Digital lender Kakao Bank surges 65% in share market debut

The bank raised around $2.2 billion in its IPO and plans to use the proceeds to expand its platform-related businesses

Digital lender Kakao Bank Corp made a stellar debut on Friday, surging 65% from its initial public offering (IPO) price to become South Korea’s biggest financial services firm by market value.

The country’s first purely mobile bank to go public is expected to capitalize on rare growth opportunities for a financial firm afforded by an unusual South Korean regulatory framework.

Kakao Bank is able to recommend and collect fees on products offered by other financial firms on a much bigger scale compared with many traditional lenders due to its large user base, and also has an advertising business.

Shareholders are bullish as it’s a platform, not just a bank, said Seo Young-soo, an analyst at Kiwoom Securities.

In late morning on Friday, its shares traded at 64,600 won ($56.51), compared with its IPO price of 39,000 won ($34.11) and valuing it at nearly $26 billion.

Kakao Bank became profitable in 2019 after less than two years in operation. It is the largest financial app in the country with 13.35 million monthly active users.

It’s the only purely mobile digital bank in the world that has grown into a large bank with 28.6 trillion won ($25 billion) in assets in just four years, said Seo.

The bank raised around $2.2 billion in its IPO and plans to use the proceeds to expand its platform-related businesses, which still only account for 6% of its income.

Three-quarters of the 804.2 billion won ($0.70 billion) it made in operating profit last year was interest income. It currently offers personal credit loans and loans for the lump sums that Koreans must provide upfront when renting a property, and plans to expand into mortgages and loans to small businesses.

Kakao Corp, operator of South Korea’s dominant chat app and Kakao Bank’s top shareholder with a 27.3% stake, is also planning to take its payments affiliate public.