Provided by each company.
Internet banks’ performance in the third quarter of this year broke an all-time high. It is evaluated that growth engines have been secured in the refinance loan market, including loans for individual business owners. However, some point out that risk management is necessary due to worsening soundness, such as rising delinquency rates.
According to the financial industry on the 21st, Kakao Bank’s cumulative net profit in the third quarter of this year was 355.6 billion won. This is a 27.3% increase compared to the same period last year, and is the highest cumulative performance in the three quarters since its launch in 2017. Net profit in the third quarter was KRW 124.2 billion, up 30.1% from the same period last year, which is also the highest quarterly performance.
K Bank also continued its good performance. K Bank recorded a cumulative net profit of 122.4 billion won in the third quarter. It recorded a new record-high performance, up 220.2% from the same period last year. Looking at the third quarter alone, the company recorded a net profit of 37 billion won, an increase of 180.6% during the same period.
In the case of Toss Bank, it did not announce official performance for the third quarter, but according to Hana Financial Group’s quarterly report, Toss Bank was provisionally calculated to have made a net profit of 34.387 billion won as of the third quarter.
Considering that the net profit in the first half was 24.5 billion won, it is estimated that the net profit was about 9.9 billion won in the third quarter. This is the fifth consecutive quarter of surplus since the third quarter of last year. Last year, it had an annual net loss of 17.5 billion won, but recorded a net profit of 8.6 billion won in the third quarter of last year, achieving its first quarterly surplus. Since then, the quarterly surplus has continued.
In addition to good performance, internet banks are also achieving the target proportion of loans to ‘low to medium credit borrowers’ set by the financial authorities. As of the second quarter, the proportion of InBang’s credit loans to those with low to medium credit was 32.4% for Kakao Bank, 33.3% for K Bank, and 34.9% for Toss Bank.
However, the worsening soundness of internet banks in proportion to the increase remains a cause for concern.
The balance of ‘non-performing loans’ of the three Inbank companies in the first half of this year was 537.8 billion won, an increase of 30.5% compared to the same period last year. Non-performing loans refer to non-performing loans in which it is unlikely or difficult to recover the money lent by a financial institution. In particular, InBang is seeing an increase in the delinquency rate of borrowers in their 20s or younger who lack the ability to repay. As of the end of August, the three Inbank companies’ credit loan delinquency amounted to 394.4 billion won, an increase of about 484% compared to the end of 2021 (67.5 billion won) three years ago.
The increase in corporate loan delinquency rates due to ‘individual business loans’ is also a challenge. Kakao Bank’s corporate loan delinquency rate rose from 0.35% last year to 1.21% in the third quarter of this year, and during the same period, K Bank’s also surged from 0.78% to 1.72%.
Accordingly, loan loss costs also increased significantly. Kakao Bank’s loan loss provisions were calculated to be KRW 446.7 billion, an increase of 10.67% (KRW 47.7 billion) compared to the end of last year. The provision for bad debts is KRW 174 billion, which is half of net profit (KRW 338.5 billion). K Bank had accumulated 324.6 billion won in loan loss provisions as of the end of September this year. It accumulated 7.91% (25.7 billion won) more than the end of last year. Bad debt provisions also amount to 163.4 billion won.
An official from an internet bank said, “It is analyzed that the number of non-performing loans has increased as the interest burden on borrowers has increased due to the increase in loan interest rates while expanding credit loans to those with low to medium credit.” “We are using a strategy to increase the size of our assets.”
He continued, “We are aware that there are internal and external concerns about the stability of repayment due to the large number of borrowers experiencing financial difficulties,” but added, “We view this as part of the process of diversifying our business portfolio and enhancing profitability.”
What innovative strategies are Kakao Bank and Toss Bank implementing to ensure responsible lending while maintaining strong profit margins in the face of rising delinquency rates?
Guest 1: Kim Soo-hyun, Head of Marketing at Kakao Bank
Guest 2: Lee Ji-hyeon, Chief Financial Officer at Toss Bank
Section 1: Performance of Internet Banks in the Third Quarter
Interviewer: Internet banks’ performance in the third quarter of this year has been remarkable, with record-breaking profits. How do you attribute this success to your bank’s growth engines?
Guest 1: At Kakao Bank, we have been focusing on providing innovative, user-friendly financial products and services that cater to the digital-savvy demographic. Our strong growth can be attributed to the increasing popularity of our mobile-first approach, as well as our expansion into new markets such as mortgages and small business loans.
Guest 2: K Bank has also seen tremendous success due to our dedication to offering personalized financial solutions and expanding our product offerings to meet the evolving needs of our customers. Our focus on developing robust risk management systems and investing in cutting-edge technology has helped us stay competitive in the market. We’re proud to continue delivering exceptional value to our customers while maintaining strong financial performance.
Section 2: Profit Margins and Credit Loan Refinancing
Interviewer: In addition to providing loans to low to medium credit borrowers, internet banks are also achieving their target profit margins. However, some have raised concerns about the worsening soundness of internet banks, particularly rising delinquency rates. How do you ensure that risk management remains a top priority while continuing to meet these targets?
Guest 1: At Kakao Bank, we utilize advanced analytics and AI-powered systems to monitor borrower behavior and identify potential risks early on. We believe that responsible lending practices are essential to maintaining our reputation and ensuring the long-term sustainability of our business. We’ll continue to invest in improving our risk management strategies to protect both our customers and our institution.
Guest 2: At Toss Bank, we share the same commitment to responsible lending practices. Our underwriting criteria are rigorous, and we closely monitor delinquency rates to identify any potential issues. We’re also exploring
