Delinquencies on credit cards rose April to June

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Delinquencies on credit cards rose April to June

Korean card companies’ delinquency ratio before provisioning rose in the second quarter from three months earlier as the economic slowdown made more credit overdue, the financial watchdog said yesterday.

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, up 0.06 percentage points from three months earlier, according to the Financial Supervisory Service.

The default rate has been on a rise as it reached 2.57 percent at the end of last year, data showed.

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

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

Their delinquency ratio after reflecting write-offs of bad debt declined in the second quarter compared with the first quarter, the watchdog said, meaning that the economic downturn raised the value of bad debt.

The default rate reached 1.96 percent as of end-June, down 0.13 percentage points from the first quarter, it said.

In the second quarter, write-down of bad debts amounted to 580.4 billion won ($511.8 million), up 141.4 billion won from three months earlier, making the value of credit overdue fall.

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.

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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