Photo courtesy of Yonhap News

 

 

[Alpha Biz= Paul Lee] South Korea’s three internet-only banks posted mixed earnings results last year, with KakaoBank and Toss Bank achieving record profits, while K Bank reported a decline in net income. Analysts say the divergence reflects differences in business models and cost structures rather than a simple gap in competitiveness.

According to industry data released on April 2, KakaoBank recorded a net profit of KRW 480.3 billion, up 9.1% year-on-year, while Toss Bank posted KRW 96.8 billion in net income, more than doubling from the previous year. Both banks successfully reduced their reliance on interest income and expanded platform-based non-interest revenue streams.

KakaoBank’s non-interest income surpassed KRW 1 trillion, signaling successful diversification of its revenue base. Toss Bank also delivered a strong turnaround by leveraging a “super app” strategy that integrates payments, advertising, and financial services. Despite a slowing interest income environment amid shifting rate conditions, platform competitiveness emerged as a key driver of earnings resilience.

In contrast, K Bank reported net profit of KRW 112.6 billion, down 12.1% from a year earlier. However, analysts caution against interpreting this solely as a weakening of profitability, pointing instead to structural cost pressures.

A major factor was the implementation of South Korea’s Virtual Asset User Protection Act in July 2024, which raised the interest rate on customer deposits linked to crypto assets from 0.1% to 2.1%. This significantly increased interest expenses associated with deposits tied to Upbit. While the regulation applied for only half of 2024, it was reflected for the full year in 2025, structurally raising cost burdens.

As a result, K Bank’s interest expenses rose to KRW 635.3 billion, while net interest income declined to KRW 444.2 billion, putting pressure on overall profitability. Additional increases in marketing costs to expand its customer base and IT investments for platform transformation further pushed up operating expenses.

Analysts view K Bank’s earnings decline as largely attributable to “front-loaded costs” rather than weakening core operations. In particular, deposit-related costs tied to its partnership with Upbit remain a key variable affecting profitability.

Despite the earnings drop, K Bank showed improvement in growth and asset quality. Its corporate loan balance more than doubled year-on-year to KRW 2.31 trillion, signaling a strategic shift from household lending toward corporate finance. At the same time, its delinquency ratio declined from 0.90% to 0.60%, with corporate delinquency rates also improving significantly from 1.83% to 0.60%. The ratio of non-performing loans also fell from 1.13% to 0.50%, indicating overall stabilization in asset quality.

Looking ahead, K Bank plans to accelerate its transition from a traditional banking model to a platform-based financial company, leveraging a potential IPO as a catalyst. The bank aims to expand non-interest income by integrating commerce and financial services, diversify its lending portfolio toward SMEs and corporate clients, and develop new services utilizing digital assets and artificial intelligence (AI).

The performance gap among the three internet banks is increasingly being viewed as a result of “platform competition” rather than interest rate competition. While KakaoBank and Toss Bank have rapidly built non-interest revenue ecosystems, K Bank remains in the early stages of transformation amid structural cost pressures. Future competitiveness will hinge on whether K Bank can reduce its reliance on Upbit-linked deposits and secure stable non-interest income streams, as the industry shifts toward platform-driven growth.

 

 

 

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