Card Industry's Recession-Type Surplus... Surprising First Half Performance

Cost Reduction Including Marketing Expense Cuts
Net Profit of 7 Specialized Companies Up 21.2%
Hanacard Soars 93.9% YoY

[Asia Economy Reporter Ki Ha-young] The card industry recorded surprisingly strong earnings in the first half of this year. Although this was a result of good performance despite the impact of the novel coronavirus disease (COVID-19), it is analyzed as a 'recession-type surplus' due to cost reductions such as marketing expense cuts.

According to the semi-annual reports of seven specialized card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, Hana Card) on the 18th, the combined net income of the seven specialized card companies in the first half of this year was about 1.0643 trillion KRW. This is about a 21.2% increase compared to the previous year (878 billion KRW).

All card companies recorded double-digit growth in the first half of this year. The company with the highest growth rate was Hana Card. Hana Card posted a net income of 65.3 billion KRW in the first half, a sharp increase of 93.9% compared to the previous year. The strong performance of corporate card companies such as Lotte Card and Hyundai Card was also notable. Lotte Card's net income for the first half was 64.3 billion KRW, up 37.6% from the previous year. Hyundai Card also recorded a net income of 166.2 billion KRW during the same period, an increase of 36.4% year-on-year. Lotte Card explained that net income improved through rapid normalization after mergers and acquisitions (M&A), adjustment of profitability-focused product portfolios, and cost efficiency. Hyundai Card analyzed that the private label credit card (PLCC) strategy and digital process efficiency were effective in improving actual performance.

Industry leader Shinhan Card recorded 302.5 billion KRW, up 11.5% from the previous year. Samsung Card posted a net income of 222.6 billion KRW, up 16%. KB Kookmin Card and Woori Card achieved 163.8 billion KRW and 79.6 billion KRW respectively, growing 12.1% and 19.6% compared to the same period last year.

Analysis suggests that the biggest factor behind these strong results was cost reduction, including cuts in marketing expenses. Initially, the market widely expected that card companies' performance would be poor this year due to economic and consumer sentiment contraction caused by COVID-19. However, as sales in travel, duty-free shops, amusement parks, and movie theaters declined due to COVID-19, related marketing expenses significantly decreased, resulting in a 'recession-type surplus.' Emergency disaster relief funds provided by the government to encourage domestic consumption were also cited as a factor in performance growth. According to the Credit Finance Association, the domestic credit sales approval amount for cards (credit, check, prepaid cards) in the second quarter increased by 3.9% year-on-year to 222.5 trillion KRW.

Concerns about risk management have been raised regarding second-half performance. This is because COVID-19 is prolonged, and increases in delinquency rates are expected due to extensions of loan repayment moratoriums and other factors. An industry insider said, "The strong performance in the first half was a result of cost reduction," adding, "In the second half, concerns about rising delinquency rates may lead to increased expenses such as provisions for bad debts."

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