Lotte Card's Nominal and Actual Delinquency Rates Rise Above 2% for First Time Since Global Financial Crisis 17 Years Ago

Warning Signs for Asset Quality Amid Homeplus and Cyber Incident Shocks
Vicious Cycle of Deteriorating Asset Quality Leading to Reduced Profitability Must Be Avoided

Both the nominal and actual delinquency rates of Lotte Card have risen into the 2% range. This is the first time in 17 years since the global financial crisis. Although the impact of the Homeplus corporate rehabilitation-related bond delinquency and the aftermath of the cyber incident were significant, there are concerns that the deterioration in asset quality indicators is excessive, prompting calls for a swift reduction back to the 1% range.

Jo Jwa-jin, CEO of Lotte Card, apologizing to the public for the hacking incident and customer information leakage of Lotte Card at Booyoung Taepyeong Building in Jung-gu, Seoul on September 18, 2025. Photo by Kang Jin-hyung

According to an analysis of the Financial Supervisory Service’s Financial Statistics Information System on November 13, Lotte Card’s nominal delinquency rate at the end of June was 2.17%, and the actual delinquency rate was 2.32%. This marks the first time both have exceeded 2% since the end of 2009 (2.1% and 2.41%, respectively). The nominal delinquency rate has soared to its highest level in 20 years since December 2004 (2.3%), while the actual delinquency rate is at its highest in 11 years since March 2014 (2.33%).

The nominal delinquency rate excludes overdue bonds arising from refinancing loans, whereas the actual delinquency rate includes them. Generally, when the nominal delinquency rate exceeds 2%, it is considered that a card company’s asset quality has reached a dangerous level.

The direct cause of the surge in Lotte Card’s delinquency rate was a sharp increase in overdue amounts of one month or more, including 79.3 billion won in Homeplus corporate rehabilitation non-performing loans in March. Lotte Card’s overdue loans of one month or more had remained in the 300 billion won range since 2023, but surged to 407.336 billion won at the end of March this year and 483.778 billion won at the end of June. As of the end of June, overdue loans increased by 34.9% (125.143 billion won) compared to the same period last year. Even excluding the Homeplus non-performing loans, the figure grew by about 45 billion won compared to previous years.

Industry insiders say that the increase in Lotte Card’s delinquency rate is too steep to be seen as a temporary phenomenon caused by the Homeplus corporate rehabilitation and the cyber incident alone. One industry official commented, “Lotte Card used to be a company with excellent asset quality management, but there are now concerns that there may be issues with the recent management system.” In fact, at the end of 2009, when Lotte Card’s delinquency rate was in the 2% range, the delinquency rates of major card companies such as Samsung Card and Shinhan Card were in the 3-4% range.

The deterioration in asset quality is highly likely to lead to reduced profitability. While this is an issue for the entire card industry, the impact is expected to be greater for Lotte Card. The situation is also negatively affecting the company’s sale process, putting it in a critical predicament. Lee Kyubok, Senior Research Fellow at the Korea Institute of Finance, noted, “Next year, the specialized credit finance sector is expected to continue to bear the burden of losses due to worsening asset quality,” adding, “As asset quality indicators such as delinquency rates gradually rise, the burden of risk management has increased, and the deterioration in asset quality is likely to undermine profitability.”

Lotte Card plans to strengthen its risk management capabilities and monitoring system. A Lotte Card representative stated, “Due to the overall high interest rate environment and sluggish consumption caused by the economic downturn, the burden of debt repayment is increasing and applications for credit relief are rising, resulting in a decline in borrowers’ repayment capacity,” adding, “We will enhance our risk management capabilities and continuously monitor management indicators to stably manage asset quality.”