Kakao approved to increase stake in Kakao BankKakao has become the first Korean nonfinancial company to be approved to own more than 10 percent of a bank, paving the way for it to become the largest shareholder of Kakao Bank.
The achievement came just two years after the online-only bank was started.
On Wednesday, the Financial Services Commission (FSC) approved the request by the mobility-to-messenger IT company to raise its stake in Kakao Bank to up to 34 percent.
The FSC said Kakao met all of the conditions needed for the approval, including: a debt-to-capital ratio below 200 percent; not being fined or criminally charged by government authorities, such as the antitrust regulator; and more than 50 percent of its assets are related to ICT.
Kakao plans to purchase 12 percent, or 41 million shares, from Korea Investment Holdings. Korea Investment Holdings is currently the majority shareholder of Kakao Bank, with a 58 percent stake.
Kakao owns 10 percent, the maximum allowed in banks by nonfinancial company.
The limit on nonfinancial company ownership was adopted in 1961 to prevent conglomerates from owning banks and using them for personal purposes. The law was revised last year to allow ICT companies to hold the largest stakes in online banks. It hoped that the change will disrupt the status quo of the local financial industry by ushering in competition and therefore benefitting customers.
Kakao CEOs Yeo Min-soo and Joh Su-yong, in a statement released on Wednesday, said the company plans to expand its technology cooperation with and its investment in Kakao Bank to continue its innovation and change.
The approval is expected to help the bank’s continued expansion.
Kakao Bank, which was established in July 2017 and is the country’s second online-only bank, recently celebrated its 10 millionth account. In the first quarter, the bank reported its first profit.
Last year, in celebrating its first anniversary, the bank laid out its ambition of going public in 2020 in order to beef up its capital reserves and scale up its business.
Rival K bank, Korea’s first online-only bank, which was established in May 2017, continues to struggle as KT, which like Kakao applied for 34-percenet ownership approval earlier this year, in May decided not to pursue the stake increase as it is under investigation by the Fair Trade Commission for antitrust violations.
The decision came a month after the FSC pulled the plug on its reviewing the request.
The bank in the first quarter reported a 24.1 billion won ($20.5 million) net loss.
In the first quarter, its capital adequacy ratio, which indicates the soundness of the bank, was down 4.05 percentage points compared to the last three months of last year to 12.48 percent.
But Kakao Bank, which is riding high, could be facing new competition as the government is pushing to introduce one or two additional online banks this year.
BY LEE HO-JEONG [firstname.lastname@example.org]
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