As internet-only banks accelerate their financial services for self-employed individuals and small business owners, Toss Bank is experiencing a slowdown. The bank appears to be adjusting its pace due to increased delinquency rates stemming from its aggressive expansion of credit-focused business loans in its early days.
According to the financial sector on July 8, the total corporate loan balance of three internet-only banks reached 7.5296 trillion won at the end of the first quarter, a 50% increase from 5.206 trillion won in the same period last year. Currently, corporate loans from internet-only banks are primarily focused on individual entrepreneurs, representing a significant area of inclusive finance aimed at improving access to financial services for self-employed individuals.
During this period, Kakao Bank's corporate loans increased by 50.9% to 3.4036 trillion won, while K Bank saw its loans more than double to 2.7529 trillion won.
In contrast, Toss Bank's corporate loans decreased by 5.4% over the past year, totaling 1.3731 trillion won. Toss Bank entered the individual entrepreneur loan market as the first internet-only bank in 2022, rapidly increasing its loan balance to around 1.8 trillion won in the first half of the following year, but it has since continued to decline. Although there was a rebound at the end of last year, the trend has reversed again this year.
The slowdown in Toss Bank's business loan growth is attributed to its relatively high delinquency rates. Analysts suggest that the portfolio formed during its initial aggressive expansion of credit loans for individual entrepreneurs is impacting its current delinquency rates.
Indeed, Toss Bank's corporate loan delinquency rate was recorded at 3.33% in the first quarter of last year and has gradually improved, but it still stands at 2.11% as of the first quarter of this year, significantly higher than Kakao Bank's 1.40% and K Bank's 0.55%. This rate is more than double that of Toss Bank's household loan delinquency rate of 0.97%.
In response, Toss Bank is diversifying its asset portfolio by increasing the proportion of guaranteed loans to manage its financial health. As of the first quarter of this year, the share of guaranteed loans within Toss Bank's business loans rose to 38%, up 13 percentage points from 25% in the same period last year.
However, there are still limitations in expanding a portfolio focused on guarantees and collateral, as the bank currently lacks secured products like real estate-backed loans. In contrast, the proportion of guaranteed and collateralized loans in Kakao Bank's business loans approaches 70%.
A Toss Bank official stated, "Rather than reducing the scale of business loans, we are restructuring our loan portfolio to balance credit and guarantees. We plan to continuously expand guarantee-based products to maintain a balance between soundness and growth."
* This article has been translated by AI.
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