The leading commercial banks currently have enormous concerns about major fintech related companies such as Kakao Bank, Kakao Pay, Naver, and Toss gobbling up various finance related service market shares. By the end of 3Q 2021, there will be three Internet banks in Korea and we think that there could be two more Internet banks by the end of 2022.
In order to compete more effectively against the major fintech companies such as Kakao Bank, the major commercial banks are likely to expand aggressively into non-finance related services such as food and parcel deliveries. A key reason for this is to improve their Big Data capabilities, especially in terms of better understanding their customers' purchase patterns.
Although we have a Positive rating on the Kakao Bank IPO, the additional competitive threats will likely to slow down the sales and profit growth of Kakao Bank considerably, especially starting 2022. Our bullish thesis on Kakao Bank rests on the relative attractive valuation of the IPO pricing.