As of the end of the third quarter this year, Lotte Card's ratio of nonperforming loans (substandard or below) rose to the mid-2% range. The ratio is climbing as Homeplus Co., once a major client, has failed to repay card payments on time. Lotte Card has also seen an increase in members leaving recently due to a hacking incident.
According to each company's quarterly report on the 19th, Lotte Card's substandard-or-below loan ratio at the end of the third quarter this year was 2.45%, up 0.98 percentage points from a year earlier. Lotte Card's substandard-or-below loan ratio has continued to rise, to 2.12% at the end of the first quarter and 2.37% at the end of the second quarter. The figure for the seven other standalone card issuers (Samsung Card, Shinhan Card, Hyundai Card, KB Kookmin Card, Hana Card, Woori Card, and BC Card) stood between 0.73% and 1.26% at the end of the third quarter.
The substandard-or-below loan ratio refers to the share of nonperforming loans in arrears for more than three months for which recovery is unlikely. It is one of the indicators of a card company's soundness.
Lotte Card's nonperforming loan ratio rose as Homeplus Co., a major client, fell into business difficulties. Lotte Card holds the largest amount among major card companies of purchase-only card sales generated at Homeplus Co. A purchase-only card is a credit or debit card that corporations are issued to pay for purchases and is used for trade credit between corporations. On Mar. 3, after Homeplus Co. filed for rehabilitation, Lotte Card has been unable to collect 60 billion won in purchase-only card payments.
Member departures tied to the hacking incident are also accelerating. On Aug. 14, Lotte Card suffered a hack that leaked internal files. The leak totaled about 200GB, affecting 2.97 million people. The hack is said to have exposed some members' resident registration numbers, CVCs (the three-digit number on the back of a card), and internal identification numbers.
Last month, Lotte Card's number of cancellations during the month reached 160,000, a 138.8% surge from the previous month. Including new sign-ups, Lotte Card's total membership stood at 9,575,000 at the end of last month, down 88,000 from the previous month.
A Lotte Card official said, "As Homeplus Co. applied for corporate rehabilitation, the related receivables were classified as substandard or below, which increased the (nonperforming loan) ratio."