SEOUL, September 05 (AJP) - South Korea's credit card companies saw their combined net profits sink more than 18 percent in the first half of the year, with delinquency rates climbing to their highest point in over a decade, according to data released Friday by the Financial Supervisory Service (FSS).
Net profits stood at 1.2251 trillion won ($8.79 billion) for the January–June period, down 18.3 percent from a year earlier. The slide came even as revenue rose by 331.1 billion won ($238 million), because overall costs jumped by 604.9 billion won ($434 million).
The increase in expenses was largely tied to higher loan loss provisions, which climbed 264.3 billion won ($190 million), as well as 11.3 billion won ($8.1 million) in additional interest costs. Merchant fee income also slipped by 291.1 billion won ($209 million).
Asset quality weakened noticeably. As of the end of June, the delinquency rate on total receivables was 1.76 percent, up 0.11 percentage points from the end of last year. It marked the highest level since late 2014, when the figure stood at 1.69 percent.
Non-performing loans rose as well, with the ratio increasing from 1.16 percent at the end of last year to 1.3 percent. The loan loss reserve ratio edged down slightly to 106.3 percent from 108.1 percent.
On the other hand, capital adequacy remained solid. The sector's adjusted capital ratio improved 0.3 percentage points to 20.7 percent, comfortably above the regulatory minimum of 8 percent.
An FSS official said net profits took a hit because of "reduced merchant fee income and increased loan loss costs," while stressing that "although delinquency rates and non-performing loans have gone up, loss absorption capacity remains
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