[Click eStock] "Card Companies Show Strong Performance in First Half... Hyundai and Lotte Lag Behind"

7 Card Companies' Sales Increase by 6.8%, Net Profit Rises by 2.0%
Expansion of High-Profit Products and Reduction in Card Expenses
Delinquency Rate Rise and Soundness Concerns Persist

Korea Investment & Securities analyzed on the 19th that the performance of major credit card companies in the first half of 2024 generally appeared favorable. The combined operating revenue (sales) of seven card companies?Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, and Hana?was recorded at 11.9885 trillion KRW, a 6.8% increase compared to the same period last year. Net income also showed a slight improvement, increasing by 2.0% to 1.4252 trillion KRW.

According to Korea Investment & Securities, this growth is attributed to increased card revenue and cost reduction. Profitability was enhanced by expanding the handling of high-yield products such as card loans, while card expenses in the first half amounted to 2.7 trillion KRW, a decrease compared to the same period last year.

However, Hyundai Card and Lotte Card showed relatively weak profitability. Hyundai Card’s net income for the first half was 156.2 billion KRW, a 0.5% decrease compared to the same period last year. This was due to a combination of factors including increased PLCC promotional expenses, higher Apple Pay fees, increased interest expenses, and higher provisions for loan losses. PLCC cards are structured so that card companies and partners share revenues and costs jointly, and these increased costs negatively impacted Hyundai Card’s profit scale.

Lotte Card’s net income for the first half also decreased by 76.4%. This is analyzed as a result of a base effect from the sale of its subsidiary Rokamobility last year, along with increased funding costs due to high interest rates. Lotte Card’s largest shareholder is the private equity fund MBK Partners, which bears relatively high borrowing costs.

Despite the overall favorable profitability in the card industry, concerns about rising delinquency rates and asset quality remain. As of the end of June, the card loan balance of the seven card companies was 37.5902 trillion KRW, a 7.9% increase year-on-year. However, the delinquency rate rose by 0.06 percentage points from the end of last year to 1.69%, marking the highest level in 10 years. KB Kookmin Card, Woori Card, and Hana Card have delinquency rates exceeding 2.0%, raising concerns.

Kim Gi-myeong, a researcher at Korea Investment & Securities, stated, "However, card companies maintain an excellent level with an average loan loss provision to delinquent loans ratio of 189.8%, and leverage ratios remain stable at around 5.5 to 6.0 times. Therefore, even if there is some increase in delinquency rates in the future, card companies are expected to maintain their profit-generating trend through sufficient buffers."