Online lender K Bank revs up for IPO in Nov on surging net profit

K Bank submitted a preliminary assessment request to the Korea Stock Exchange on Thursday, the first step to an initial public offering. 

The online lender chose NH Investment & Securities Co., J.P. Morgan Securities, and Citigroup Global Markets Korea Securities Ltd. as its underwriters. Samsung Securities Co. also takes part. 

The company is expected to receive the green light around September and October and get listed on the Korean bourse by November. 

K Bank had initially planned for an IPO in 2023 but decided to expedite the process to take advantage of the rapid growth it has seen since late last year. 

The lender has enjoyed a whopping 22.4 billion won ($17.3 million) in net profit in 2021, turning a surplus in just four years of launch. 

In the first quarter of this year alone, its net profit reached 24.5 billion won, surpassing the figure for all of last year.

The number of subscribers hovered around 2.2 million towards the end of 2020. The figure skyrocketed to 7.2 million last year. 

At the time of writing this article, the subscriber count rose even future to 7.8 million. 

K Bank also benefited from its collaboration with cryptocurrency exchange Upbit last year. Experts say the move strengthened its competitive edge in the virtual lending space. 

CORPORATE VALUE 

The online bank’s corporate value is estimated as at least 6 trillion won ($4.6 billion). 

Earlier this year, it was estimated to be even higher at 8 trillion won in the curb market.

Back in July 2020, the company’s corporate value stood at a mere 2.4 trillion won. 

“The company’s mid to long-term profitability is high thanks to cost-effectiveness and it can realize rapid growth through sales competitiveness in the short-term,” Doosan Baek, senior analyst at Korea Investment & Securities Co. wrote in a recently published report. 

The report indicated K Bank’s price-to-book ratio (P/B) to be 3.5 and the appropriate enterprise value to be around 6 trillion won. 

The P/B ratios for the four major financial institutions in Korea are somewhere between 0.3 and 0.4.

Some analysts forecast the bank’s value to surge to over 8 trillion won when the market recovers.

Kim Soo-hyun, a team leader at Shinhan Investment Corp., forecasted K Bank’s corporate value to be around 7.3 trillion won, in a report published in March. The calculation is four-fold of the P/B projection for KakaoBank Corp., another leading digital lender. 

US investment bank Morgan Stanely, wrote this last year: “To be conservative, we value K Bank at 8 trillion won, at 25% of KakaoBank’s latest market cap.”

KakaoBank, majority-owned by South Korea’s No.1 messaging platform operator Kakao Corp., currently boasts the largest market capitalization in the sector. 

Concerns remain, however, that the continued slide by Kakao and its three major subsidiaries including KakaoBank, and the ensuing bearish investor sentiment could negatively affect K Bank's upcoming IPO.

Coming back to the positives, industry insiders are hopeful the IPO will dilute some of the worries regarding K Bank’s capital adequacy. 

K Bank’s largest shareholder is BC Card, a subsidiary of wireless carrier KT Corp. 

During last year’s capital increase, there was a clause that indicated that BC Card will repurchase stakes in the digital lender if it fails to go public by 2026. 

The capital adequacy ratio for K Bank will climb 11.4% point if and when it manages a successful IPO within this year. 

Write to Nan-Sae Bin at binthere@hankyung.com
Jee Abbey Lee edited this article.