[Click eStock] "Samsung Card, Government's Fee Rate Reduction... Performance Impact Inevitable"

Annual Impact on Samsung Card Sales Estimated at 70 to 80 Billion KRW
Shinhan Financial Investment "Maintains Samsung Card Target Price at 42,000 KRW"

[Asia Economy Reporter Gong Byung-sun] The government has decided to lower the commission rates for small-scale franchisees. This is inevitably expected to have some negative impact on Samsung Card's performance.

According to Shinhan Financial Investment on the 28th, on the 23rd, the Financial Services Commission and the Democratic Party of Korea decided in a government-party consultation to reduce the card commission rate for small-scale franchisees with annual sales of 300 million KRW or less from the current 0.8% to 0.5%. Additionally, for annual sales between 300 million and 500 million KRW, the rate will be lowered from 1.3% to 1.1%, and for annual sales between 500 million and 1 billion KRW, from 1.4% to 1.25%.

This decision to reduce franchisee commission rates is expected to affect the card industry's revenue. Overall, sales are estimated to decrease by about 470 billion KRW. Among this, Samsung Card's sales are expected to be impacted by approximately 70 to 80 billion KRW annually, which corresponds to about 2.1% of the projected total sales for next year.

From the perspective of fair economy in the future, the high commission rates of big tech companies are also likely to be subject to review. Unlike card companies regulated every three years through the calculation of eligible card fee costs, big tech companies currently have no legal basis for regulating their commission systems. However, since regulatory authorities have recently emphasized the principle of equal function and equal regulation, it is expected that the high commission rates of big tech companies will also be reviewed going forward.

Kim Soo-hyun, a researcher at Shinhan Financial Investment, explained, "The institutional issues related to the current calculation method exposed to franchisee commission rate reductions will be resolved in the mid to long term," adding, "Samsung Card is expected to focus on defending profitability by reducing service costs and other operating expenses in the future."

Accordingly, Shinhan Financial Investment maintained its investment opinion of 'Buy' on Samsung Card with a target price of 42,000 KRW. The closing price on the previous day was 34,200 KRW.