South Korea’s K bank has so far had a limited response as it tries to attract new institutional investors to hike its capital base by about 600 billion won ($542 million).
The online-only bank has approached institutional investors, including pension funds and mutual aid associations, to participate in a rights issue of around 400 billion won, industry sources said on Monday (January 25). The rights issue is expected to be worth a maximum of 600 billion won if KT’s subsidiaries, including BC Card, decide to inject 200 billion won into the bank’s capital hike.
K bank increased its capital base by 400 billion won in July 2020 by issuing 239.2 billion won of common stock and 157.4 billion won of convertible preferred stock, which boosted its capital from 500 billion won to 900 billion won. It plans to increase its capital to 1.5 trillion won by raising funds from outside investors and existing shareholders amid increasing competition in the fast-growing digital bank sector.
“K bank has tried to attract institutional investors to secure new shareholders,” said an industry source, adding, “It approached several pension funds and mutual aid associations and is waiting for their decisions.”
The bank is expected to receive proposals from investors in February and complete the process by the end of June. However, industry observers have mixed views on whether the process will go as planned, because it could take a long time to persuade potential investors.
“[K bank] proposed participation in a rights issue without providing an option to build our preferred investment structure,” said a source, adding, “We are skeptical whether we will accept the offer as we can’t secure a protection against downside risk.”
Financial investors considering participation in the rights issue are said to be taking a cautious stance on valuing the lender amid the heated digital banking competition.
K bank has completed seven rounds of recapitalization since it was founded with capital of 250 billion won in 2017. The largest shareholder is BC Card, with a stake of 34%, followed by Woori Bank with 26.2% and NH Investment & Securities with 10%. (Reporting by Ar-rum Rho)