Capital and Other Credit Card Companies' H1 Net Profit 1.6 Trillion KRW... 450 Billion KRW Decrease YoY

Impact of Sharp Increase in Interest and Bad Debt Expenses
Delinquency Rate at 1.78%...Up 0.53%P This Year
Steady Growth in Allowance for Bad Debts... "Preparing for Uncertainty in Second Half"

Photo by Getty Images Bank

The net profit of specialized credit finance companies, excluding credit card companies, in the first half of this year was recorded at around 1.6 trillion KRW, down 22% compared to the same period last year. This is attributed to increased bad debt expenses and interest expenses.

According to the Financial Supervisory Service on the 7th, as of the end of the first half of this year, the net profit of 156 specialized credit finance companies excluding credit card companies (25 installment finance companies, 26 leasing companies, and 105 new technology finance companies) was 1.6171 trillion KRW. This is a decrease of 21.9% (452.9 billion KRW) compared to the first half of last year. Although total revenue increased by 2.10508 trillion KRW (19.5%) compared to the same period last year, the increase in expenses during the same period was larger at 2.6037 trillion KRW (29.0%).

In particular, the increase in interest expenses and bad debt expenses was notable. Interest expenses rose from 1.8399 trillion KRW in the first half of last year to 3.1017 trillion KRW in the first half of this year, an increase of 68.6%. Already in the first half, 71.9% of last year's total interest expenses of 4.3137 trillion KRW were incurred. Bad debt expenses more than doubled to 748.2 billion KRW from 539.3 billion KRW in the first half of last year.

Provided by Financial Supervisory Service

Total assets increased by 1.8% (4.1 trillion KRW) from the end of last year to 236.1 trillion KRW. While installment finance assets (4.6%) and leasing assets (2.5%), mostly automobile finance assets, increased, resulting in a 3 trillion KRW rise in proprietary business assets, loan receivables decreased by about 800 billion KRW. Corporate loans increased by about 1.4 trillion KRW, but household loans decreased by 2.2 trillion KRW (7.8%).

The delinquency rate as of the end of the first half was 1.78%, up 0.53 percentage points from the end of last year. However, it remained at a similar level to 1.79% at the end of the first quarter. The ratio of non-performing loans overdue by more than three months (fixed and below credit ratio) also rose by 0.55 percentage points to 2.09% compared to the end of last year.

Provided by Financial Supervisory Service

However, the bad debt reserve ratio increased by 3.9 percentage points from the end of last year to 133.3%. This is attributed to the additional bad debt reserves of 892.5 billion KRW set aside in the first half of this year alone. As a result, the balance of bad debt reserves (including bad debt provisions) was recorded at 5.0852 trillion KRW, an increase of 21.3% compared to the first half of last year.

Meanwhile, the adjusted capital adequacy ratio was 17.3%, more than twice the regulatory management guidance ratio of 7%. It also rose by 0.4 percentage points compared to the end of last year. The adjusted capital adequacy ratio is an indicator of the capital soundness of specialized credit finance companies, similar to the Bank for International Settlements (BIS) capital adequacy ratio for banks. It shows the pure capital size excluding loan assets from total assets.

The Financial Supervisory Service evaluated that although the net profit of specialized credit finance companies in the first half of this year decreased compared to the same period last year, it was at the average level of the past five years' first halves (1.62 trillion KRW). The rising trend in delinquency rates also slowed in the second quarter, and capital adequacy is improving. A Financial Supervisory Service official stated, "Considering the still uncertain domestic and international environment, such as whether monetary tightening will continue in the second half and the possibility of a global economic slowdown, we will thoroughly guide the management of asset soundness, including expanding the disposal of non-performing loans and debt restructuring." He added, "We will monitor the bond market and liquidity situation of specialized credit finance companies and respond proactively if necessary."

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