South Korean credit card companies saw their third-quarter earnings plunge due mainly to a cut in their fee rates on member stores, data showed Wednesday.
The combined net income of eight stand-alone card firms stood at 419.6 billion won ($375 million) in the July-September period, down 20 percent from a year earlier, according to the data by the Financial Supervisory Service and industry sources.
The nosedive was attributed to the fee-rate cut conducted in August. The card issuers lowered their rates by between 0.5 percentage point and 0.7 percentage point to ease the financial burden of member merchants.
Market sources estimated the fee reduction would shave the industry's earnings by around 350 billion won over a one-year period.
Lotte Card Co. made a net loss of 26.7 billion won, while the bottom line of industry leader Shinhan Card Co. shrank 15.7 percent on-year to 149.5 billion won.
KEB Hana Card was the only card issuer that enjoyed an on-year earnings gain, with net climbing 8.2 percent to 22.4 billion won.
Despite the generally poor results, in the first nine months of the year, the card firms' combined net profit surged 17.1 percent from a year earlier to 1.84 trillion won due largely to a one-off factor.
The financial watchdog allowed Shinhan Card to include 300 billion won in loan loss reserves in its earnings for the cited period.
Market watchers warned the credit card industry faces a gloomy outlook, as the central bank is widely expected to hike its benchmark interest rate by a quarter percentage point to 1.5 percent this month, which would raise their funding costs.
Starting next year, the legal maximum interest rate will be cut to 24 percent from the current 27.9 percent, which may force card firms to lower interest rates on cash advances, they added.
"Given those negatives, concerns are growing about the future performance of credit card issuers," an industry source said. "The worsening conditions for the credit card industry are worrisome." (Yonhap)