Credit Card Companies Show Resilient Q1 Performance of Overseas Subsidiaries Despite COVID-19 (Comprehensive)

Shinhan Card and Four Subsidiaries Including Vietnam
Total Net Income of 3.126 Billion KRW
KB Kookmin and Woori Card in Profit

[Asia Economy Reporter Ki Ha-young] Despite the impact of the novel coronavirus disease (COVID-19) in the first quarter of this year, overseas subsidiaries of credit card companies posted solid earnings. Although still minor compared to the overall revenue of card companies, they are establishing themselves as a pillar of business diversification.

According to the first quarter business reports of each company on the 1st, overseas subsidiaries of Shinhan, KB Kookmin, and Woori Card recorded profits in the first quarter. Shinhan Card achieved a total net income of 3.126 billion KRW from four overseas subsidiaries in Vietnam, Myanmar, Indonesia, and Kazakhstan. Shinhan Vietnam Finance, which showed significant growth last year, led the overall performance with a net income of 2.761 billion KRW. Shinhan Finance LLC in Kazakhstan recorded a net income of 526 million KRW, and Shinhan Microfinance, operating a microloan business in Myanmar, posted a net income of 327 million KRW.

However, Shinhan India Finance, which turned profitable last year with a net income of 465 million KRW, returned to a net loss of 488 million KRW. The company explained that it is facing difficulties due to the worsening economic situation and financial market stagnation in Indonesia caused by COVID-19. In fact, Indonesia's financial market has shown instability, with a significant decrease in foreign exchange reserves amid capital outflows and exchange rate volatility caused by COVID-19.

Overseas subsidiaries of KB Kookmin Card and Woori Card also achieved profits in the first quarter. KB Kookmin Card's local subsidiary KB Daehan Special Bank, established in Cambodia in 2018, recorded a net income of 48 million KRW in the first quarter. KB Daehan Special Bank, which posted a net loss of 255 million KRW in 2018, turned profitable last year with a net income of 107 million KRW. Woori Card's overseas subsidiary Myanmar Tutu Finance also performed well, achieving a net income of 1.125 billion KRW in the first quarter. Tutu Finance posted a net loss of 346 million KRW in 2018 but recorded a net income of 2.71 billion KRW last year.

Overseas subsidiaries of Lotte Card, still in the early stages of overseas expansion, continued to post losses in the first quarter following last year. Lotte Finance Vietnam, Lotte Card's overseas subsidiary, recorded a net loss of 1.798 billion KRW in the first quarter, an increase of 642 million KRW compared to the same period last year. This was due to the contraction of the local economy in Vietnam caused by COVID-19. However, Lotte Card expects Lotte Finance Vietnam to gradually increase profits as it is still in the investment phase.

Not only overseas subsidiaries but also card companies defended their performance in the first quarter despite consumption contraction caused by COVID-19. The net income of seven specialized card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, and Hana Card) in the first quarter was 521.7 billion KRW, up 14.3% from the same period last year. Continuous cost reduction efforts, revenue diversification, and strengthened risk management are cited as reasons. However, concerns about revenue decline are rising from the second quarter due to the prolonged COVID-19 situation. This is because the effects of consumption contraction from social distancing and interest repayment deferrals for small business owners will be fully reflected. According to the analysis of card approval performance in the first quarter released by the Credit Finance Research Institute, card approval amounts decreased by 4.3% year-on-year last month. This is the lowest monthly growth rate since the 2008 financial crisis. After increasing by 5.8% in January and 6.5% in February, it turned to a decline in March.

A financial industry official said, "In emerging markets of the New Southern region where domestic card companies have entered, the financial market remains unstable due to the impact of COVID-19," adding, "As concerns about emerging markets are growing, we are closely monitoring the situation caused by COVID-19."

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