CARDS & PAYMENTS | Cesar Tordesillas, Korea

Delinquency ratio up for Korean card firms

Delinquency ratio before provisioning of South Korean card companies rose by 0.06 percentage point in the second quarter from the previous quarter.

This was attributed to more credit overdue on account of economic slowdown.

The average delinquency ratio before gauging write-down of bad debt by seven stand-alone card companies came in at 2.74 percent as of the end of June, according to the Financial Supervisory Service.

The economic slowdown jacks up the value of credit overdue, making card companies set aside more provisioning to cover potential loan-loss.

"The economic slowdown is undercutting borrowers' capacity to repay debt, raising the delinquency ratio. A let-up in growth of card firms' assets since the second half of last year can be also cited as the reason," said an official at the FSS.

The data came as the Korean economy grew 0.4 percent on-quarter in the second quarter on faltering exports and sluggish domestic demand. The slowing downturn and stagnant income growth are hurting Korean household's capacity to repay debt.

In the second quarter, the card companies' net profit reached 570.3 billion won, up 379.3 billion won from the first quarter, mainly due to one-off profits and a fall in expenses.

South Korea's household credit including credit purchases and loans, hit a record high of 922 trillion won as of end-June, up 10.9 trillion won from three months earlier, data by the central bank showed.

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