SEOUL, South Korea – Shinhan Card, once a dominant force in South Korea's credit card market, is once again offering a voluntary early retirement program, a mere six months after its last such initiative. This unusual mid-year offer underscores the severe challenges facing the nation's card companies, which are grappling with persistent declines in profitability driven by a protracted economic downturn. The broader financial sector is responding to these headwinds by downsizing operations, including early retirement schemes and reductions in new hiring.

According to financial industry sources on June 4th, Shinhan Card plans to begin accepting applications for its voluntary early retirement program from June 19th. This move follows a similar program implemented at the end of last year. The current offer targets employees born between 1968 and 1979, with special retirement benefits reportedly amounting to up to 30 months' worth of their average monthly salary.

This marks the first major human resources initiative under CEO Park Chang-hoon, who assumed leadership in January of this year. The timing of the early retirement program is particularly noteworthy, as such measures are typically executed towards the end of the year. An industry insider commented on the situation, stating, "Given the unfavorable performance, it appears to be an effort to streamline the company's 'jar-shaped' personnel structure," referring to a workforce where the middle-aged demographic is disproportionately large.

Shinhan Card's financial performance has indeed been a cause for concern. Last year, the company's annual net profit stood at 572.1 billion won, a figure that saw it cede its long-held industry leadership to Samsung Card (029780), which reported a net profit of 664.6 billion won. The first quarter of 2024 further exacerbated these worries, with Shinhan Card's net profit plummeting by 26.27% year-on-year to 136.9 billion won. In contrast, Samsung Card posted 184.4 billion won in net profit for the same period, raising concerns that the gap between the two industry giants could widen significantly throughout the year.

Beyond profitability, Shinhan Card's asset quality indicators are also deteriorating. As of the end of the first quarter, the company's delinquency rate climbed to 1.61%. This represents an increase of 0.05 percentage points from 1.56% in the same period last year and a 0.10 percentage point rise from 1.51% in the previous quarter. This marks the highest delinquency rate recorded by Shinhan Card since the end of the third quarter of 2015, when it stood at 1.68%, signaling increasing credit risks within its portfolio.

The broader landscape for South Korea's credit card industry reflects these challenges. According to financial sector data, out of the eight dedicated credit card companies in the country, only two – Hyundai Card and BC Card – recruited new employees in the first half of this year. This significant reduction in new hiring across the industry underscores the severe pressure on operating margins and the cautious outlook adopted by card issuers as they navigate a challenging economic environment characterized by high interest rates, inflationary pressures, and subdued consumer spending. The cumulative effect of these factors is forcing companies to re-evaluate their operational structures and pursue aggressive cost-cutting measures to maintain financial stability.