The resale of Lotte Card, the fifth-largest credit card company in South Korea, which experienced a failed sale in 2022, is expected to be challenging. There is a lack of clear intention to acquire from financial holding companies or other potential corporations, and there are also concerns that the credit card industry is in decline.
According to the financial sector on the 28th, MBK Partners, the major shareholder of Lotte Card, distributed a teaser letter to eight potential acquirers, including financial holding companies and financial firms, earlier this month. In particular, MBK Partners has shown its intention to sell by lowering the desired valuation from the existing 3 trillion won range to the 2 trillion won range, but it is reported that there are still no entities showing active interest in acquiring. Looking at Lotte Card's equity structure, MBK Partners holds 59.83%, while Woori Bank and Lotte Shopping hold 20.00% each.
It has been a month since the guidance was received, but financial holding companies are still said to be lukewarm about acquiring Lotte Card. In the past, Hana Financial Group was considered the top candidate during the first sale, but now they have stated that they are reviewing it through standard procedures. Woori Financial Group, which holds 20% equity, and KB Financial Group are also reported to be not considering the acquisition of Lotte Card.
It seems that Woori Financial Group and KB Financial Group, which already have credit card companies, believe that there will be little synergy with Lotte Card. One of Lotte Card's foundations is the distribution channels of Lotte Group, which include Lotte Department Store. However, as offline stores are struggling to perform, it is evaluated that the market share or profitability improvement would not be significant enough to justify the high cost of acquisition.
There are also concerns about soundness. With the introduction of the qualified expense calculation system in 2021, credit card companies have seen a decrease in credit sales revenue, leading to a significant increase in reliance on loan products such as card loans since last year. By the end of last year, the balance of long-term card loans reached 42.3873 trillion won, an increase of 3.6 trillion won from the previous year, and the delinquency rate rose by 0.02 percentage points to 1.65%. In essence, the declining profitability of credit sales is being offset by profits from the lending sector. For this reason, financial authorities are demanding that credit card companies strengthen their soundness management.
Additionally, the card industry is facing a complex crisis. Revenue per transaction has significantly decreased due to qualified expenses, and there are movements towards monetization of easy payment platforms including Samsung Pay. The virtual asset industry is speculating potential entry into the payment market through stablecoins, fundamentally threatening the card payment system.
Earlier, Naver was also considered a candidate for acquisition in the card industry. However, Naver recently officially noted that this is "groundless." Speculation arose as Naver spun off its Naver Pay service business into Naver Financial and began expanding, considering potential synergies with card companies. If Naver were to acquire Lotte Card, it would have the advantage of securing a status as a finance company.
However, it has also been suggested that Naver Financial, which solidly occupies the payment market through easy payments, sees no reason to acquire a credit card company valued at 2 trillion won while increasing its loss-making credit card sales. A card industry official said, "In the case of credit card companies, there were initial expectations that acquiring Lotte Card could elevate them to the upper tier of the industry in terms of market share, but given the overall decline in the card market recently, it seems that there are not many companies capable of acquiring at such a high cost."