Increase in Marketing and Other Costs... Last Year's Credit Card Companies' Net Profit Down by 90 Billion Won Compared to Previous Year

[Asia Economy Reporter Kim Hyo-jin] The net profit of domestic credit card companies last year slightly decreased compared to 2018. Profitability worsened somewhat due to increased costs such as marketing expenses driven by competition to attract customers.

According to the Financial Supervisory Service on the 30th, the net profit (IFRS basis) of eight domestic full-service card companies last year was 1.6463 trillion KRW, down 5.3% (92.5 billion KRW) from 1.7388 trillion KRW in 2018.

Merchant fee income decreased by 2.0% (239.8 billion KRW), but total revenue increased by 1.6% (388.7 billion KRW) due to increases in installment fee income (18.6% / 304.4 billion KRW) and card loan income (3.9% / 146.0 billion KRW), among others.

Meanwhile, total expenses also rose by 2.1% (481.2 billion KRW), including bad debt costs (8.9% / 191.3 billion KRW), funding costs (5.9% / 107.5 billion KRW), and marketing expenses (7.7% / 518.3 billion KRW).

Provided by the Financial Supervisory Service

As of the end of last year, the delinquency rate (based on total claims) was 1.43%, down 0.05 percentage points from 1.48% at the end of the previous year. The delinquency rate in the credit sales sector slightly declined, while the card loan delinquency rate improved by 0.15 percentage points from 2.44% at the end of the previous year to 2.29%.

The adjusted capital adequacy ratio at the end of last year was 22.3%, down 0.06 percentage points from 22.9% at the end of the previous year, but it remained at a high level compared to the regulatory ratio (8%).

The cumulative number of credit cards issued at the end of last year was 110.97 million, an increase of 5.6% (5.91 million cards) compared to 105.06 million at the end of the previous year.

Credit card usage amounted to 701 trillion KRW, up 5.6% (37 trillion KRW) from 664 trillion KRW the previous year, and check card usage was 173.7 trillion KRW, an increase of 3.0% (5.1 trillion KRW) compared to 168.6 trillion KRW the previous year.

Card loan (financial service and card loan) usage last year was 105.2 trillion KRW, up 1.3% (1.4 trillion KRW) from 103.8 trillion KRW the previous year.

An official from the Financial Supervisory Service said, "Although profitability weakened, delinquency rates improved and the adjusted capital adequacy ratio significantly exceeded the regulatory ratio, maintaining a stable level of soundness indicators."

The official added, "However, in preparation for the potential realization of latent risks such as weakening soundness and profitability due to the recent economic and consumption contraction caused by COVID-19, we will regularly monitor the status of soundness and liquidity, and continue to promote institutional improvements to create new revenue sources for the card industry and strengthen long-term competitiveness."

Provided by the Financial Supervisory Service

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