Samsung Card Performance Shows Positive Signs... Target Price Raised Consecutively

[Asia Economy Reporter Park Jihwan] The securities industry is continuously raising the target price for Samsung Card. As personal consumption, which had slowed down due to COVID-19 last year, showed a full recovery, Samsung Card posted double-digit earnings growth in the first quarter of this year, and this trend is expected to continue for the time being, which has been highly appreciated.

According to the financial investment industry on the 29th, Korea Investment & Securities raised the target price for Samsung Card by 10.0%, from 40,000 KRW to 44,000 KRW, the day before. SK Securities raised it by 18.4%, from 38,000 KRW to 45,000 KRW, and DB Financial Investment increased it by 17.7%, from 42,500 KRW to 50,000 KRW. BNK Investment & Securities and Hana Financial Investment set target prices of 36,000 KRW and 42,000 KRW, respectively, up 9.1% and 7.7%.

Samsung Card recorded a net profit of 138.4 billion KRW in the first quarter of this year, up 23.4% compared to the same period last year. The biggest reason for the improvement in Samsung Card's net profit was that sales increased due to increased personal card usage, while costs showed a clear declining trend.

From this year, consumption sentiment, which had been depressed due to COVID-19 last year, is showing a recovery trend. Samsung Card's personal card usage amount (new sales) in the first quarter of this year increased by 11.8% compared to a year ago. New sales in February increased by 8.4% compared to the same period last year, and it is estimated that growth reached the 20% range last month. This contrasts with the declines of 3.4% and 2.4% in December last year and January this year, respectively. Baek Doosan, a researcher at Korea Investment & Securities, explained, "Even after adjusting for the COVID-19 base effect in March last year, there is a trend of at least 9% growth compared to the same period last year," adding, "Not only online channels but also some offline retail sectors such as department stores and outlets are strong."

The downward trend in various costs is also positive. Bad debt expenses in the first quarter decreased by 4.4% compared to the previous year. The total borrowing interest rate also fell by 0.05% from the previous quarter to 2.14%, improving the net interest margin. Lee Byung-geon, a researcher at DB Financial Investment, predicted, "The trend of a quarterly borrowing rate decline of around 0.02% is expected to continue for the time being." In addition, due to changes in consumption patterns caused by COVID-19, marketing costs have been reduced, and the level of selling and administrative expenses within 50 billion KRW per quarter is also considered stable. Due to cost stabilization and consumption recovery, Samsung Card's net profit this year is expected to increase by 14% year-on-year to 452.6 billion KRW.

However, the reduction of the legal maximum interest rate to be applied from July, which will reduce interest income by about 14 billion KRW, and the issue of cost reassessment of merchant fees at the end of the year, which may increase pressure to lower fees, are expected to be variables affecting performance. Choi Jungwook, a researcher at Hana Financial Investment, said, "Considering that card companies' profit resilience has greatly improved and that they have accumulated response capabilities through several fee rate reduction measures, the possibility of significant damage to profitability is low."