August Bank Loan Delinquency Rate at 0.53%... Financial Supervisory Service Expects Decline in September

Continued Increase in July... Up 0.06%p from Previous Month
Large Enterprises Remain Steady, Small and Medium Enterprises Rise by 0.11%p

The bank loan delinquency rate in August continued its upward trend following July. Both household and corporate loan delinquency rates increased.

According to the Financial Supervisory Service on the 18th, as of the end of August, the delinquency rate on won-denominated loans at domestic banks was 0.53%, up 0.06 percentage points from the previous month (0.47%). This is 0.10 percentage points higher compared to the same month last year (0.43%).

The amount of new delinquencies in August was 3 trillion won, an increase of 300 billion won from the previous month (2.7 trillion won). Meanwhile, the amount of delinquent loans resolved (through collection, sale, etc.) during the same period was 1.4 trillion won, down 100 billion won from the previous month (1.5 trillion won).

Specifically, the corporate loan delinquency rate rose 0.09 percentage points to 0.62% from 0.53% in the previous month. There were differences by company size during the same period: the delinquency rate for large corporations remained unchanged at 0.05%, while the delinquency rate for small and medium-sized enterprises (SMEs) increased by 0.11 percentage points to 0.78%. Among these, the delinquency rate for small and medium-sized corporate loans was 0.84%, up 0.13 percentage points from 0.71% in the previous month, and the delinquency rate for individual business owner loans rose 0.09 percentage points to 0.70% from 0.61%.

The household loan delinquency rate also increased by 0.02 percentage points to 0.40% from 0.38% in the previous month. During the same period, the delinquency rate on mortgage loans rose 0.01 percentage points to 0.26%, while the delinquency rate on other household loans such as unsecured loans increased by 0.06 percentage points to 0.82%.

The Financial Supervisory Service evaluated that "the current level is still low compared to the long-term average before COVID-19, and the loss absorption capacity of domestic banks has greatly improved compared to the past, making it a manageable level." The average delinquency rate from 2010 to 2019, before the COVID-19 pandemic, was 0.78%.

It added, "Typically, at the end of a quarter (or year), the delinquency rate tends to drop sharply due to an increase in the resolution of delinquent loans by banks, so the delinquency rate at the end of September is expected to decline."

However, it noted, "If the effect of the base interest rate cut becomes fully effective, the repayment burden on borrowers is expected to ease," but also added, "Since the new delinquency rate remains high mainly among SMEs and individual business owners who are sensitive to economic conditions, it is necessary to prepare for an expansion of credit losses for the time being."

Accordingly, the Financial Supervisory Service plans to encourage banks to strengthen asset soundness management through active resolution of delinquent loans and sufficient provisioning for loan losses. It also intends to support the alleviation of debt burdens for vulnerable borrowers by promoting self-debt restructuring for borrowers at risk of delinquency.

This content was produced with the assistance of AI translation services.