The Korea Herald


Internet-only banks soar past W100tr in assets

By Choi Ji-won

Published : April 1, 2024 - 16:47

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(Toss Bank, K bank, Kakao Bank) (Toss Bank, K bank, Kakao Bank)

Last year witnessed remarkable growth for South Korea's three internet-only banks, as their combined value surged past the milestone 100 trillion won ($74 billion).

The aggregate assets of Kakao Bank, K bank and Toss Bank reached approximately 101.61 trillion won by the end of last year, marking a substantial 27 percent increase from the previous year's 79.5 trillion won. Kakao Bank led the pack with total assets of 54.48 trillion won, followed by Toss Bank with 25.73 trillion won and K bank with 21.4 trillion won, according to data released by each institution.

This achievement comes less than seven years since the inception of South Korea's first online-only bank, K bank, in April 2017. Kakao Bank, now the industry leader, commenced operations in July of the same year, while Toss Bank entered the fray most recently, in October 2021.

While internet banks surged last year, traditional banking heavyweights experienced comparatively modest growth. Combined assets of the five major commercial banks grew by 64.5 trillion won, a 2.9 percent increase year-on-year in the same period.

Aggressive expansion in housing-related loans appears to be the primary driver behind the growth of online lenders. Leveraging their cost-efficient internet-only operations, these banks managed to offer lower interest rates, capturing a significant portion of the market demand for mortgage loans.

Consequently, the outstanding balance of mortgage loans at the three internet banks soared to 26.6 trillion won, marking a staggering 70 percent increase from the previous year's 15.6 trillion won, as per data disclosed by Rep. Yang Gyung-sook of the main opposition Democratic Party of Korea last month.

Kakao Bank claimed the largest share, with its outstanding mortgage loans reaching 21.3 trillion won by the end of December, marking 60 percent annual growth, while K bank witnessed its outstanding balance more than double to 4.9 trillion won during the same period.

In contrast, the combined outstanding balance of mortgage loans at the five major commercial lenders increased by 3.3 percent, or 16.7 trillion won, from 2022, according to reports.

Fueled by their mortgage loan sales, the three internet lenders continued to attract a large influx of new customers. K bank and Toss Bank each surpassed the milestone of 10 million customers in February, while Kakao Bank reached an impressive 23 million the previous month, resulting in a combined annual increase of approximately 9 million for the three companies, in a country of some 52 million.

Despite varying growth rates, Kakao Bank and Toss Bank sustained robust expansion through successful product and service launches, while K bank faced slight setbacks due to increased provisions.

Kakao Bank achieved its best-ever performance, with annual net profit exceeding 350 billion won last year.

Toss Bank, although still in the red, narrowed its annual loss to 17.5 billion won and recorded consecutive quarterly surpluses in the latter half of last year, expressing confidence in turning profitable this year.

On the contrary, K bank witnessed an over 80 percent year-on-year decline in net profit to 12.8 billion won last year. The firm attributed this decline to a significant increase in provisions, which more than doubled from 136.1 billion won to 292.7 billion won, in preparation for potential credit insolvencies.