Eight major South Korean card issuers reported a revenue decline in Q1 2025 despite rising loan volumes, as average interest rates dropped from 14.64% to 13.50%. Card loan revenue fell approximately 1.2% year-over-year to 1.31 trillion won, while loan issuance grew about 2% to 10.65 trillion won, according to financial sector data released on the 13th. The revenue contraction coincided with a doubling of mid-rate loan supply — from 1.26 trillion won in Q1 2024 to 2.57 trillion won in Q1 2025 — driven by government inclusive finance policies and an influx of high-credit borrowers seeking alternatives to tightened first-tier bank lending. Industry observers attribute the profitability squeeze to regulatory pressure for lower-rate lending and voluntary rate discounts by card companies.
Card Loan Volume and Balance Growth in Q1 2025
The eight card issuers — Lotte, BC, Samsung, Shinhan, Woori, Hana, Hyundai, and KB Kookmin — recorded Q1 card loan issuance of 10.65 trillion won, up from 10.42 trillion won in Q1 2024. Card loan balances increased approximately 1% from 39.29 trillion won to 39.68 trillion won over the same period. By March end, the combined card loan balance across nine issuers (including NH Nonghyup Card) reached 42.99 trillion won, marking a three-month consecutive rise and surpassing the previous record of 42.99 trillion won set in February 2024, according to Korea Financial Investment Association statistics released on the 20th.
Revenue Decline Despite Rising Loan Issuance
Q1 2025 card loan revenue totaled 1.31 trillion won, down from 1.32 trillion won in Q1 2024. The share of card loan revenue within total card revenue declined from 24.5% to 23.9%. The revenue drop occurred as the average interest rate fell 1.14 percentage points from 14.64% in Q1 2024 to 13.50% in Q1 2025. An industry official stated that "as we supplied loans at lower rates in line with the government's inclusive finance stance, revenue itself appears to have decreased."
Mid-Rate Loan Expansion Drives Interest Rate Reduction
Mid-rate loan issuance doubled to 2.57 trillion won in Q1 2025 from 1.26 trillion won in Q1 2024, aligning with the government's inclusive finance policy targeting low- to mid-credit borrowers. Another industry official noted that "the result seems to reflect the industry's voluntary rate discount efforts under regulatory emphasis on inclusive finance and mid-rate loan expansion." The expansion of mid-rate products contributed to the overall decline in average lending rates across card issuers' portfolios.
High-Credit Borrower Influx Pressures Profitability
Industry observers cite an influx of high-credit borrowers as an additional factor in weakening card loan profitability. Tightened household lending regulations at first-tier banks created a balloon effect, increasing card loan demand among high-credit customers who qualify for lower-rate products. An industry official remarked that "when high-credit individuals use card loans, low-rate products are issued accordingly, so that influence seems to be present." The shift toward lower-risk, lower-margin borrowers compressed overall interest income despite rising loan volumes.
FAQ
Why did Korean card issuers' revenue decline in Q1 2025 despite rising loan volumes?
Revenue fell approximately 1.2% to 1.31 trillion won as average interest rates dropped from 14.64% to 13.50%, driven by government inclusive finance policies and a doubling of mid-rate loan issuance to 2.57 trillion won.
What caused the interest rate reduction in Korean card loans during Q1 2025?
The rate decline resulted from expanded mid-rate loan supply (up from 1.26 trillion won to 2.57 trillion won year-over-year), regulatory pressure for inclusive finance, and an influx of high-credit borrowers qualifying for lower-rate products due to tightened first-tier bank lending.
