Long-term card loans in South Korea surged more than 20% in the first half of this year, a rise the industry attributes to growing demand for leveraged stock investing amid a buoyant equity market.
Total card lending by credit card companies reached 56.1 trillion won ($40.5 billion) in the first half, up 9.0%, or 4.6 trillion won, from a year earlier, according to first-half earnings figures for specialized credit finance companies released by the Financial Supervisory Service on the 27th.
Long-term card loans, known as cardrons, accounted for 28 trillion won of that total, a 20.9% increase over the same period. Industry officials said demand for buying stocks with borrowed money, driven by volatility in the equity market, was behind the increase. Short-term card loans, or cash advances, fell 0.8% to 28.1 trillion won.
Combined spending on credit and debit cards totaled 635.3 trillion won in the first half, up 6.7%, or 39.6 trillion won, from a year earlier. Credit card spending rose 6.9%, or 34.5 trillion won, to 532.5 trillion won, while debit card spending increased 5.2%, or 5.1 trillion won, to 102.8 trillion won.
Net profit at card companies came to 1.2934 trillion won in the first half, up 5.6%, or 68.3 billion won, from a year earlier. As of the end of June, the delinquency rate on total credit card receivables stood at 1.54%, and the ratio of substandard-or-below loans was 1.13%.
Non-card specialized credit finance companies, including installment finance firms, leasing companies and new technology finance firms, posted first-half net profit of 2.2352 trillion won, up 25.4%, or 452.3 billion won, from a year earlier. Their delinquency rate and substandard-or-below loan ratio stood at 2.29% and 2.85%, respectively, at the end of June. An FSS official said card companies saw profits rise on expanded credit sales while non-card firms benefited from higher earnings in new technology finance, adding that soundness indicators such as delinquency and substandard-or-below loan ratios were holding at stable levels.
