Savings Banks Delinquency Rate 'Worsens'... Rises 0.9%P in One Year to 3.4%

As delinquency rates among domestic financial companies simultaneously showed an upward trend, financial authorities have also stepped up to manage soundness by encouraging capital expansion and additional provisioning.

According to the Financial Supervisory Service (FSS) announcement on the 24th, the total loan delinquency rate of mutual savings banks as of the end of last year recorded 3.4%. This is an increase of 0.9 percentage points compared to the end of the previous year (2.5%). The delinquency rates for household loans (4.7%) and corporate loans (2.8%) at mutual savings banks each rose by 1 percentage point compared to the previous year-end.

According to the FSS, delinquency rates across the entire financial sector?including banks, credit cards, mutual financial cooperatives, and savings banks?rose simultaneously at the end of last year compared to the previous year-end. For banks, the delinquency rate at the end of last year was 0.25%, up 0.04 percentage points from the previous year. In January, the delinquency rate also reached 0.31%, entering the 0.3% range for the first time in a year and a half. The credit card delinquency rate stood at 1.2% at the end of last year, up 0.11 percentage points from the previous year. The delinquency rate in the mutual financial sector?including NongHyup, SuHyup, ShinHyup, and the Forestry Cooperative?increased by 0.35 percentage points from 1.17% to 1.52% during the same period.

This trend is also reflected in data from the Bank of Korea. According to data submitted by the Bank of Korea to Kim Hee-gon of the People Power Party, a member of the National Assembly’s Political Affairs Committee, the delinquency rate of all non-bank financial institutions at the end of last year was 1.75%, up 0.57 percentage points from 1.18% the previous year. Looking at the increase compared to the previous quarter, the delinquency rate in the savings bank sector rose by 0.45 percentage points within three months from 2.95% in the third quarter of last year. The mutual financial sector increased by 0.31 percentage points, and specialized credit finance companies rose by 0.26 percentage points. Rep. Kim said, "The rising delinquency rates in non-bank financial institutions such as savings banks indicate that authorities should closely monitor soundness."

The FSS has also been demanding capital expansion and additional provisioning from financial companies through financial supervision briefings since the 16th. An FSS official stated, "Although the delinquency rate of savings banks has somewhat worsened, it is not a situation to be overly concerned about," adding, "We plan to enhance the loss absorption capacity of savings banks to prepare for potential credit risks." The capital adequacy ratio (BIS ratio) of mutual savings banks last year was 13.25%, a decrease of 0.06 percentage points from 13.31% the previous year, but it remained at a high level compared to regulatory requirements. The regulatory ratio is 8% for assets over 1 trillion KRW and 7% for assets under 1 trillion KRW.

Meanwhile, the net income of mutual savings banks as of the end of last year was 1.5957 trillion KRW, down 368.9 billion KRW from the previous year. Although interest income increased by 789.3 billion KRW, net income decreased due to an increase of 835.6 billion KRW in loan loss provisions. Total assets rose by 20.3 trillion KRW to 138.6 trillion KRW compared to the previous year.