- Published 2026.11.09 16:43
Average ROA of seven card issuers falls to 1.2% in first half
Widening funding cost gap deepens earnings divergence among card firms
Vulnerable borrower delinquencies and funding competitiveness are key variables
According to a report released by NICE Credit Rating on Nov. 9, the rate hikes and high-rate environment that have persisted since 2022 are casting a long shadow over Korea's credit card industry. With fee cuts and lending regulations choking off core revenue, interest expenses and credit costs have surged, dragging down both profitability and asset soundness. The damage is concentrated among lower-tier card issuers with weaker rate defenses, making earnings polarization among players increasingly pronounced.
The simple average return on assets (ROA) of seven standalone credit card companies fell to 1.2% in the first half of this year from 1.5% in 2020. Card issuers tried to defend earnings by cutting acquisition costs and scaling back interest-free installment benefits, but rising market rates pushed the average interest expense ratio to 3.4% from 2.2% over the same period, eating into overall profits. Asset quality indicators also deteriorated. The combined delinquency rate of one month or more for the seven issuers jumped to 1.6% at the end of June this year from 1.1% at the end of 2021. Despite offloading non-performing loans (NPLs) through sales and write-offs, defaults continue to mount among marginal borrowers as household debt burdens grow.
What stands out is the wide divergence in each card issuer's ability to withstand the high-rate wave. The core driver of profitability polarization is funding competitiveness. Compared with 2020, the standard deviation of the interest expense-to-total assets ratio across the seven issuers surged 3.7 times as of 2025. Prime issuers with AA+ credit ratings such as Shinhan Card, Samsung Card and KB Kookmin Card, and mid-to-lower tier issuers rated AA or below such as Lotte Card, Woori Card and Hana Card, saw their funding spreads in the market widen, which in turn widened the interest expense gap.
The asset quality gap also stems from differences in loan portfolio orientation. Card issuers that aggressively expanded loan assets or held a higher share of high-risk assets during the high-rate period saw larger increases in delinquency rates. The analysis shows that from the end of 2022 to the end of 2024, loan asset growth at top-rated card issuers averaged just 2.0% per year, while the three mid-to-lower tier issuers posted an annual average of 9.9%. As a result, the delinquency rate gap between top and bottom issuers, which was only 0.5 percentage point at the end of 2020, widened to 1.4 percentage points at the end of June 2026.
Given a business structure that makes it difficult to offset high-rate burdens with internal profitability, the future path of the base rate is a key factor that will determine the entire card industry's earnings. If, as the market expects, base rate hikes stop at the 3.5% level and cuts begin within a year, additional downward pressure on earnings could be limited. However, the debt repayment capacity of marginal borrowers has deteriorated significantly compared with the early stages of past rate hike cycles, so even a small rate shock could trigger a sharp rise in delinquencies among multiple-debt borrowers. If high rates persist longer than expected, the average ROA of card issuers could fall by an additional 0.3 percentage point.
Ultimately, future success will hinge on the ability to defend funding costs and manage NPLs. With refinancing burdens approaching, card issuers that have secured stable funding bases and favorable maturity structures can accumulate capital and widen the gap further. Conversely, companies with weaker funding competitiveness that aggressively expand high-risk assets to offset declining profitability risk falling into a vicious cycle of rising credit costs. The level of delinquency defense among vulnerable borrowers and each card issuer's refinancing maturity structure will be key indicators for gauging individual companies' fundamentals.
※ This article is an AI translation of the Korean original published by Korea Credit News; it was checked by automated quality guards and published by the English edition desk.
