Q1 Delinquency Rate 4.93%... Up 2.51%p YoY
Non-performing Loans and Risk Assets Also on the Rise
Even large savings banks are rapidly experiencing a deterioration in soundness. The industry plans to tighten delinquency rate management through the sale of non-performing loans.
Analyzing the management disclosures of the top 10 savings banks by asset size (SBI, OK, Korea Investment, Welcome, Pepper, Accuon, Daol, Sangsangin, Moa, KB) on the 5th, their average delinquency rate in the first quarter of this year was 4.93%. Sangsangin Savings Bank had the highest rate at 8.57%, while OK and Pepper Savings Banks recorded 6.83% and 5.82%, respectively, both exceeding the industry average delinquency rate of 5.1% during the same period. Following were Moa at 4.49%, Welcome at 4.42%, KB at 4.23%, Daol at 4.14%, Accuon at 3.8%, Korea Investment at 3.61%, and SBI at 3.36%.
The rate of increase is also significant. Compared to the same period last year (2.42%), it rose by 2.51 percentage points (p), doubling the delinquency rate in one year. The largest increase was at Sangsangin Savings Bank (5.59%p), followed by Pepper Savings Bank at 3.4%p. OK (2.76%p), KB (2.62%p), and Daol (2.34%p) also saw increases of more than 2%p compared to a year ago.
The ratio of non-performing loans past due over 3 months, which indicates the proportion of loans overdue for more than three months in total loans, is also on the rise. It increased by 2.19%p from 3.17% in the first quarter of last year to 5.36% in the first quarter of this year. Difficult-to-recover non-performing loans are rapidly increasing, centered on Sangsangin (2.68% → 8.11%), Welcome (4.82% → 6.83%), and Pepper (2.82% → 6.61%).
Assets with a high possibility of loss have also increased significantly. The risk-weighted assets of the top 10 savings banks in the first quarter of this year totaled KRW 61.5958 trillion, an increase of more than KRW 5 trillion compared to KRW 56.365 trillion a year ago. Risk-weighted assets refer to bank assets such as loans that carry the risk of loss and are one of the key indicators for measuring bank soundness. However, as these savings banks newly increased their capital, the Basel Committee on Banking Supervision (BIS) ratio slightly rose from 11.57% in the first quarter of last year to 12.59% in the first quarter of this year. The BIS recommended ratio is 8%, and a higher ratio means a greater ability of the bank to cover losses with its own capital.
The reason even large institutions with substantial asset sizes could not avoid deterioration in soundness is due to borrowers' reduced repayment ability amid high interest rates. Typically, savings banks lend to medium- and low-credit borrowers whose credit ratings are lower than those of commercial banks, so when interest rates rise, delinquency rates tend to increase. Accordingly, savings banks have raised lending standards and started risk management since the end of last year. The total loan amount of the 10 savings banks decreased from KRW 63.3774 trillion in the fourth quarter of last year to KRW 61.618 trillion in the first quarter of this year.
Another factor contributing to the increase in delinquency rates was that the sale of non-performing loans was limited only to the Korea Asset Management Corporation (KAMCO). Although savings banks could reduce delinquency rates by selling non-performing loans, they were reluctant to sell to KAMCO due to not receiving full value. However, industry concerns have somewhat eased as sales to the private sector will be possible as early as June this year. A representative of a large savings bank said, “Previously, we had to sell loans at a loss, but now that there is an additional channel, it is positive for risk management.” Another industry official also stated, “We plan to manage delinquency rates more actively by considering loan sales or write-offs more aggressively than in the first quarter of this year.”
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