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KakaoBank brushes off overvaluation concern Internet-only bank explains appropriateness of its IPO valuation

Translated by Kim So-in 공개 2021-07-22 07:46:54

이 기사는 2021년 07월 22일 07:44 더벨 유료페이지에 표출된 기사입니다.

South Korea’s internet-only bank KakaoBank has dismissed concerns over the bank’s overvaluation ahead of its initial public offering (IPO) scheduled for next month.

KakaoBank CEO Yun Ho-young said at an online press conference held on Tuesday that the lender was established to contribute to creation of financial innovation. “Our profit model, as the first lender which provides banking service through a mobile platform only, is clearly different from those of other commercial lenders.”

“We are responsible for a whole new sector of services that do not overlap with other domestic lenders," Yun said.

The bank stressed that it cannot be compared with existing financial services companies in assessing its corporate value given its scalability and growth potential as a platform business.

It also emphasized its governance structure as strength. Under the Special Act on Internet-only Banks, non-financial companies including information and communication technology (ICT) firms are permitted to hold a maximum 34% of shares with voting rights. The bank said that 45% of its full-time employees are IT professionals, which allow the company to plan and develop products and services as an ICT company.

In addition, the lender distinguished itself with its scalability and growth potential based on a large number of monthly active users (MAU). According to KakaoBank, it has the largest number of MAU among Korean banking apps and the 14th largest among entire domestic apps.

The online lender focused on resolving controversy over an adequacy of comparable companies presented in its IPO prospectus. KakaoBank has selected U.S.-based personal finance and consumer service company Rocket Companies, Brazilian financial technology solutions provider PagSeguro Digital, Russian online retail financial services provider TCS Group, and Swedish digital bank Nordnet as its peer companies. Its selection of the peer group sparked controversy as their price-to-book ratio (PBR) significantly exceeds domestic banks’ PBR of 0.34-0.46 times.

KakaoBank tried to explain characteristics that the lender and peer companies have a lot of things in common. Rocket Companies provides online-only loan service and launched a product that is similar to an online-based mortgage loan KakaoBank is preparing to launch, Yun said.

He added PagSeguro Digital, a Brazil's leading comprehensive financial platform that encompasses franchisees and consumers, aims to become a digital bank and fintech platform at the same time, which KakaoBank also aims to achieve.

KakaoBank and Nordnet are similar in that they both are expanding their business to digital financial platform, which provides personal pension savings and other financial products, he said.

Russia-based TSC Group’s subsidiary Tinkoff Bank has a business structure most similar to that of KakaoBank, Yun said. The Russian bank provides not only finance, but also travel services such as air tickets, hotels, train tickets, and rental cars, as well as leisure services such as movies, restaurants, and concerts.

PagSeguro Digital has a PBR of 8.8 times, TCS Group 8 times, Nordnet 7.6 times and Rocket Companies 4.6 times. KakaoBank used the four peers’ average PBR of 7.3 times to estimate the valuation for its IPO. (Reporting by Jang-jun Lee)
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