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Kakao to boost stake in its bank

It will finally become majority shareholder, improving capital flow
Nov 22,2019
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Internet giant Kakao will officially become the top shareholder of Kakao Bank as Korea Investment Holdings, currently the largest stakeholder, is scheduled to sell a sizable share to the tech company today.

The transition of ownership is expected to help the internet-only bank gain a strong capital stream and foster close business ties with Kakao’s diverse platforms and services.

The financial holdings unit will sell a 16 percent stake in Kakao Bank to Kakao, a maneuver that will push up Kakao’s entire holdings to 34 percent.

Korea Investment Holdings, which until today held a 50 percent stake, will offload a further 29 percent to its asset management affiliate Korea Investment Value Asset Management, according to its electronic disclosure posted on Tuesday. It will sell a further 0.1 percent stake to Yes24.

The planned sale will make Korea Investment Holdings the fourth-largest shareholder with 4.99 percent shares after KB Kookmin Bank.

The deal was made possible after the Financial Services Commission granted a regulatory nod on Wednesday.

Market analysts expect the change in ownership to help the digital bank to further expand into new businesses and hold an anticipated initial public offering next year.

“Kakao Bank will likely enter new businesses such as mortgage loans [through the deal],” said Kim Dong-hee, an analyst at Meritz Securities.

The bank has also expressed its intention to enter the credit card business and sell more diverse investment products as it developed a sound user base for deposit and loan services.

Since the bank started business, Kakao has sought to become the top shareholder, but a regulation that limits the IT company’s ownership of banks to 10 percent has always got in the way. But after a bill that lifted the rule passed earlier this year, Kakao finally had a chance to take over its eponymous bank.

A glimmer of hope also came to K bank, Korea’s only other internet-only bank, which has been struggling with capital since KT faced regulatory hurdles to become the top shareholder of the bank.

A second bill aimed at further easing the criteria for the largest shareholder of an internet-only bank passed a subcommittee at the National Assembly, a critical phase before it advances to the plenary session.

KT, which also applied for 34 percent ownership approval earlier this year, in May decided not to pursue the stake increase in K bank as it is under investigation by the Fair Trade Commission for antitrust violations.

The law stipulates that a company with a record of violating the Fair Trade Act and other financial irregularities will not be eligible to become the largest shareholder of an internet-only bank for five years after its most recent violation.

The new bill will exclude a Fair Trade Act violation from the criteria for top shareholders.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]