Internet banks' loans to sole proprietors surge 50% in a year as household lending tightens

K bank up 109%, Kakao Bank up 45% in a year

Non-interest businesses — platforms, wealth management, digital assets — emerge as new growth engines

Internet banks, whose growth has been constrained by tightening household lending regulations, are pushing deeper into corporate finance by expanding loans to sole proprietors. At the same time, they are building out non-interest businesses — including loan-comparison platforms, wealth management, and digital assets — to reduce their dependence on lending income.

According to semiannual reports filed by Kakao Bank, K bank and Toss Bank, the combined balance of sole-proprietor loans at the three internet banks stood at 8.33 trillion won ($6.03 billion) at the end of the first half of this year.

That marks a 2.8 trillion won, or 50.6 percent, increase from 5.53 trillion won a year earlier, as the banks rapidly diversified their loan portfolios toward sole-proprietor lending amid stricter household credit regulations.

K bank posted the sharpest growth among the three. Its sole-proprietor loan balance more than doubled, rising 1.72 trillion won — from 1.58 trillion won at the end of the first half of last year to 3.3 trillion won at the end of the first half of this year, a 108.7 percent increase.

K bank extended 1.52 trillion won in new sole-proprietor loans in the first half of this year, equivalent to 82.6 percent of its full-year total of 1.84 trillion won last year — achieved in just six months. Driven by the surge in sole-proprietor lending, corporate loans now account for 17 percent of the bank's total won-denominated loan balance.

Kakao Bank's sole-proprietor loan balance reached 3.69 trillion won at the end of the first half, up 1.15 trillion won, or 45.2 percent, from 2.54 trillion won a year earlier.

Kakao Bank's total loan balance stood at 48.22 trillion won. Sole-proprietor loans accounted for 48 percent of the net increase in total loans during the first half — nearly half of all new lending.

Toss Bank bucked the trend: its sole-proprietor loan balance fell 68.9 billion won, or 4.9 percent, from a year earlier to 1.34 trillion won. Its total loan balance grew 3.3 percent over the same period to 15.64 trillion won.

The internet banks plan to use sole-proprietor lending as a springboard into broader corporate finance. They are expanding their secured-loan product lineups, broadening the permitted uses of funds, and preparing to offer fully digital loans to small and medium-sized enterprises.

Kakao Bank plans to expand its product lineup, including a refinancing service for sole-proprietor real estate-backed loans. Over the medium to long term, it aims to extend into non-bank lending and overseas operations.

K bank plans to broaden the collateral accepted under its sole-proprietor real estate-backed loan product — currently limited to apartments — to include row houses, multi-family homes, officetels and commercial properties. It also intends to expand eligible loan purposes beyond working capital to include facility investment.

In the second half of the year, K bank will scale up sole-proprietor finance while also preparing digital loan products for small and medium-sized enterprises — a strategy aimed at extending its corporate finance reach beyond sole proprietors to SMEs.

Toss Bank plans to introduce a customized banking system for sole proprietors, with services tailored to their cash-flow patterns and financial needs, in a bid to grow its customer base in that segment.

Alongside expanding lending, the internet banks are investing in non-interest businesses such as platforms and wealth management to reduce their reliance on interest income, which has become increasingly volatile as interest rates and lending regulations shift.

Loans arranged through Kakao Bank's loan-comparison service at partner financial institutions reached 1.56 trillion won in the second quarter of this year, up 12 percent from the same period last year. Debit card spending also hit a record quarterly high of 6.3 trillion won.

In the second half, Kakao Bank plans to launch an auto-loan comparison service, expand investment service tie-ups and introduce new debit card products.

K bank is positioning digital assets and stablecoins as new growth drivers, building on its existing virtual asset partnerships to broaden its financial service offerings in the sector.

Toss Bank is making wealth management and investment services a core growth pillar. It plans to formally launch a fund-sales brokerage business in the second half of the year, expanding its asset management product lineup for retail investors.

"As household lending regulations make it harder for internet banks to grow at their previous pace, the importance of sole-proprietor and SME lending is rising," a banking industry official said. "How well they can secure stable revenue streams in non-interest areas such as platforms and wealth management will also determine their competitiveness going forward."

attom@heraldcorp.com