Despite Reduced Card Usage, Cost Savings Lead to Solid Performance... Card Companies Achieve 'Recession-Type Surplus' in First Half of Year

Effect of Reducing Total Costs by Over 110 Billion Won
Delinquency Rate and Other Soundness Indicators 'Favorable'

[Asia Economy Reporter Kim Hyo-jin] Despite a slowdown in credit card usage due to the impact of the novel coronavirus disease (COVID-19), credit card companies recorded a nearly 19% increase in net profit in the first half of the year compared to the same period last year, according to preliminary data. This is analyzed as a 'recession-type surplus' resulting from cost reductions.

According to the Financial Supervisory Service on the 14th, the net profit of eight domestic specialized credit card companies in the first half of the year was 1.1181 trillion won, an 18.9% (177.6 billion won) increase from 940.5 billion won in the first half of last year.

Financial Supervisory Service

This was due to a reduction of about 112 billion won in total expenses, mainly from overseas payment fees, partnership fees, and bad debt costs. However, the increase in revenue was somewhat limited due to a decrease of 94.5 billion won in merchant fee income.

The total credit and check card usage in the first half was 424.7 trillion won, down 0.3% (1.3 trillion won) from 426.1 trillion won in the same period last year. Amid the impact of COVID-19, the growth rate of personal credit card usage was low at 1.0%, while corporate credit card usage decreased by 5.1%, and check card usage decreased by 0.3%.

As of the end of June, the cumulative number of credit cards issued was 112.53 million, an increase of 3.5% (3.83 million cards) compared to 108.7 million cards at the end of June last year. The issuance growth rate continues to slow, and the Financial Supervisory Service identified that online issuance has greatly expanded to reduce recruitment costs.

During the same period, the number of check cards issued was 111.59 million, a decrease of 0.2% (190,000 cards) compared to 111.78 million cards at the end of the same month last year.

Card loan usage (cash service and card loan) in the first half was recorded at 53 trillion won, a 1.4% (700 billion won) increase from 52.3 trillion won in the same period last year. While card loan usage (25.4 trillion won) increased by 10.5% (2.4 trillion won), cash service usage (27.6 trillion won) decreased by 5.7% (1.7 trillion won).

"Soundness is good... Encouraging strengthened loss absorption capacity"

As of the end of June, the delinquency rate of credit card companies (based on total claims) was 1.38%, down 0.23 percentage points from 1.61% at the end of June last year. Delinquency rates improved in both credit sales (down 0.11 percentage points) and card loans (down 0.31 percentage points).

At the end of June, the adjusted capital adequacy ratio of credit card companies was 22.2%, slightly down 0.9 percentage points from 23.1% at the end of June last year, and the leverage ratio was 5.0 times, up 0.3 times from the same period last year.

All credit card companies were found to comply with the supervisory standards of an adjusted capital adequacy ratio of 8% or higher and a leverage ratio of 6 times or less.

A Financial Supervisory Service official evaluated, "Although the growth in revenue slowed due to a decrease in credit and check card usage in the first half of this year, net profit increased significantly due to a large reduction in costs. Soundness indicators such as delinquency rates and adjusted capital adequacy ratios remain in good condition."

The official added, "In preparation for the prolonged COVID-19 pandemic and economic slowdown, we are encouraging the strengthening of loss absorption capacity through additional provisioning for bad debts, and we will strengthen monitoring of soundness indicators to devise a smooth landing plan in anticipation of the end of principal and interest repayment deferrals."

Financial Supervisory Service

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