Card Industry's Net Profit in First Half of This Year Increases by 8.7% to 1.6243 Trillion Won

Card Company Profit and Loss Status (Unit: 100 million KRW · %). Photo by Financial Supervisory Service

[Asia Economy Reporter Song Seung-seop] In the first half of this year, domestic full-service card companies posted a provisional net profit of 1.6243 trillion KRW, an increase of 129.9 billion KRW (8.7%) compared to the same period last year.

According to the Financial Supervisory Service on the 13th, total revenue of card companies increased by 977.6 billion KRW. After setting aside provisions for bad debts, net profit was 1.3695 trillion KRW, up 259.7 billion KRW (23.4%) from 1.1098 trillion KRW the previous year.

Installment card fee income increased by 127.1 billion KRW due to increased card usage, and merchant fee income rose by 114.5 billion KRW. Total expenses increased by 847.7 billion KRW, with interest expenses rising by 213.6 billion KRW, and bad debt expenses and selling and administrative expenses increasing by 148.5 billion KRW and 113.8 billion KRW respectively.

As of the end of June, the cumulative number of credit cards issued was 120.81 million, up 3.12 million cards (2.7%) from 117.69 million at the end of the previous year. The year-over-year growth rate of credit card issuance has been gradually rising from 1.4% at the end of June 2020 to 1.5% last year. However, dormant cards (14.58 million) also increased by 1.44 million cards (11.0%) from 13.14 million at the end of the previous year. The growth rate has also increased from 2.7% two years ago. On the other hand, the number of check cards issued decreased by 630,000 cards (0.6%) from 10.61 million to 10.48 million.

The usage amount of credit and check cards was 516 trillion KRW, an increase of 53.4 trillion KRW (11.5%) compared to 462.6 trillion KRW in the same period last year. Credit card usage was 426 trillion KRW, up 50.8 trillion KRW (13.5%) from 375.2 trillion KRW in the same period last year, and check card usage slightly increased from 87.4 trillion KRW to 90 trillion KRW.

Card loan usage was 54 trillion KRW, down 2.1 trillion KRW (3.7%) from 56.1 trillion KRW in the first half of last year. Card loans showed a healthy growth of 1.3% in the first half of 2020 and 5.8% in the first half of last year but turned to a decline this year. Short-term card loans (cash services) increased by 1 trillion KRW (3.7%) to 28.2 trillion KRW, but long-term card loans (card loans) decreased by 3.1 trillion KRW (10.7%) to 25.8 trillion KRW.

In terms of asset soundness, the delinquency rate of card companies (based on total claims) was 1.05%, down 0.04 percentage points from 1.09% at the end of the previous year. However, the delinquency rate for credit sales rose by 0.04 percentage points to 0.58% from 0.54% at the end of the previous year. The delinquency rate for card loans fell by 0.21 percentage points to 2.39% from 2.60% at the end of the previous year. During the first half, an additional 473 billion KRW was set aside for bad debt provisions, increasing the coverage ratio by 60.4 percentage points to 705.3% from 644.9% at the end of the previous year.

Regarding capital adequacy, the adjusted capital adequacy ratio (20.1%) fell by 0.7 percentage points from 20.8% at the end of the previous year, but all card companies exceeded the management guidance ratio (8%).

The financial authorities plan to prepare for the potential realization of latent insolvency due to worsening economic and financial conditions such as the so-called "3 highs" phenomenon (high interest rates, high inflation, and high exchange rates) in the second half of this year. The Financial Supervisory Service stated, “We will encourage additional provisioning for bad debts by thoroughly assessing credit risks for vulnerable borrowers,” and added, “We plan to guide companies to proactively prepare for liquidity risks by establishing emergency funding plans reflecting recent financial market conditions.”

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