Card Companies vs Capital Companies, Car Installment Competition Intensifies... Card Companies Surpass 9 Trillion Won in Assets (Comprehensive)

9.1 Trillion KRW in Q1, 17.04% Increase
Possibility of Surpassing 10 Trillion KRW This Year
Capital Companies Counterattack with Interest Rate Cuts Amid Aggressive Sales

[Asia Economy Reporter Ki Ha-young] The auto installment loan assets of credit card companies have surpassed 9 trillion won for the first time. As credit card companies, whose profitability in the credit sales sector has deteriorated due to reduced merchant fees, aggressively enter the auto installment finance market, competition with the established capital companies is expected to intensify.

According to the Financial Supervisory Service's Financial Statistics Information System on the 28th, the auto installment finance assets of six credit card companies (Shinhan, KB Kookmin, Samsung, Woori, Lotte, Hana) in the first quarter of this year totaled 9.0118 trillion won. This represents a 17.04% increase compared to the previous year, with an increase of 1.3121 trillion won in one year. If this growth trend continues, it is expected that the auto installment assets of credit card companies could surpass 10 trillion won within this year.

Credit card companies urgently needing business diversification are aggressively increasing their assets in the auto installment market. Shinhan Card ranked first with assets of 3.6027 trillion won, up 13.4% from the previous year. Following closely, KB Kookmin Card recorded 3.4838 trillion won, a 19.3% increase. Woori Card surged 45.0% from a year ago to 1.1669 trillion won, ranking third. Samsung Card recorded 597.7 billion won, a 19.9% decline from the previous year, but its assets have returned to an upward trend this year. Lotte Card increased by 96.9% to 103.2 billion won, and Hana Card, which started auto installment finance this year, recorded 57.5 billion won.

As assets increase, profits are also growing. In the first quarter of this year, the total profit of the six credit card companies engaged in auto installment finance was 70.88 billion won, up 9.2% from the previous year. Shinhan Card maintained the lead with 32.431 billion won, followed by KB Kookmin Card with 25.839 billion won. These figures represent increases of 4.8% and 16.8%, respectively, compared to the previous year. Woori Card recorded 7.981 billion won, and Lotte Card 826 million won in profits, increasing 33.9% and 187.8% respectively from a year ago. Only Samsung Card saw a 34.1% decrease to 3.676 billion won, while Hana Card earned 127 million won in profits.

[Image source=Yonhap News]

Credit Card Companies' Aggressive Asset Expansion... Capital Companies Counterattack with Interest Rate Cuts

Due to such aggressive operations, the market share of credit card companies in new car financing has nearly doubled over the past four years. According to the 'Securities and Capital Credit Risk Outlook' released by NICE Credit Rating at the beginning of this year, the market share of credit card companies (Shinhan, KB Kookmin, Samsung, Woori Card) in new car financing rose from 15.1% in 2016 to 27.9% as of the third quarter of last year. Meanwhile, during the same period, the market share of capital companies fell from 84.9% to 72.1%.

In response, capital companies have launched countermeasures. Industry leader Hyundai Capital recently introduced an auto installment finance product with an interest rate of 2.6% for a 60-month term. Hyundai Capital's auto installment assets, which reached 14.9916 trillion won at the end of last year, decreased by 307.6 billion won to 14.684 trillion won in the first quarter of this year. However, the interest rates offered by credit card companies for new car purchases are lower. Samsung Card's auto installment interest rate is 2.5% for 60 months, the lowest in the industry.

An industry insider said, "With profitability deteriorating due to reduced merchant fees and the urgent need for business diversification, auto installment finance, which generates profits, is a market that credit card companies must target," adding, "Competition between credit card companies and capital companies over the growing auto installment finance market will become even fiercer."

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