SEOUL (Reuters) -Digital lender Kakao Bank Corp made a stellar debut on Friday, surging 75% from its IPO price to become South Korea’s biggest financial services firm by market value.

The country’s first purely mobile bank to go public is expected to capitalise on rare growth opportunities for a financial firm afforded by an unusual South Korean regulatory framework.

Due to its large user base, Kakao Bank is able to recommend and collect fees on products offered by other financial firms on a much bigger scale than many traditional lenders, and also has an advertising business.

“Shareholders are bullish as it’s a platform, not just a bank,” said Seo Young-soo, an analyst at Kiwoom Securities.

Its shares were changing hands at 68,100 won in afternoon trade on Friday, compared with its IPO price of 39,000 won and valuing it at roughly $28 billion.

By contrast, KB Financial Group Inc, South Korea’s biggest traditional financial group, was worth about $19 billion.

Kakao Bank became profitable in 2019 after less than two years in operation and has 13.35 million monthly active users, making it the largest financial app in the country.

“It’s the only purely mobile digital bank in the world that has grown into a large bank with 28.6 trillion won ($25 billion) in assets in just four years,” said Seo.

Some market participants said, however, that Kakao Bank’ debut valuations were hard to justify given its earnings, noting that KB Financial is expected to post around 3 trillion won in net profit this year, more than ten times what Kakao Bank is likely to make.

EXPANSION PLANNED

Kakao bank raised some $2.2 billion in its IPO and plans to use the proceeds to expand its platform-related businesses, which still only account for 6% of its income.

Three-quarters of the 804.2 billion won it made in operating profit last year was interest income.

It offers unsecured personal credit loans and now holds 6% of that market. It also extends loans for the lump sums that Koreans must provide upfront when renting a property and plans to expand into mortgages and loans to small businesses.

Although Kakao Bank must compete with digital services from traditional banks, there is only one other pure online lender in South Korea, K Bank. K Bank, owned by BC Card and other domestic firms, reported an operating loss last year and has yet to announce any plans to list.

The listing is the country’s biggest since game company Netmarble’s IPO raised 2.7 trillion won in 2017, continuing a bumper year for South Korean stock market floats although some valuations have been slashed in recent offerings.

Kakao Corp, operator of South Korea’s dominant chat app and Kakao Bank’s top shareholder with a 27.3% stake, is also planning to take its payments affiliate public.

But Kakao Pay, which is also backed by China’s Ant Financial, has been asked by financial authorities to resubmit here its IPO registration statement. Prior to that request it had been seeking to raise up to $1.4 billion for a market value of as much as $10.5 billion.

($1 = 1,143.1100 won)

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