[Exclusive] Saemaeul Geumgo Corporate Loan Delinquency Rate Nears 10%... Introduction of Dedicated Management System for Delinquent Businesses

Saemaeul Geumgo Crisis Rumors Persist
Ministry of the Interior and Safety Focuses on Managing Overdue Businesses
Overdue Businesses Over 20 Billion Won Including Managed Land Trusts
'Regional Headquarters Dedicated Management System' in Operation
Intensive Inspection Expected on Deteriorating Corporate Loan Soundness

The corporate loan delinquency rate of Saemaeul Geumgo was confirmed to be approaching 10% as of the first quarter. The Ministry of the Interior and Safety plans to take drastic measures, such as implementing a 'Regional Headquarters Dedicated Management System' for delinquent business sites with over 20 billion KRW in arrears, including managed land trusts.

Corporate Loan Delinquency Rate Soars... Inspection of Delinquent Business Sites and Corporate Loan Defaults

According to the 'Saemaeul Geumgo Delinquency Rate Status for the Past 5 Years' obtained by Asia Economy on the 3rd from the office of Hong Sung-guk, a member of the National Assembly's Planning and Finance Committee from the Democratic Party of Korea, the corporate loan delinquency rate of Saemaeul Geumgo as of the first quarter of this year (end of March) recorded 9.99%, rising sharply by 3.27 percentage points compared to the end of last year, and nearly quadrupling over five years.

The corporate loan delinquency rate, which was 2.56% at the end of 2018, remained in the 2-3% range until the end of 2021, then rose to 6.72% by the end of last year. The steadily rising corporate loan delinquency rate surpassed 8% by recording 8.06% at the end of January this year. It increased to 8.99% at the end of February and rose again by nearly 1 percentage point within a month.

This sharp rise in the corporate loan delinquency rate is analyzed to be due to the downturn in the real estate market. Saemaeul Geumgo's corporate loans also include loans handled through the 'managed land trust' method. These are loans provided to construction companies or developers in sales projects and are broadly classified in the industry as real estate project financing (PF) loans, along with land acquisition cost loans and bridge loans.

As the corporate loan delinquency rate soared, the Ministry of the Interior and Safety, the supervisory authority of Saemaeul Geumgo, hastily began managing delinquent business sites. The ministry reported to the National Assembly on the same day that it plans to operate a 'Regional Headquarters Dedicated Management System' to intensively manage 87 business sites worth 3.2 trillion KRW, including managed land trusts. According to the ministry, the management targets include 13 business sites related to managed land trust loans (180 billion KRW) and 74 business sites with loans exceeding 20 billion KRW (2.9998 trillion KRW).

Additionally, from the 10th of this month to the 11th of next month, the Financial Supervisory Service, the Korea Deposit Insurance Corporation, and the Saemaeul Geumgo Central Association will form teams to conduct special inspections of 30 Geumgo branches and special checks of 70 branches. Through this, they plan to intensively inspect and examine the overall 'corporate loan management status,' which has recently deteriorated in soundness.

Delinquency Rate of Individual Business Loans Also Surpasses 5%... Overall Delinquency Rate Twice That of Mutual Finance Sector

The delinquency rate of individual business loans at Saemaeul Geumgo also surpassed 5%. As of the first quarter, the delinquency rate for individual business loans was 5.11%, up 1.63 percentage points from 3.48% at the end of last year. The delinquency rate for individual business loans, which was 1% in 2018, steadily rose to 2.21% at the end of 2021, 3.48% at the end of last year, entered the 4% range at the end of January this year with 4.29%, and then rose to the 5% range in just three months.

The overall loan delinquency rate of Saemaeul Geumgo recorded 5.34% as of the first quarter, exceeding 5%, and was estimated at 5.41% (provisional figure, based on National Assembly report) as of the end of June. This level is more than twice the delinquency rate of other mutual finance sectors such as credit unions, Nonghyup, Suhyup, and the Korea Forestry Cooperative. According to the Financial Supervisory Service, the delinquency rate of credit unions, Nonghyup, Suhyup, and the Korea Forestry Cooperative was 2.42% as of the first quarter.

As concerns about Saemaeul Geumgo's crisis continue due to the rising delinquency rates, financial consumers' worries are also growing. Recently, anxiety has spread mainly through online communities about whether deposits should be withdrawn from Saemaeul Geumgo. In fact, Saemaeul Geumgo's deposit balance was 258.2811 trillion KRW as of the end of April, down 6.9889 trillion KRW compared to the end of February. The figure at the end of June was 259.5 trillion KRW, increasing by about 1 trillion KRW over two months.