Concerns are being raised about K bank’s planned capital hike, with some industry watchers concerned that it could lead to a more dispersed ownership structure and less efficient decision-making by the online business.

K bank, a South Korean digital-only bank, plans to increase its capital base by issuing 400 billion won ($348 million) of new common shares or convertible preferred shares to existing and new investors during the first half of next year.

But there are concerns about the impact this could have on the bank’s ownership base. K bank’s shareholder structure is less concentrated than that of rival Kakao Bank, whose two largest shareholders – Kakao Corp and Korea Investment Holdings Group, which are in partnership with each other – together have a stake of more than 67%.

In contrast, BC Card, Woori Bank and NH Investment & Securities hold stakes of 34%, 26.2% and 10% respectively in K bank, and their interests are all different. Since other shareholders cannot or are unwilling to invest more, K bank is expected to focus on attracting new investors with the coming capital increase. This would dilute holdings by existing investors and produce a more dispersed ownership structure.

“Without a leading shareholder, K bank may have difficulties with making key business decisions in the future if the planned capital increase causes a more dispersed shareholder structure,” an industry insider said.

K bank has no option but to issue new shares to raise additional capital because of a weakened market position. The latest statistics show that digital-only banks accounted for 1.1% of the country’s total loans denominated in Korean won at the end of June. K bank’s share was only 0.1%, with the remaining 1% claimed by Kakao Bank.

The gap between K bank and Kakao Bank has widened after K bank temporarily suspended new lending for about a year from last summer due to the lack of capital. Its market share in retail credit lending declined to 0.6%, while Kakao Bank’s portion stood at 5.8%.

Since the inception of K bank and Kakao Bank, South Korea’s digital bank market has grown at a rapid pace, creating a positive outlook for the business. The daily average of loans via online applications increased to 192.5 billion won in 2019 from 103 billion won in 2017 and 22 billion won in 2016. (Reporting by Ar-rum Rho)