S. Korean Card Firms Swing To Profit In Q4

South Korean credit card companies posted a quarterly profit in the fourth quarter of last year for the first time in more than two years as they wrote off bad debts and adopted strict lending requirements for customers, the country's financial regulator said Monday.

Samsung Card Co., LG Card Co. (KSE:032710), and four other credit card firms recorded a combined 254 billion won (US$254 million) in profit in the October-December period, the first time since the third-quarter of 2003 that they remained in the black, according to a report released by the Financial Supervisory Service (FSS).

For all of 2004, the credit card issuers saw their losses drop sharply from a year earlier as well. Their combined losses narrowed to 1.34 trillion won last year from a loss of 7.73 trillion won a year earlier.

"Along with budding signs of economic recovery, improving asset quality and low borrowing costs are all indicating that credit card firms may return to the black this year," said an FSS official.

Asset quality at the credit card firms improved sharply on the back of their efforts to trim dud assets and curb a rise in overdue card bills.

Payments overdue for one month or more, which include those from rescheduled credit card bills, accounted for 18.24 percent of its total assets in December, a drastic fall of 10.04 percentage points from the year earlier.

Consequently, the average adjusted capital adequacy ratio for the six credit card companies, a barometer of financial health, was 9.83 percent at the end of last year, up 13.14 percentage point, the FSS report showed.

Card companies are required to have a capital adequacy ratio above 8 percent, which is usually regarded as the minimum requirement for any financial institution.

By company, Samsung Card Co., South Korea's largest credit card firm by assets, recorded a loss of 1.1 trillion won last year, and LG Card Co., the country's second-largest, logged a loss of 81.6 billion won.

Hyundai Card Co. also suffered a loss of 218 billion won.

Lotte Card Co. racked up a profit of 50.3 billion won, and BC Card Co. and Shinhan Card Co. also remained in the black, the report showed.

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