Major Savings Bank Fails to Repay 3 Million Won, Small Credit Loan Delinquency Rate Rises by 1%p

Q3 Last Year 6.69% → Q3 This Year 7.69%
Handling Reduced for Soundness Management
Welcome Down 25.4 Billion, SBI Down 25 Billion

The delinquency rate for small credit loans under 3 million KRW at large savings banks has increased by 1 percentage point over the past year. As these banks reduce the volume of such loans to manage soundness, concerns are rising that the emergency funding channels for low-credit borrowers are narrowing.

On the 9th, an analysis of the management disclosures of the top seven savings banks by asset size?SBI, OK, Korea Investment, Welcome, Pepper, Accuon, and Daol?showed that their average delinquency rate for small credit loans in the third quarter of this year was 7.69%, up 1 percentage point from 6.69% in the third quarter of last year.

Looking at each savings bank, Korea Investment Savings Bank's delinquency rate rose by 2.54 percentage points from 10.93% in the third quarter of last year to 13.47% this year. Accuon increased by 0.12 percentage points from 12.49% to 12.61% during the same period. Daol rose from 4.39% to 6.11%, and Pepper saw the largest increase from 2.36% to 5.99%. SBI also increased from 2.2% to 4.11%. OK and Welcome decreased by 2.3 percentage points (6%→4%) and 0.59 percentage points (8.16%→7.57%), respectively.

Small credit loans refer to loans under 3 million KRW, primarily handled by large savings banks. In the third quarter of this year, the top seven savings banks' small credit loan volume was 774.4 billion KRW, accounting for about 70% of the total loan amount (1.1129 trillion KRW) of 37 savings banks that handled more than 1 billion KRW in small credit loans.

Due to the rise in delinquency rates, many large savings banks reduced their small credit loan volumes compared to last year. Welcome decreased by 25.4 billion KRW from 86.2 billion KRW in the third quarter of last year to 60.8 billion KRW this year, and SBI reduced by 25 billion KRW from 221.1 billion KRW to 196.1 billion KRW during the same period. Korea Investment and Accuon followed with decreases of 3.6 billion KRW (39.5 billion KRW→35.9 billion KRW) and 1.1 billion KRW (14.2 billion KRW→13.1 billion KRW), respectively.

Small credit loans have smaller amounts per case and are often used by low-credit and low-income borrowers for emergency funds, so their interest rates are higher than general credit loans. According to the Bank of Korea, the interest rate on small credit loans at savings banks in the third quarter of this year (based on new loans) was 17.8% per annum, 1.25 percentage points higher than the general credit loan rate of 16.55% per annum.

On the other hand, OK Savings Bank's small credit loan volume increased by 166.2 billion KRW over the past year (from 196.9 billion KRW in the third quarter of last year to 363.1 billion KRW this year), recording the largest volume in the industry for this quarter as well as the previous one.