Following its successful W800 billion ($680.7 million) going public bond and W1 trillion recapitalization, Samsung Card has told FinanceAsia it is actively looking to now work out its NPLs in joint venture, potentially with a foreign partner.
The top Korean credit card company reckons it will break even in its operations in the fourth quarter, but is wasting no time in trying to deal with its bad debts.
According to CFO, Kim Suk, the card company faces the problem that if it keeps a delinquent portfolio for more than six months it has to put up 100% against it as reserves. "So we need to find a conduit to transfer these assets," he says.
The portfolio of problem loans is currently split between those being rescheduled (worth W3.2 trillion) and the delinquent portfolio (W2.5 trillion). On the assumption that 30% of the rescheduled pool goes delinquent too, that suggests Samsung Card will want to transfer around W3.4 trillion to the new asset management company. Kim wants to transfer the delinquent pool immediately.
Samsung Card is looking to set up a joint venture, most likely with a foreign firm to workout these NPLs in the new asset management company. "The best thing for us is to transfer these loans to a third party. Because these loans are then in a different entity that entity can be more effective in collections and more aggressive in restructuring."
Foreign funds and investment banks have made considerable profits from Korean NPL workouts in recent years and will no doubt see the Samsung Card portfolio as a potentially lucrative opportunity.