Korean credit card companies saw earnings surge 46.1 percent last year from a year earlier due mainly to one-off gains, the financial regulator said Thursday.
The combined net profit of six local credit card-only companies reached 2.72 trillion won ($2.4 billion) in 2010, compared with 1.86 trillion won in 2009, the Financial Supervisory Service (FSS) said in a report.
The stronger bottom line came after industry leader Samsung Card Co. earned 607.5 billion won by selling off its share holdings of affiliated companies, while Shinhan Card Co. received a tax refund of 195.5 billion won, the FSS said.
Barring the one-off gains, the six firms’ earnings remained little changed at 1.92 trillion won from 2009, the regulator noted.
Out of the six card firms, only Hana SK Card Co., Hana Financial Group Inc.’s joint business with SK Telecom Co., reported a loss of 58.9 billion won, it said.
The deficit was due to operational costs needed for the company that went into operation in late 2009, it said.
The average default rate on the six firms’ total credit lending stood at 1.68 percent as of the end of 2010, down from 1.83 percent from a year earlier, according to the FSS.
Total credit card spending, including credit purchase and card loans, rose 9.9 percent from a year earlier to reach 517.4 trillion won last year, marking the most annual spending ever, the FSS noted. The tally is the sum of the six credit card firms’ total bills as well as those by 14 other banks that issue credit cards.
As of the end of 2010, a total of 85.14 million cards were in use, 11.5 percent more than a year earlier, the regulator said.
Although card companies’ profits and financial health appear to be sound, growing competition in the market is feared to damage their soundness down the road, the watchdog said.
“Card firms’ increasing competition to win over customers and provide more gifts has recently led to an increase in card loan issuance, which is riskier assets compared to credit purchase,” the FSS said.
The companies’ average marketing costs totaled 27.6 percent of their profits coming from credit card operations as of the end of 2010, up from 21.9 percent a year earlier, it said.
The FSS will substantially strengthen supervision of credit card firms in order to slow down their excessive competition and prevent potential default risks, it added.