Seoul, February 10, 2026 — Kakao Bank, a leading South Korean digital lender, posted record profits last year, but a growing reliance on mortgage loans is raising concerns as the government tightens regulations on household debt. The bank’s future growth hinges on diversifying its portfolio and capitalizing on new revenue streams.
Mortgage Dependence and the Regulatory Shift
Kakao Bank’s net profit reached a record 480.3 billion won in 2025, but over 30% of its loans are now tied to the housing market.
Kakao Bank reported operating revenue of 3.0863 trillion won, operating profit of 649.4 billion won, and a net profit of 480.3 billion won for 2025, marking all-time highs. Sales increased by 14.9% and net profit by 9.1% compared to the previous year. The bank’s credit balance grew by 9% to 46.9 trillion won, with total deposits reaching 68.3 trillion won. Kakao Bank now serves over 26.7 million customers, with 20 million monthly active users.
A notable shift occurred in income sources. While interest income decreased by 2.9% to 1.9977 trillion won, non-interest income surged by 22.4% to 1.0886 trillion won, now accounting for 35% of total operating revenue. Fees and platform profits, including linked funds, insurance, and securities accounts, increased by 2.9% to 310.5 billion won.
However, the net interest margin (NIM) – a key indicator of profitability – was 1.94%, up slightly from the previous quarter (1.81%) but down 0.21 percentage points year-over-year (2.15%). The net interest spread (NIS) also fell from 2.50% to 2.34%, attributed to the rapid growth of lower-interest mortgage and policy loans.
The Rise of Housing Loans
As of the end of 2025, Kakao Bank’s housing mortgage loan balance, including policy mortgages like the Bogeumjari Loan, reached 14.541 trillion won, a 15% increase from the previous year (12.652 trillion won). Mortgage loans now represent 31% of the bank’s total loan portfolio, up from 29%.
Over 90% of Kakao Bank’s loans are household loans, further solidifying the ‘household + mortgage’ structure. While increasing policy mortgages enhances asset soundness, it can negatively impact profitability (NIM). The bank is also seeing success in expanding loans to borrowers with low to mid-level credit scores, providing approximately 2 trillion won in new loans in 2025. As of the fourth quarter of last year, these loans comprised 32.1% of the total loan balance, though the portfolio remains weighted towards ‘high-quality households + mortgage loans’ compared to other internet banks.
Kakao Bank maintains a strong capital position, with a BIS ratio of 23.15% and a common equity capital ratio (CET1) of 22.03%, the highest in the industry. However, these ratios have decreased by approximately 4 percentage points compared to the previous year, raising questions about balancing growth, dividends, and investment capacity.
Government Intervention and Future Strategies
The government’s household debt management plan, introduced on June 27, 2025, aims to curb the growth of mortgage and household loans. The Financial Services Commission reported that bank household loan growth slowed to 1.8% in 2025, significantly lower than the 3.5% recorded in 2024, with further moderation expected this year. Internet-only banks, including Kakao Bank, are under scrutiny to ensure they don’t become avenues to circumvent these regulations.
Kakao Bank CEO Ho-young Yoon presented the bank’s plans in 2023.
Kakao Bank must now navigate a changing landscape, potentially limiting its reliance on mortgage loans as a primary growth driver. The bank’s next phase of growth will depend on three key areas: expanding inclusive finance for low-to-mid credit borrowers and young people, increasing financial services for small business owners and the self-employed, and growing platform-based non-interest income from investments, insurance, and overseas remittances.
Diversification is Key
Expanding loans to those with lower credit scores aligns with the policy goals of internet banks. However, managing delinquency and insolvency rates will be crucial. Financing for small business owners and the self-employed also presents growth potential, but carries higher economic sensitivity and risk. Kakao Bank’s success in this area will depend on its ability to leverage non-face-to-face screening and data-driven credit models for digital entrepreneurs like delivery workers and online sellers.
Platform non-interest income has already surpassed 1 trillion won. The challenge lies in converting ‘recommendation/connection fees’ from funds, insurance, securities, foreign exchange, and overseas remittances into a consistent revenue stream and retaining customers through data-driven, lifestyle-integrated financial services.
Kakao Bank faces the delicate balance of expanding inclusive finance while maintaining growth, profitability, and shareholder dividends. An industry official explained, “Kakao Bank is no longer simply a deposit/savings/home loan bank, but must prove itself as a comprehensive retail platform encompassing mid-to-low credit, self-employed individuals, investments, and insurance.” They added, “Considering the government’s household debt management policy, home loan growth will be moderated, but non-interest and new loan portfolios will be core to evaluation over the next two to three years.”
This year, Kakao Bank plans to focus on policy funds and loans to individual businesses, rather than aggressively pursuing household loans. The bank aims for a total credit balance growth rate similar to 2025 (8.5%), expanding its business portfolio and increasing real estate-secured loans for individual businesses. Loans to individual business owners have more than tripled in two years, from 783 billion won at the end of 2023 to 1.894 trillion won at the end of 2024 and 3.055 trillion won at the end of 2025, contrasting with a 1.2 trillion won decrease in loans to individual business owners from the five major banks during the same period.
Kakao Bank also plans to increase advertising business sales by over 30% in 2026, expand its loan comparison services to include individual business and automobile finance, and boost commission and platform profits by 20% through new payment products and investment services. A new ‘Investment’ tab will be added to the app in the second quarter, allowing customers to compare and invest in various products, including MMFs, virtual assets, and domestic and overseas stocks. The goal is to increase operating profits by improving fund management scale and portfolio efficiency.
A Kakao Bank official stated, “Even in an environment where commercial banks’ loan balances for small business owners and individual business owners are decreasing, we will actively work to supply policy funds and loans to individual business owners. Our key task this year is to establish a stable profit base even amid falling NIM and household loan regulations by diversifying our credit portfolio and growing our fee and platform businesses.”
