[Click eStock] "Positive Impact of COVID-19 on Samsung Card"

Kiwoom Securities Issues 'Buy' Investment Opinion and Sets Target Price at 51,000 Won... Closing Price on 5th at 35,000 Won

[Asia Economy Reporter Geum Bo-ryeong] Contrary to concerns, an analysis has emerged that the novel coronavirus infection (COVID-19) will have a positive effect on Samsung Card.

According to Kiwoom Securities on the 6th, while the COVID-19 crisis is a significant burden for banks, it is expected to be an opportunity for card companies to achieve better-than-expected performance.

Due to the impact of COVID-19, there is a high possibility of a temporary increase in delinquencies. However, considering the government's proactive measures, many positive aspects are evaluated. Seo Young-soo, a researcher at Kiwoom Securities, explained, "There will be margin improvement due to reduced funding costs from the decline in market interest rates," adding, "Samsung Card's funding cost rate in the fourth quarter of last year was 2.4%, and if the current trend continues, a quarterly decrease of about 0.06 percentage points is expected. At the beginning of March, the card bond interest rate was around 1.32%, down 0.35 percentage points from 1.67% in December last year within three months. Further declines in market interest rates are expected with the base rate cut."

It is estimated that the decrease in card usage will not be significant compared to concerns due to various government measures to stimulate the domestic economy. The government decided to expand income tax deductions from 30% to 60% for check cards and from 15% to 30% for credit cards from March to June.

This year’s earnings are likely to improve more than initially expected. Researcher Seo said, "Although a temporary rise in delinquency rates is expected due to COVID-19, conservative credit management will likely prevent a large burden on provisions," and added, "Rather, with the decline in funding rates and increased interest income from short-term loan demand, profits are likely to improve more than initially expected. We are raising Samsung Card’s earnings estimates for this year and next year by 2% and 5%, respectively."

Kiwoom Securities has issued a 'Buy' investment opinion on Samsung Card. The target price was raised from 49,000 KRW to 51,000 KRW. The closing price on the 5th was 35,000 KRW.

This content was produced with the assistance of AI translation services.