Kakao Bank, South Korea’s second-largest internet-only lender, will expand lending to people with low-to-moderate credit scores and make a foray into business lending later this year, the company’s CEO said on Tuesday. .
Yoon Ho-young, CEO of the lender, told reporters that loans for low and medium credit borrowers will be “significantly” increased from last year’s 1.38 trillion won ($1.24 billion ). The size and interest rates of these loans will depend on market conditions, risk management and financial strength, he said.
The move is seen as a response to criticism that, contrary to the original aim of helping financial minorities, the bank has focused on high credit borrowers.
“Last year we focused relatively heavily on high credit borrowers and fell short of lending expectations for mid-rate customers. This year we will expand our lending customer base” , Yoon said.
As part of efforts to increase lending for holders of low and medium credit ratings, Kakao Bank lowered lending limits for high-credit users from 150 million won to 100 million won in January, while raising interest rates for them by 0.34 percentage points from February.
It is also developing a unique credit scoring system for holders of low and moderate credit ratings as well as those who lack credit information, Yoon noted.
CSS developed by the banking arm of mobile phone giant Kakao could pose a threat to typical credit scoring methods used by traditional banks, if the bank can create a breakthrough system that could improve profitability and reduce rates default on low and medium credit loans.
“We are developing and improving our CSS based on a financial and non-financial database owned by the Kakao family,” Yoon added.
During an online press conference on Tuesday, Kakao Bank CEO Yoon Ho-young outlined the company’s strategy for 2021. (Kakao Bank)
The lender, which is not licensed to lend to large businesses, will roll out its first small business loans, initially targeting the self-employed.
In addition to expanding the lending customer base, it also plans to strengthen its platform business areas by utilizing the high number of users by adding sales channels for fund, bancassurance and debit card products. credit.
In 2020, Kakao Bank added 3 million new users to reach the current number of 15.4 million users, nearly 30% of the country’s population. The average number of unique monthly visitors was 12.5 million last year, the company said. The number of transactions reached 640 million and the transaction amount soared 80% to 234 trillion won in 2020.
It appears that the internet-only bank has been successful so far in translating its strong user base into profits.
Kakao Bank posted a net profit of 113.7 billion won last year, up 729 percent from 13.7 billion won in 2019, the first year it recorded a profit.
Net income growth was led by an increase in credit loans which contributed to a better net interest margin. The NIM stood at 408 billion won last year.
The bank’s total assets stood at 26.65 trillion won at the end of 2020, adding 3.92 trillion won from the previous year.
The triple-digit growth in net profit combined with the strategic maneuvers announced on Tuesday, if successful, will pave the way for a much-anticipated IPO for the company this year.
The company’s IPO is one of the most anticipated this year, along with other companies such as Kakao Pay, game studio Krafton and SK Bioscience.
Over-the-counter shares of Kakao Bank are trading at 72,000 won per share as of 2:30 p.m. Tuesday. This puts Kakao Bank’s valuation at 29.3 trillion won, well above the valuation of major commercial banks such as KB Bank’s 17 trillion won and Shinhan Bank’s 16 trillion won.
However, the company’s IPO will not take place in the first half, according to Yoon, as the company plans to seriously prepare for a listing after its 2020 financial results are approved at a shareholders’ meeting. in March.