Credit Card Companies' Auto Installment Financing Assets and Earnings Soar... "Accelerating Business Expansion"

Automobile Installment Financing Net Profit and Asset Size Increased by 11.3% and 16.5% Respectively in the First Half of This Year

[Image source=Yonhap News]

[Asia Economy Reporter Ki Ha-young] Competition among card companies is fierce over the rapidly emerging automobile installment financing market as a new source of revenue. While profits from their core card business are declining, they are intensifying efforts to target not only domestic new cars but also used cars and overseas markets.

According to the Financial Supervisory Service's Financial Statistics Information System on the 8th, the net profit from automobile installment financing of five card companies (Shinhan, Samsung, KB Kookmin, Woori, Lotte) engaged in automobile installment financing in the first half of this year reached 132.4 billion KRW, an 11.3% increase compared to the previous year. Shinhan Card recorded 62.8 billion KRW, up 10.4% from the same period last year, and KB Kookmin Card jumped 41.5% to 45.2 billion KRW.

Automobile installment financing assets also increased. During the same period, automobile installment financing assets totaled 8.2839 trillion KRW, a 16.4% growth compared to the previous year. Shinhan Card led with assets of 3.3216 trillion KRW, followed by KB Kookmin Card with 3.1626 trillion KRW. Shinhan Card's assets grew 12.4% year-on-year, while KB Kookmin Card's surged 37.5% during the same period.

In particular, KB Kookmin Card's growth is steep. To leverage synergy with KB Capital, KB Kookmin Card expanded its platform and entered the used car market to boost profitability. In January, KB Kookmin Card opened the 'Auto Finance Center,' a specialized branch for used car installment financing, in Gangseo-gu, Seoul, and is considering establishing Auto Finance Centers in other regions. In the first quarter of next year, it plans to launch the 'Peer-to-Peer Used Car Transaction Card Safe Payment Service,' selected as an innovative financial service by the Financial Services Commission.

Shinhan Card also laid the foundation for creating new revenue sources by acquiring over 1 trillion KRW worth of auto and retail financial assets from its holding company affiliate Shinhan Capital in July. Beyond Korea, it is expanding its automobile installment financing business overseas by partnering with 'Asia Auto,' the leading vehicle manufacturer and seller in Kazakhstan.

Samsung Card operates automobile finance platforms 'Direct Auto' and 'Direct Auto Used Cars,' generating stable profits, while Lotte and Woori Cards are also expanding their businesses by focusing on new car-centered automobile finance. Hana Card is preparing to enter the automobile installment financing business, targeting the first quarter of next year.

With the implementation of the revised Specialized Credit Finance Business Supervisory Regulations this month, which relax the leverage limit for card companies from 6 times to 8 times, the expansion of card companies' automobile installment financing businesses is expected to accelerate. As the leverage limit increases, card companies can expand their assets and strengthen their automobile installment financing assets and operations accordingly.

An industry insider said, "Automobile installment financing is an attractive source of income for card companies because it can generate stable profits in the long term. Especially in the case of used cars, although transaction volumes are higher than new cars, the related financial market is still underdeveloped, so not only capital companies with know-how from new cars but also card companies are entering the market."

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