Kakao Bank's second quarter profit jumps almost nine-fold

An executive from Kakao Bank gives a presentation on stage at a conference held last year at COEX, Gangnam District, southern Seoul. [NEWS1]

Kakao Bank's net profit was up almost nine-fold in the second quarter on-year ahead of a possible public offering of stock in the second half of 2020.

The strong results were driven by a sharp rise in net interest income and a boost in commissions from the sale of financial products.

The online-only bank Wednesday reported 26.8 billion won ($22.6 million) of net profit in the second quarter, up from 3.0 billion the same period last year. The first half 2020 net profit figure was 45.3 billion won, up from 9.6 billion in the first half of 2019.

"We were able to make more profit from increased revenues from lending and fees from partnering with credit card companies and brokerages," the company said in a statement.

Net interest income rose dramatically, from 108.9 billion won in the first half of 2019 to 182.9 billion won in the first half of 2020.

“Kakao’s earnings surprise could be the result of increased liquidity in the market caused by the government’s coronavirus-related measures. People started taking out a lot of loans,” said Seo Young-su, an analyst at Kiwoom Securities.

Net commission income went from a negative 26.2 billion in the first half of 2019 to a negative 3.8 billion in the first half of 2020. The bank explained that it pays significant fees for the use of the ATMs of the other banks — 26 billion won in the first half of 2020 — but that is now being largely offset by higher commissions related to the sale of credit cards and brokerage products.

The bank currently introduced customers to three brokerages and is in discussion with another.

The bank's capital hit 24.4 trillion won in June, up from 5.8 trillion won when it was founded in 2017. Kakao Bank's delinquent loan ratio was 0.22 percent in the first half, while its net interest margin was 1.60 percent.

Kakao Bank remained the most used banking app in the country. It now has more than 11 million monthly active users, of which half were under the age of 50.

“The market for contactless banking will continue to grow as the coronavirus pandemic continues on,” said analyst Lee Chang-young of Yuanta Securities.

“While its current focus is on consumer loan products, there's room for growth as Kakao Bank has not entered the corporate financing market and mortgage loans business yet.”

BY KANG JAE-EUN [kang.jaeeun@joongang.co.kr]