"Non-performing loan ratio increased but better than pre-COVID levels"
"Provisioning levels also higher than usual years"
The Financial Supervisory Service announced on the 21st that the ratio of non-performing loans (NPLs) at domestic banks stood at 0.47% at the end of December last year, up 0.03 percentage points (p) from the end of the previous quarter. This represents an increase of 0.07 percentage points compared to the same period last year (0.40%).
The total amount of NPLs was 12.5 trillion won, an increase of 1 trillion won from the previous quarter, with corporate loans (10 trillion won), household loans (2.3 trillion won), and credit card receivables (200 billion won) in that order.
The balance of loan loss provisions increased by 1.8 trillion won from the end of the previous quarter to 26.5 trillion won due to each bank's increased reserves. However, the loan loss provision coverage ratio fell by 3 percentage points from the previous quarter to 212.2%. While the coverage ratio rose in commercial banks (14.3 percentage points), regional banks (1.4 percentage points), and internet-only banks (6.9 percentage points) due to increased provisions, it declined by 12.6 percentage points in special banks such as the Korea Eximbank, pulling down the overall coverage ratio.
Additionally, newly generated NPLs in the fourth quarter of last year amounted to 5.7 trillion won, an increase of 1.4 trillion won from the previous quarter. By loan type, new corporate NPLs rose by 1.3 trillion won to 4.4 trillion won. New NPLs in large corporations increased by 500 billion won to 1.2 trillion won, while those in small and medium-sized enterprises (SMEs) grew by 800 billion won to 3.2 trillion won. New household loan NPLs remained similar to the previous quarter at 1.1 trillion won.
Furthermore, the amount of NPLs resolved in the fourth quarter was 4.7 trillion won, up 1.4 trillion won from the previous quarter. Specifically, this included 2 trillion won from sales, 1.3 trillion won from write-offs, 700 billion won from loan recoveries through collateral disposal, and 400 billion won from loan normalization.
Meanwhile, the NPL ratio by loan sector showed that corporate loans recorded 0.59%, up 0.06 percentage points from the end of the previous quarter. Large corporate loans increased by 0.11 percentage points to 0.50%, SME loans rose by 0.03 percentage points to 0.64%, small corporation loans expanded by 0.04 percentage points to 0.85%, and individual business loans increased by 0.01 percentage points to 0.34%.
The NPL ratio for household loans remained similar to the previous quarter at 0.25%. Mortgage loans decreased by 0.01 percentage points to 0.16%, and other unsecured loans also fell by 0.01 percentage points to 0.47%. Credit card receivables stood at 1.36%, similar to the end of the previous quarter.
An official from the Financial Supervisory Service stated, "The NPL ratio of domestic banks at the end of December last year rose slightly compared to the previous quarter but remains significantly lower than the pre-COVID-19 level (0.77%). Despite the increase in NPLs, the loan loss provision coverage ratio is maintained at a higher level than in previous years."
However, the Financial Supervisory Service added, "Given the latent risk factors such as the slowdown in the real estate market and uncertainties in major countries' monetary policies, we will guide banks to strengthen asset soundness management through the disposal and sale of NPLs. We also plan to encourage the expansion of loan loss provisions by fully reflecting domestic and international uncertainties and risk factors."
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