Maximum Interest Rate Reduction... Leadcorp Says 'I'm Fine'

Reduced Marketing Expenses Over External Growth...Positive Impact on Performance

[Asia Economy Reporter Park Jihwan] As the government plans to lower the statutory maximum interest rate that financial companies can charge from the current 24% to 20% starting in the second half of next year, there are observations that this could have a positive impact on the performance of Leadcorp, the only publicly listed company in the lending industry.

On the 17th, Leadcorp was trading at 6,850 KRW as of 9:15 AM, down 0.15% compared to the previous trading day. The stock price, which had been hovering in the 7,000 KRW range earlier this month, has shown a weak trend following the government's amendment to the enforcement decree the day before, which lowered the statutory maximum interest rate by 4 percentage points from 24% to 20%. This adjustment marks the first reduction in three years since the rate was lowered from 27.9% to 24% in February 2018.

Leadcorp operates in consumer credit finance (lending), petroleum retail, and rest area businesses. Among these, lending accounts for an absolute proportion of its operating performance. Since lowering the statutory maximum interest rate reduces the interest that can be charged on loans, a decline in profitability is inevitable for the lending industry.

However, Leadcorp's recent operating profit has actually been on the rise. Leadcorp's cumulative operating profit for the third quarter of this year was 43.6 billion KRW, a 6.34% increase from 41 billion KRW in the previous year. This is analyzed to be the result of strengthened cost control rather than external growth. The reduction in competitors, such as OK Financial Group's withdrawal from the lending business, led to decreased marketing expenses, which positively affected performance growth. Operating expenses during this period decreased by 31%, from 335.5 billion KRW to 230.6 billion KRW. The recent efforts to diversify business through ventures like the rental business are also positive. In February, Leadcorp invested 25 billion KRW to acquire BS Rental, a rental platform company.

An industry insider stated, "Leadcorp's operating profit margin in the lending sector for the third quarter of this year was 37.26%, a sharp increase of 11.22 percentage points compared to 26.04% in the same period last year," adding, "The effect of reduced marketing costs and increased customer inflow due to fewer competitors outweighs the profitability decline caused by the interest rate cut, resulting in improved performance. Therefore, the outlook for stock price appreciation in the near term also looks bright."

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