'Income gap' widens among card issuers

By Park Jae-hyuk

The gap in earnings between large and small credit card firms widened in 2019, as the latter was hit harder by the government policy to cut transaction fees to alleviate the burden on small business owners, according to analysts, Monday.

Last year, Shinhan, Samsung and KB Kookmin managed to post solid earnings as before.

In contrast, Woori and Hana suffered worsening profits, because of the unfavorable policy.

Given the smaller card firms have relied heavily on profits from transaction fees, unlike larger ones that have minimized their revenue losses through business diversification, analysts expect the “income gap” to become wider among the domestic card issuers.

“Due to tightened government regulations, the nation's card industry will be reorganized, giving large companies more controls over the market,” Shinhan Investment analyst Kim Soo-hyun said.

Business bellwether Shinhan Card, for example, has made efforts to earn more from leasing and installment financing to offset declining profitability.

As a result, it posted a 508.8 billion won ($430 million) net profit last year, only a 2 percent decline from 519.4 billion won in2018.

Samsung Card posted a 344.1 billion won net profit, down 0.3 percent year-on-year.

Its 2019 earnings were initially expected to be sluggish, because its long-term partner Costco formed a new exclusive partnership with Hyundai Card.

The credit card arm of Samsung Group, however, offset its revenue loss by joining hands with E-mart, a domestic discount chain that also runs its own warehouse store, Traders.

KB Kookmin Card became the only card firm that showed a growth in net income last year.

Its net income grew 10.4 percent to 316.6 billion won in 2019.

KB Financial Group said interest income from its installment financing business and its efforts to cut costs resulted in the strong earnings of its credit card unit.

Hyundai Card, another major card firm that will announce its 2019 earnings in April, is also assumed to have performed well last year.

Its accumulated net income during the first three quarters of 2019 was 151.8 billion won, up 18.7 percent from a year earlier.

Smaller firms, on the other hands, suffered rapid declines.

Hana Card, which has shown higher dependence on transaction fees, posted 56.3 billion won in net profit, suffering a 47.2 percent decline year-on-year.

The net income of Woori Card dropped 10 percent to 114.2 billion won.

Lotte Card, another small credit card firm that will announce its 2019 earnings in March, is also assumed to have faced sluggish earnings, because it has relied heavily on profits from transaction fees.

Its accumulated net income during the first three quarters of 2019 was 41 billion won, down 40.7 percent from a year earlier.

The card firm turned a loss during the third quarter of last year, immediately after it was sold to MBK Partners from Lotte Group.

Back then, it attributed the loss to compensation paid to its employees and the disposal of its overseas assets.