Market watchers are closely watching whether Kbank will raise additional capital from global institutional investors in the second half of this year. South Korea’s first digital-only lender, which has decided to raise about 900 billion won ($744.5 million) in capital next month to normalize its operations, is reportedly said to have held behind-the-scenes talks with institutional investors based in Singapore.
Kbank held a shareholders meeting on June 19 and voted to raise capital by issuing new shares worth 157.4 billion won. If the rights issues totaling 239.2 billion won, which was decided in April, is added to it, the total amount of capital raising rises to about 400 billion won, taking Kbank’s total capital to 901.7 billion won.
Kbank initially planned to expand its capital to 1.1 trillion won through rights issues amounting to 594.9 billion won by June 18 and then resume its loan operations which had been suspended for more than a year. However, it announced on June 15 that it would postpone the capital increase until the end of next month due to the delay of major shareholders’ investment decisions. Kbank, which was launched in 2017, had to suspend its new loans last year as it fell short of capital due to its financial difficulties.
According to the financial industries, Kbank is planning to seek overseas funding in the second half of the year when it completes capital raising next month. Industry watchers said that Kbank may have judged that capital raised domestically may not be enough for it to generate stable interest income, as its deficits have been accumulated for years.
Government of Singapore Investment Corporation and Temasek Holdings, Singapore’s sovereign wealth funds, were mentioned as potential investors earlier this year. Kbank officials have visited Singapore to investigate the demand for overseas funding since the end of last year. Singapore is a country where interest in digital banks is rising rapidly. Its internet banking industry is still in its infancy.
A group of directors in charge of fintech at the Monetary Authority of Singapore (MAS) visited Kbank and KakaoBank, another internet bank, last October. The visit was regarded as an effort to map out the direction and strategy of Singapore’s financial industry. At that time, it was reported that MAS directors analyzed not only the strengths of Korea’s two internet banks but also the limitations the banks are facing.
Industry watchers said that institutional investors in Singapore think highly of the value of South Korea’s banking license because Korea’s strict banking regulations can act as a high-entry barrier to set up new banks, although they may also limit the growth of banking industries. Some also predict that if Kbank becomes normalized as capital raising goes smoothly, it will speed up its innovative financing with KT, the parent company. In fact, KT insiders predict that Kbank’s status in the group will rise in the future.
Lee Moon-hwan, the newly appointed Kbank CEO, had experience attracting foreign capital in 2019 when he was BC Card CEO. He attracted investment from China UnionPay Merchant Services Co. (China UMS), a subsidiary of China UnionPay, by selling 20% of BC Card’s stake in its subsidiary Smarto. It was the first time BC Card attracted foreign capital.
“It is true that we had some communication with institutional investors based in Singapore because they showed a high level of interest in us,” a Kbank official said. (Reporting by Hyunwoo Jin)