Nikolas Sargeant
Bank prepares for third initial public offering attempt despite crypto exchange reliance concerns and challenging market conditions.
K Bank's IPO Journey Faces Persistent Challenges
K Bank, a prominent South Korean neobank, may encounter significant obstacles in its latest initial public offering (IPO) attempt due to its substantial "dependence" on crypto exchange giant Upbit.
According to Busan Ilbo, K Bank will launch its third IPO attempt following a board meeting held on March 12. The neobank previously tried to go public in February 2023 and again in October 2024, shelving both attempts as regulatory approval deadlines approach.
Following the second unsuccessful bid, several South Korean media outlets suggested the Upbit partnership was "to blame," citing K Bank's over-reliance on Upbit-related business. Market sources now predict similar difficulties for this third attempt, with the bank's "chronic dependence" on its Upbit banking arrangement potentially becoming a decisive factor.
Crypto Exchange Partnership: Benefit or Liability?
Upbit maintains its position as South Korea's dominant cryptocurrency exchange by market share and trading volume. The K Bank-Upbit partnership proved exceptionally profitable during the coronavirus pandemic when they offered the only fully digital solution for new clients.
South Korean regulations require all fiat-trading crypto exchanges to establish partnerships with domestic banks, which provide customers with social security number-verified fiat on/off ramps. While other banks initially required in-person account opening at physical branches, K Bank and Upbit pioneered online crypto wallet-linked bank accounts.
Though competing banks have since developed similar digital offerings, Upbit's market dominance remains unchallenged, with some lawmakers characterizing the exchange as a de facto "monopoly" in the sector.
Profitability Sustainability Concerns
Busan Ilbo described K Bank's "dependence" on Upbit as "excessive," identifying this relationship as "one of the reasons" behind "poor demand forecasts" for the IPO. The publication elaborated:
"The fact that a significant portion of K Bank's profits depend heavily on Upbit raises questions about its ability to sustain its profitability in the long term. Upbit accounts for about 20% of K Bank's deposit balance. There are concerns that it could experience a 'bank run' if there is significant volatility in the crypto market."
The outlet further noted that Upbit's recent fiat deposit interest rate increase could negatively impact K Bank's profitability margins. Another media source reported last month that several "traditional" banks are closely monitoring the Upbit-K Bank situation.
Banking Competitors Assess Opportunities
The current partnership agreement between K Bank and Upbit expires in October, with multiple financial institutions reportedly "weighing their options" for potential collaboration. These institutions may find encouragement in recent developments at Bithumb, Upbit's nearest competitor, which recently terminated its partnership with NongHyup Bank in favor of an agreement with Kookmin, South Korea's largest banking institution.
Additional factors potentially hampering K Bank's IPO attempt include "sluggish stock market prices" resulting from "internal and external uncertainties." The neobank previously sought a 4 trillion won ($2.75 billion) valuation in its most recent IPO effort. Market insiders suggest this valuation "should be lowered by at least 1 trillion won ($687 million)" to increase viability.
This valuation adjustment could create additional complications, as Busan Ilbo reported that financial investors would likely object to a reduced valuation request, further complicating K Bank's public offering prospects.
