A Special Edition on Credit Cards
 Revival of interest in credit card business — We believe investors’ interest will
revert to the credit card sector triggered by recent sanguine macro data
points. We view credit card as a good proxy to play a pick up in personal
spending.
 Market expansion with fiercer competition — Resilient card spending data
confirms that the market is expanding. We anticipate around 10% annual
growth in card spending for the next few years. Furthermore, a severe decline
in interest burden on credit card (albeit partially offset by hike in mortgage
interest payment) suggests room for a turnaround.
 Check card, a new driver while loan products are key for profitability —
Check card usage exploded on better tax credit vs. credit card and more
disciplined spending behavior. Check card provides thinner margin with no
default risk. We view expanding loan product is the key for profitability given
much higher profitability with higher risk.
 ROAA decomposition and normalized ROA — Current sector pretax ROA at
7%, suggests profitability downside but we note higher ROA may persist
longer than market expects on recoveries from written-off assets for major
players. We estimate 4.5% normalized pretax ROA in the medium term.
 Operational strategy and best hit products — SWOT analysis suggests
monoliners are more nimble in marketing/promotion while banks’ credit card
operations retain cheaper acquisition channel, bank branches. We view a
separate credit card company under the financial holdings company will be
the best structure amid current operational environment.
 Positive for Korea banks — Recent brisk data on card spending is positive for
banks particularly with significant credit card portfolio such as Shinhan FG
and Kookmin Bank. We have positive view on Korea banks.

Contents
A Special Edition on Credit Cards 3
Revival of interest in credit card business 4
Long-term growth potential in card usage 4
Consumer balance sheet analysis 6
Product comparison 8
ROAA decomposition by issuer 11
Who is advancing and who’s losing? 13
Appendix A-1 20
Analyst Certification 20