Credit Card Companies Show Strong Q1 Performance... 38.6% Increase YoY

Impact of Consumer Recovery Trend and Decline in Delinquency Rates

[Asia Economy Reporter Ki Ha-young] In the first quarter of this year, credit card companies posted strong earnings due to a recovery in consumer spending and a decline in delinquency rates. Although they achieved double-digit growth in net income compared to last year, they seem unable to fully celebrate the good results ahead of the upcoming merchant fee recalculation this year.

According to the quarterly reports of each credit card company on the 19th, the combined net income (consolidated basis) of seven specialized credit card companies (Shinhan, Samsung, KB Kookmin, Hyundai, Lotte, Woori, and Hana Card) in the first quarter of this year was 723.2 billion KRW, an increase of 38.6% compared to the previous year.

Industry leader Shinhan Card recorded a net income of 168.1 billion KRW in the first quarter, up 32.8% year-on-year. During the same period, Samsung Card and KB Kookmin Card also achieved net incomes of 138.4 billion KRW and 141.5 billion KRW, up 23.4% and 72.4%, respectively. Hyundai Card posted a net income of 80.2 billion KRW, growing 16.4% compared to the same period last year.

Small and medium-sized card companies also posted remarkable results. Hana Card recorded a net income of 72.5 billion KRW, a sharp increase of 139.3% year-on-year. Woori Card also achieved 72.0 billion KRW, up 41.2% from the previous year. Lotte Card’s net income on a separate basis increased by 34.5%, but due to poor performance of subsidiaries, its consolidated net income decreased by 0.4% to 50.5 billion KRW.

The strong performance is mainly attributed to the improvement in consumer sentiment, which had been depressed by COVID-19. Durable goods consumption such as automobiles and furniture has increased this year, and sales at large retailers such as department stores have also risen. Domestic card approval amounts have also been on the rise for three consecutive months since February. According to the Ministry of Economy and Finance’s 'Recent Economic Trends (Green Book),' card approval amounts increased by 18.3% year-on-year last month, continuing a double-digit growth for two consecutive months following March’s 20.3% increase.

Additionally, the base effect from poor performance in the first quarter of last year due to the spread of COVID-19 was also reflected. The reduction in provisions due to the decline in delinquency rates also contributed to the strong earnings of credit card companies.

However, credit card companies are not entirely welcoming these strong results. The good performance could serve as a justification for lowering merchant fees ahead of this year’s fee recalculation. The fee rate is determined by reviewing eligible costs calculated based on an analysis of costs such as the card companies’ funding costs, risk management costs, general administrative expenses, VAN fees, and marketing expenses. If costs decrease, it could be grounds for fee reductions. An industry insider said, "There is concern that the base effect caused by COVID-19 might be used as a reason for lowering merchant fees."

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