Samsung Card, Major Beneficiary of Interest Rate Cuts... Target Price Raised

[Asia Economy Reporter Oh Ju-yeon] Due to the impact of the novel coronavirus infection (COVID-19), the issue of interest rate cuts is gaining attention. While this atmosphere poses a burden on banks due to a decline in net interest margin caused by falling market interest rates, the situation is different for card companies. It is explained that net interest margin improves due to lower funding costs, and the impact of deteriorating asset quality may be limited thanks to favorable real estate market conditions and government policy support. Furthermore, an increase in loan demand from high-quality customers is expected to be a factor driving better-than-expected performance this year.

In this context, Kiwoom Securities has maintained a "Buy" investment rating on Samsung Card and raised the target price to 51,000 KRW.

Researcher Seo Young-su evaluated, "Considering the government's proactive measures, there are more positive aspects than negative ones."

Researcher Seo mentioned, "The government has decided to expand income tax deductions from March to June for check cards (30% → 60%) and credit cards (15% → 30%)," adding, "With various government measures to stimulate domestic demand, the decrease in card usage is expected to be less significant than concerns suggest." He also cited reasons such as "expected margin improvement due to lower funding costs from falling market interest rates" and "anticipated concrete support centered on card companies as compensation for banks' support in economic stimulus."

In particular, Samsung Card was judged to be the top priority stock within the banking and card sectors, reflecting its minimal impact from COVID-19.

Researcher Seo stated, "The impact of government regulations has been sufficiently absorbed through restructuring, stable profit growth is expected in the future, and benefits from government policy support such as the passage of the three data laws and approval of the MyData business are anticipated."

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