[Provided by Kakao Bank]
[Provided by Kakao Bank]

Kakao Bank posted a net profit of 328 billion won ($229 million) in the first half of this year, its highest ever for a half-year period. The record came as the bank expanded lending — led by loans to self-employed borrowers — even amid tighter household credit controls, while growing its platform businesses in loan comparison, payment services and investment products.

According to earnings disclosed Wednesday, first-half net profit rose 24.4 percent from the same period last year. Second-quarter net profit reached 140.8 billion won, up 11.5 percent year-on-year.

Profitability indicators also improved. The first-half return on equity came in at 9.95 percent, up 2.73 percentage points from the full-year figure of 7.22 percent last year, while return on assets rose from 0.68 percent to 0.86 percent. The cost-to-income ratio fell 2.7 percentage points to 34.2 percent, entering the mid-30 percent range for the first time.

First-half operating profit, however, slipped 0.5 percent year-on-year to 351.6 billion won. Second-quarter operating profit of 194 billion won — up 14.0 percent — was not enough to offset the half-year decline. The double-digit growth in net profit despite lower operating profit was largely due to 93.8 billion won in non-operating income booked in the first quarter, related to Super Bank, Kakao Bank's joint-venture bank in Indonesia. Non-operating income was 800 million won in the second quarter, compared with 700 million won in the same period last year.

Interest income maintained steady growth. First-half net interest income reached 775.7 billion won, up 20.8 percent year-on-year. The second-quarter net interest margin rose 0.13 percentage points from the previous quarter and 0.21 percentage points from a year earlier to 2.13 percent. The cumulative first-half NIM of 2.07 percent exceeded the four major commercial banks' average of 1.62 percent.

Funding costs also eased. The cumulative first-half funding cost ratio of 1.83 percent was 0.23 percentage points below the four major banks' average of 2.06 percent. As savings deposit costs declined, the second-quarter funding cost ratio fell 2 basis points from the previous quarter to 1.82 percent.

In non-interest income, fee revenue and advertising drove growth. First-half fee income surged 91.6 percent year-on-year to 25.1 billion won, from 13.1 billion won a year earlier. Loan disbursements through the bank's loan comparison service reached 1.56 trillion won in the second quarter, up 12 percent year-on-year and 17 percent quarter-on-quarter. Debit card spending over the same period totaled 6.3 trillion won.

Second-quarter advertising revenue rose 81 percent year-on-year, and advertising's share of platform revenue expanded from 19 percent last year to 31 percent. Fund sales balances stood at 1.8 trillion won, giving Kakao Bank a 4.2 percent share of the retail public fund market among banks.

Overall operating revenue growth was limited to 5.5 percent, however, as other operating income fell. Second-quarter other operating income dropped 49.2 percent year-on-year to 49.9 billion won, reflecting a contraction in valuation and trading gains on investment assets. Rising market interest rates boosted bond interest income, pushing second-quarter investment income up 12 percent from the previous quarter to 169.8 billion won.

Costs also rose. Second-quarter selling and administrative expenses increased 17.5 percent year-on-year to 153.9 billion won, as full-scale operation of the bank's own data center drove depreciation and IT operating costs up 50.4 percent and 35.4 percent, respectively. The bank had 1,843 employees at the end of the first half.

Asset quality remained stable. The second-quarter delinquency rate held at 0.51 percent, unchanged from the previous quarter, and the non-performing loan ratio was 0.54 percent. The cumulative first-half credit cost ratio fell 4 basis points from the previous quarter to 0.51 percent. Loan loss reserves stood at 543 billion won, with a coverage ratio of 209 percent — down 10 percentage points from a year ago.

Total loans outstanding at the end of the second quarter reached 48.22 trillion won, up 518 billion won from the previous quarter. Household loan growth was modest at 234 billion won, while self-employed loans rose 284 billion won to 3.69 trillion won. Self-employed loans grew 45 percent over the past year, with guaranteed and collateralized loans accounting for 69.1 percent of the portfolio. Self-employed loans made up 48 percent of total net new lending in the first half.

The average balance of unsecured loans to mid- and low-credit borrowers stood at 4.8 trillion won, representing 31.9 percent of the loan book — above the regulatory threshold of 30 percent. The share has been gradually declining, however, from 33.1 percent in the second quarter of last year. New disbursements in the second quarter totaled 520 billion won, bringing the first-half cumulative total to around 1 trillion won.

Deposit balances grew 5.4 percent year-on-year to 67.11 trillion won, though they fell 2.25 trillion won from the previous quarter as funds shifted toward the stock market. Kakao Bank said more than 1 trillion won flowed back in during July, returning deposits to net growth. Low-cost deposits accounted for 39.5 percent of the total, below the banking sector average of 56.7 percent. The balance in group savings accounts stood at 11.7 trillion won, with about 13.1 million users.

The total customer count at the end of the second quarter reached about 27.63 million, up 930,000 from the start of the year. Monthly active users numbered about 20.32 million, while cumulative subscribers to the bank's conversational AI service reached about 5.28 million — a 15-fold increase in one year.

Kakao Bank plans to accelerate business diversification in the second half. In August, the bank will launch a "Payment Home" service and its second private-label credit card, and in September it will expand its loan comparison service to auto financing.

For Masten Capital, in which Kakao Bank signed a deal to acquire a 100 percent stake in June, the bank is targeting Financial Services Commission approval for the investment within the year. Once the acquisition is complete, it plans to roll out auto financing in 2027 and expand the business in stages. Regarding its equity investment in Mongolia's M Bank, Kakao Bank signed a term sheet in July and is pursuing a definitive agreement in the fourth quarter.

"We will extend our contactless financial innovation technology and expertise into the capital finance sector to deliver new financial experiences in areas closely tied to customers' daily lives," the bank said. "We will strengthen productive finance and enhance our platform competitiveness and capital efficiency to increase corporate value."


won@heraldcorp.com