K Bank announced that it will focus on expanding corporate loans with about 1 trillion won worth of funds expected to be secured through an initial public offering (IPO). The plan is to find a breakthrough in corporate loans as financial authorities have recently put the brakes on retail-oriented sales strategies due to concerns about the increase in household loans in the banking sector.
K-Bank President Choi Woo-hyung is speaking at a K-Bank press conference held ahead of the listing at the Conrad Hotel in Yeouido, Seoul on the 15th. /Photo=Reporter Kang Ji-soo jisoo@
Where will 1 trillion won of public offering funds be used?
K-Bank President Choi Woo-hyung said at a press conference held at the Conrad Hotel in Yeouido, Seoul on the 15th, “If we have grown centered on retail so far, we plan to grow around three major axes, including corporate finance based on SMEs and platform business, in the future.”
Through this initial public offering, K Bank expected to be able to secure public offering funds of over KRW 1 trillion, adding KRW 389.5 billion based on the lower end of the desired public offering price to the KRW 725 billion raised during the past paid-in capital increase.
In particular, the plan is to use the 725 billion won, which will be recognized as BIS capital after listing, as a financial resource for the newly launched ‘President’s Collateral Loan’ this year, thereby providing a breakthrough in the financial authorities’ recent policy of suppressing household loans.
In the retail sector, we plan to increase the number of customers using our main bank by launching specialized deposit products and, based on this, focus on securing an efficient funding structure by expanding low-cost deposits.
Regarding ‘platform’, one of the three major growth strategies, it was emphasized that some of the public offering funds will be used to develop and introduce the latest IT technologies such as artificial intelligence (AI), open API, and multiple supplier agreement (MSA) to expand the platform business. .
To this end, the plan is to pursue an ‘open ecosystem’ strategy that builds an ecosystem through various partnerships with leading businesses in each industry sector rather than relying on specific large platforms or affiliates.
Higher PBR than Cabin? “Governance is superior”
In response to the criticism that Kakao Bank’s stock price has fallen significantly since its listing in the past, Chairman Choi explained, “I think K Bank is quite free from governance-related risks and has a significant advantage in terms of ESG management and sound finance.”
This is interpreted as a response to the controversy over K Bank’s ‘overvaluation’ by pointing out that Kakao Bank is undervalued due to governance risks due to the arrest of board chairman Kim Beom-soo.
Previously, when setting the desired public offering price, K Bank selected three domestic and foreign financial companies, including Kakao Bank (Korea), SBI Smithin Net Bank (Japan), and Bancorp (USA). The PBR at the bottom of K Bank’s desired public offering price was 1.69 times the net profit. and monthly active users (MAU) were all pointed out to be higher than the leading Kakao Bank PBR (1.62 times).
In addition, it was explained that 41 million shares, which is about half of the 82 million shares in the public offering, were comprised of sales of old shares, in order to alleviate concerns about overhang. CFO Lee Jun-hyeong said, “As the financial investor (FI) stake is 30%, there is a risk of overhang if old stock sales are not made at an appropriate size, so we set (the old stock sales size) in consideration of shareholders.”
In addition, regarding the point out that the amount of shares that can be traded immediately after listing is as high as 37.32%, “Considering that the number of shares available for circulation was about 40% at the time of listing of Kakao Pay or Krafton in the past, it is not a high level considering the market trend.” He added, “I believe that an appropriate amount of distribution will help create a fair stock price in the market.”
“Upbit interest cost is around KRW 60 billion per year… no problem.”
Chairman Choi explained that there was ‘no problem’ regarding concerns about a decrease in profitability due to the increase in K Bank Upbit interest costs. The interest rate on Upbit deposits increased significantly from 0.1% per year to 2.1% per year following the enforcement of the Virtual Asset User Protection Act in July.
Regarding this, Chairman Choi predicted that the proportion of Upbit received funds in total receipts is decreasing every year, and that the SME credit newly launched last month is expected to be expanded, which will be able to offset the cost of rising interest rates.
He said, “In 2021, the proportion of Upbit deposits among all deposits was more than half, and currently, the size of Upbit deposits is about KRW 3.2 trillion with deposits of KRW 22 trillion.” If the interest rate is 2%, it is about KRW 60 billion per year, but this year. “It will be applied from August and will cost 20 to 30 billion won in interest,” he said.
In addition, regarding the concern that a bank run may occur if Upbit cuts off transactions with K-Bank during the government audit conducted this month, the company explained that the concern is not significant as it is investing in highly liquid assets.
President Choi said, “Upbit deposits are managed separately by matching them with highly liquid assets such as government bonds and MMFs. Even if Upbit funds are withdrawn, there is no concern about a bank run because they are matched with funds that can be immediately liquidated.”
K Bank will conduct demand forecasting until the 16th and then confirm the public offering price on the 18th of this month. General subscription is from the 21st to the 22nd, and the listing date is the 30th.
