[Apha Biz=(Chicago) Reporter Paul Lee] The net profits of all five credit card companies (Shinhan, Samsung, KB Kookmin, Woori and Hana Card) that announced their performance in the first half of last year all plunged. This is due to the direct impact of high interest rates, such as increased procurement costs and risk of insolvency.

According to the company's disclosure on the 28th, the net profit of the five credit card companies fell 22.17% (272.1 billion won) year-on-year to 954.9 billion won in the first half of last year. Woori Card, which saw the biggest drop, recorded KRW 81.9 billion, down 38.9% (KRW 52.1 billion) from the same period last year. Shinhan Card's net profit also fell 23.2% (95.8 billion won).

The main reason for the decline in net profit is high interest rates. Interest rates on credit-specialized financial corporate bonds, a major financing channel, remained high at more than 4 percent due to a combination of a rate hike and a financial crunch from Legoland.

Credit card companies, which still raise about 70 percent of their funds, were forced to increase their operating costs. Increasing their ability to absorb losses in preparation for the lack of borrowers' ability to repay in the wake of high interest rates was also a factor in profitability.

In fact, industry leader Shinhan Card spent 447.7 billion won on interest in the first half of last year, up 50.1 percent from 298.2 billion won a year earlier. The allowance for bad debts was set aside an additional 373.3 billion won, up 44.8% (115.4 billion won) from a year ago.

 

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