Corporate loan delinquency rate at 0.78%, up 0.11 percentage points year on year

Both large and small businesses see increases

Household rate falls below year-ago level

A corporate customer service counter at a bank in Seoul [Yonhap]
A corporate customer service counter at a bank in Seoul [Yonhap]

The delinquency rate on won-denominated loans at domestic banks rose in July to its highest level for that month in a decade, driven by increases across both large and small corporate borrowers. The household loan delinquency rate, by contrast, edged down from a year earlier.

According to the Financial Supervisory Service, the delinquency rate on won-denominated loans at domestic banks stood at 0.63 percent at the end of July, up 0.07 percentage points from 0.56 percent at the end of the previous month. It was also 0.06 percentage points above the 0.57 percent recorded at the end of the same month last year. For the month of July, the rate was the highest since July 2016, when it reached 0.78 percent.

Bank delinquency rates typically fall at the end of each quarter as lenders concentrate their write-offs and sales of delinquent debt, then climb again during the quarter. In July, the volume of delinquent debt resolved totaled 1.4 trillion won ($1.01 billion), down 3.9 trillion won from 5.3 trillion won the previous month. Newly generated delinquent debt, meanwhile, rose to 3.2 trillion won, up 600 billion won from the prior month. The new delinquency rate also climbed to 0.12 percent, up 0.02 percentage points from 0.10 percent the month before.

By segment, the rise in corporate loans was particularly pronounced. The corporate loan delinquency rate reached 0.78 percent at the end of July, up 0.10 percentage points from the previous month and 0.11 percentage points from the same month last year.

The delinquency rate on loans to large corporations rose to 0.36 percent, up 0.14 percentage points from the previous month and 0.22 percentage points above the 0.14 percent recorded a year earlier. The rate for small and medium-sized enterprise loans also climbed to 0.91 percent, up 0.09 percentage points from the prior month. Within that category, the delinquency rate for small and medium-sized corporate borrowers reached 1.00 percent, up 0.08 percentage points from 0.92 percent the previous month, while the rate for self-employed borrowers rose 0.08 percentage points to 0.77 percent.

[Newsis]
[Newsis]

The household loan delinquency rate, meanwhile, edged up 0.02 percentage points from the previous month to 0.42 percent but remained 0.01 percentage points below the 0.43 percent recorded a year earlier. The mortgage delinquency rate held steady at 0.29 percent, roughly in line with the year-ago level, while the rate for other household loans — including unsecured credit loans — fell 0.02 percentage points year on year to 0.84 percent.

The Financial Supervisory Service said the end-of-July delinquency rate turned higher due to a reduction in the volume of delinquent debt resolved compared with the previous month, as well as new delinquencies stemming from corporate rehabilitation and workout proceedings involving affiliates of Joongang Group. The regulator added that the delinquency rate could continue to rise given the upward trend in market interest rates and uncertainty in external economic conditions, and said it would maintain close monitoring of delinquency rates and overall asset quality, with a particular focus on vulnerable sectors at risk of deterioration.

Separately, data the Financial Supervisory Service submitted to the office of People Power Party lawmaker Kim Jae-seop showed that substandard and below loans in the banking sector's corporate credit portfolio totaled 15.19 trillion won in the first half of this year. That figure has grown by more than 6.8 trillion won over four years from 8.34 trillion won in 2022, and the ratio of substandard and below loans rose from 0.52 percent to 0.77 percent over the same period. Precautionary loans — debt not yet classified as non-performing — reached 16.38 trillion won, exceeding the volume of substandard and below loans.


rim@heraldcorp.com