Shinhan, Samsung see biggest net profits

By Kang Seung-woo

First-half net income of Korea’s credit-card companies dropped 8.7 percent compared to a year earlier, due to big losses by two major players, the financial watchdog said Monday.

The Financial Supervisory Commission (FSC) said that the combined net earnings of six credit-card issuers totaled 895.3 billion won ($772.64 million) in the first six months, compared with 980.7 billion won over the same period a year ago.

The result includes the losses of Hana SK Card, which spun off from its parent Hana Financial Group last November.

Without Hana SK Card, the earnings reached 918.7 billion won, accounting for a 6.3 percent decline from a year ago.

The FSC said that Samsung Card’s massive gap in profits between 2009 and 2010 and BC Card’s non-operating cost affected the figures.

“In the second quarter of 2009, Samsung Card earned 130.5 billion won after selling its VISA Card stocks and non-performing loans,” an FSC official told The Korea Times.

Samsung made 64.6 billion won from the sale of the stock and 40.9 billion won from the sale of the bad loan recording income of 362.6 billion won last year. This year its net income went down to 232.6 billion won.

BC Card was one of the two card firms who ran into the red with a net loss of 48.9 billion won. The other is Hana SK which recorded 23.4 billion won in deficit.

“As for BC Card, it had to distribute 135.5 billion won made from its VISA IPO to its member firms, so it showed a loss in the first half,” he said.

In addition, he said that growing operating expenses also affected the net income.

The total costs rose by 546.6 billion won.

Shinhan recorded the biggest net income of 367.1 billion won and Samsung was a distant runner-up with 362.6 billion won, followed by Hyundai (136.3 billion won) and Lotte (72.7 billion won). Hana SK and BC posted losses.

Despite the dwindling profits, the credit-card industry maintained financial health, as the default rate stayed low, regulators said.

As of the end of the first half, the average delinquency rate on their card bills and cash lending decreased to 1.84 percent, down from 2.23 percent at the end of last year and 1.96 percent from three months ago.

Credit-card spending totaled 250.4 trillion won, up 22.2 trillion won, or 9.7 percent, from a year earlier ― 199 trillion won from credit purchases and 51.4 trillion won from cash-advances and card-loan services ― behind the recovering economy.

A total of 81.5 million credit cards were in use in Korea as of the end of June, up 6.7 percent from the end of 2009.

“The growth of credit card use is likely to slip in the second half of the year due to slowing consumer spending,” the FSS said in the statement. “Tightening sales competition between credit card issuers and rising marketing costs are also forecast to squeeze the operating profit margin.”