[Click eStock] "Samsung Card, Net Profit Expected to Increase by 18% Year-on-Year This Year"

[Asia Economy Reporter Song Hwajeong] Korea Investment & Securities forecasted on the 28th that Samsung Card's performance will significantly increase this year due to stabilization of bad debt expenses and recovery in consumption, maintaining a 'Buy' investment rating and a target price of 44,000 KRW.

Baek Dusan, a researcher at Korea Investment & Securities, stated, "Despite the card point cash-out service launched in January and the statutory maximum interest rate reduction to be applied from July, the core indicator, credit sales (Shinpan) usage amount, is steadily increasing, which is positive," adding, "With stabilization of bad debt expenses and consumption recovery, net profit this year is expected to reach 470.1 billion KRW, an 18% increase compared to the previous year."

Samsung Card's first-quarter performance this year exceeded market expectations (consensus). Researcher Baek analyzed, "The first-quarter net income attributable to controlling interests was 138.4 billion KRW, surpassing consensus by 21%. Despite increased selling and administrative expenses related to the card point cash-out service, credit sales revenue increased steadily and bad debt expenses were low."

The first-quarter personal credit sales usage amount increased by 11.8% compared to the same period last year. Due to an increase in the number of users, Samsung Card's personal credit sales usage share improved from 17.3% to around 18% during the same period, and the total industry usage amount in the first quarter is estimated to have increased by 9-11%. The usage amount growth rate, which was somewhat sluggish until January this year, rose sharply in February and March. Researcher Baek explained, "In particular, the usage amount growth rate in March is estimated to have recorded the 20% range compared to the same period last year. Even after adjusting for the COVID-19 base effect in March last year, the trend shows at least a 9% increase year-on-year, with strength not only in online channels but also in some offline retail sectors such as department stores and outlets."

The first-quarter bad debt ratio was 1.69%, down 223 basis points (1bp=0.01%) from the previous quarter and 19 basis points from the same period last year. Researcher Baek said, "Considering delinquency rates and recovery rates of delinquent loans, asset quality is expected to remain sound after the second quarter," adding, "The annual bad debt ratio this year is estimated to be 30 basis points lower than the previous year."

Despite rising interest rates, the total borrowing cost rate fell by 5 basis points compared to the previous quarter due to low procurement costs for new borrowings relative to the balance and efficient procurement composition. The merchant fee rate also maintained the previous quarter's level, excluding seasonal fee refunds.