[Click eStock] Samsung Card's Funding Costs Are Increasing

Korea Investment & Securities Lowers Target Stock Price

[Asia Economy Reporter Junho Hwang] Korea Investment & Securities lowered the target price of Samsung Card to 40,000 KRW on the 26th, citing increased funding costs.

Baek Doosan, a researcher at Korea Investment & Securities, stated, "Considering the recent interest rate situation of specialized credit finance company bonds, we changed the weighting of the mid- to long-term funding cost rate. Taking into account the annual average net profit decrease effect of around 6%, we raised the capital cost applied to the target price, resulting in a 9% decrease in the target price."

Samsung Card's total borrowing interest rate in the first quarter of this year was 2.15%, up 4 basis points from the previous quarter. Considering the rise in new card bond issuance rates, it is inevitable that the funding cost rate based on balance will increase mainly by 5 to 10 basis points each quarter until the end of 2025.

In particular, although the first quarter of this year recorded profits exceeding market expectations through cost control, it is difficult to continue cost control. The selling and administrative expenses in the first quarter of this year were 471.2 billion KRW, down 5% compared to the same period last year. Service costs, including card product bundled billing discounts, decreased by 27% during the same period. Marketing expenses also decreased by 7%.

Researcher Baek said, "As expenditures related to face-to-face services, where benefits are concentrated within card products, recover in the future, it is expected that the current downward trend in selling and administrative expense ratio will be difficult to continue," and added, "The strong risk management capabilities within the card company and the low leverage ratio are strengths, so we maintain a buy rating as the reduction in return on equity (ROE) is minimized."