It has been confirmed that the delinquency rate for credit loans linked to virtual asset accounts at K-Bank has reached an all-time high. K-Bank is a partner bank for the won accounts of Upbit, which accounts for more than 70% of the domestic virtual asset transaction amount. In order for Upbit users to trade virtual assets in won, they must open an account with K-Bank and deposit funds.
With the boom in the virtual asset market, K-Bank expected to benefit, but the delinquent balance of virtual asset-linked accounts has increased, raising concerns about its financial soundness. After two consecutive failures to go public, K-Bank is preparing for an initial public offering (IPO) next year, but concerns have been raised that its excessive dependence on the virtual asset exchange Upbit and soundness indicators, which were pointed out during the National Assembly's audit, could be obstacles to the listing.
According to data submitted to the office of Kim Jae-seop, a lawmaker from the People Power Party, by the Financial Supervisory Service on the 30th, the delinquency rate for personal credit loans among customers using virtual asset-linked accounts at K-Bank for the third quarter of this year is 1.28%, and the delinquent balance is recorded at 47.4 billion won. Since starting virtual asset-linked accounts in June 2020, K-Bank has consistently broken records for both the delinquency rate and delinquent balance.
The situation is even more serious for low to medium credit customers among those holding accounts linked to the virtual asset exchange. During the same period, the delinquency rate for low to medium credit customers (those with KCB credit scores in the bottom 50%) at K-Bank has increased by 0.03 percentage points to 2.2%, with delinquent amounts totaling 34.4 billion won. In comparison to high credit customers with a delinquency rate of 0.6%, it is more than three times higher. Considering that the virtual asset rally began after Donald Trump was elected as the U.S. presidential candidate in November, the delinquency rate is expected to have risen further by the end of the year.
K-Bank is reportedly set to reinitiate its listing efforts next month. The preliminary examination for listing that it received in August is valid until February next year, leading industry observers to believe K-Bank will attempt to go public before then. Furthermore, recent analyses suggest that the active virtual asset market is favorable for K-Bank, as it can generate additional revenue by managing investors' assets deposited for use on Upbit.
However, Upbit is being described as a double-edged sword for K-Bank. As deposits increase, the interest that K-Bank must pay to users on these deposits also rises. Since the introduction of the Virtual Asset User Protection Act in July, the deposit interest rate, which was nearly nonexistent at 0.1% per year, has now surged to 2.1%, an increase of 21 times. While increased deposits lead to operational revenue, they also raise the burden of costs for K-Bank.
Moreover, the uncertainty in the virtual asset market can negatively impact K-Bank's soundness. As the loan amounts linked to virtual asset accounts have increased every year, the delinquency rate has also grown. In the case of popular altcoins (excluding Bitcoin) in South Korea, prices often fluctuate dramatically, which can lead to a decrease in asset value, resulting in customers being unable to repay their loans and adversely affecting the delinquency rate.
Additionally, K-Bank has been evaluated as having weaker financial soundness compared to other internet banks. As of the third quarter, K-Bank's non-performing loan balance stands at 207.2 billion won, which is an increase of 29.2% (46.8 billion won) compared to the same period last year. Non-performing loans are typically defined as those that have been overdue for more than three months or do not generate interest income. This level is significantly higher than that of competitors Kakao Bank (187.4 billion won) or Toss Bank (115.4 billion won).
A source in the financial sector noted, "Given the characteristics of internet banks that target low to medium credit customers, managing financial soundness is essential during IPO preparations. In K-Bank's case, its dependence on Upbit and the delinquency rate of virtual asset-linked accounts could impose financial burdens. It appears that measures are needed, such as increasing collateral loans or loans to high-credit individuals to manage the overall delinquency rate."