Kakao Bank CEO Yun Ho-young speaks during an online press conference on July 20 ahead of its initial public offering slated for early next month. Photo courtesy of Kakao Bank

Korean internet-only bank will go public early August

South Korea’s largest digital lender Kakao Bank shattered the record for initial public offering in terms of demand by attracting funds bigger than the country’s yearly outputs.

Kakao Bank received 2,585 trillion won ($2.3 trillion) of deposits from almost 2,000 institutional investors on July 21 and 22, according to its IPO advisors, including KB Investment & Securities.

The figure breaks a three-month-old record set by SK IE Technology, Korea’s battery material manufacturer affiliated with SK Innovation, which drew 2,417 trillion won deposits in April.

Thanks to the high demand, Kakao Bank’s IPO price is expected to be 39,000 won ($34) _ the internet-only lender presented a price range between 33,000 won and 39,000 won.

It plans to sell about 65 million shares in the Aug. 6 IPO to raise around 2.5 trillion won ($2.2 billion).

Then, its initial market capitalization would be some 18.5 trillion won, comparable to the country’s largest banking groups of KB and Shinhan. Their market capitalizations are 21 trillion won and 19.4 trillion won, respectively.

Kakao Bank is a subsidiary of Kakao, which has a broad user base thanks to its KakaoTalk instant messaging service. Young customers take advantage of Kakao Bank thanks to its convenience.

During a recent press meeting, Its CEO Yun Ho-young said that almost 40 percent of those aged between 14 and 19 use Kakao Bank services, although the proportion is just 15 percent for citizens aged 50 or older.

“KB and Shinhan each operate almost 1,000 branches across. By contrast, Kakao Bank does not run a single offline branch. Still, its market valuation is comparable to those of traditional lenders,” Prof. Sung Tae-yoon at Yonsei University said.

“This shows that a paradigm shift is underway. The trend is expected to speed up.”

Prof. Jung Yu-sin at Sogang University said that we need to wait and see.

“Kakao Bank has a unique business model, which is different from other digital lenders outside of the country. Hence, it does not have a benchmark to compare with,” Jung said.

“If young customers of Kakao Bank remain loyal to the service, its valuation is acceptable. But there is no guarantee of it.”