. "We will renew our bid as soon as possible with investor demands fully factored in."

The sudden withdrawal followed intense scrutiny of the bank's financial soundness a day earlier.

Financial Supervisory Service Governor Lee Bok-hyun said the authorities will closely monitor the IPO process throughout during the National Assembly audit of the financial watchdog, Thursday.

"We are aware of the problem," he said. "We have guided the internet-only lender to reduce reliance on a single entity for funding."

It was a response to a question from Rep. Lee Kang-ill of the main opposition Democratic Party of Korea on the National Assembly National Policy Committee.

The lawmaker said over 90 percent, or 21 trillion won of Kbank's funding total of 23 trillion won was sourced from bank user deposits, as of June.

About 4 trillion won, or 20 percent, of the 21 trillion won is drawn from Upbit's customers.

"I have never seen such a heavy reliance on a single source for funding in a bank portfolio. It is very concerning," the lawmaker said during the assembly audit.

This means the lender is paying its entire profit to paying interest to the Upbit account holders at an annual rate of 2.1 percent.

"Kbank's net profit came to 85.4 billion won in the first half, and the interest payment for the Upbit customers with a combined deposits of 3.8 trillion won reaches 86.7 billion won. The bank needs its entire profit and more just to pay interest."

The lawmakers said the lender could be reduced to a source of deep pocket for a handful of individuals and firms.

"Kbank's survival will be on the line, a lingering concern heightened by uncertainties surrounding Upbit in the months to come."

Kbank maintains that the figure is on a continued downtrend from the previous high of 53 percent end-2021.

The fund operation is limited to highly liquid stable money market funds and government bonds, it added.

The bank CEO said Tuesday during the IPO presser that the Upbit deposits are managed separately from other accounts, always available for immediate liquidation.