Annual Performance Results Announced
Two Consecutive Years of Deficits... Delinquency Rate at 8.52%
Non-Performing Loans to Be Managed Through Both Auctions and Fund "Two-Track" Approach
The Korea Federation of Savings Banks announced on the 21st that the improvement of profitability and soundness indicators of 79 savings banks last year has been slow due to increased macroeconomic uncertainty and continued deterioration in borrowers' repayment ability. However, it emphasized that there are no major abnormalities in the management stability of most savings banks.
According to the Korea Federation of Savings Banks, the 79 savings banks recorded a net loss of 397.4 billion KRW last year. This reduced the deficit by 178.4 billion KRW (31%) compared to the end of the previous year (-575.8 billion KRW).
Total assets stood at 120.9 trillion KRW, down 5.7 trillion KRW (4.5%) from 126.6 trillion KRW at the end of the previous year.
The delinquency rate, a soundness indicator, rose by 1.97 percentage points to 8.52% compared to 6.55% at the end of the previous year. The non-performing loan (NPL) ratio, related to bad loans, increased by 2.91 percentage points to 10.66% from 7.75% at the end of the previous year. A lower ratio indicates greater stability. In the savings bank sector, an NPL ratio below 5% is generally considered good, and below 3% is regarded as excellent.
The Basel Committee on Banking Supervision (BIS) capital adequacy ratio, a stability indicator, rose by 0.67 percentage points to 15.02% from 14.35% the previous year. A higher ratio indicates better stability. The regulatory ratio is 7% for savings banks with assets under 1 trillion KRW and 8% for those with assets over 1 trillion KRW. This means the banks maintained a level about twice the regulatory ratio.
The loan loss provision coverage ratio was 113.23%, exceeding the legal standard of 100% by 13.23 percentage points.
The liquidity ratio was 181.92%, 1.8 times higher than the legal standard of 100%.
The Federation emphasized that it has liquidity and systems in place to respond step-by-step to unexpected large-scale deposit withdrawals (bank runs). It explained that a four-step liquidity supply system has been established for savings banks, including liquidity support from the Federation, utilization of external credit lines, use of repurchase agreements (RP), and liquidity support from the Bank of Korea.
A Federation official said, "We have secured available liquid capital equivalent to about 15% or more of deposit scale, including cash, deposits, Federation deposits, and immediately marketable securities."
The Federation expects savings banks to gradually improve profitability and management stability through various self-help efforts such as proactive loan loss provisioning, capital increases, sales, and write-offs.
A Federation official stated, "Considering the volatility of the real estate market, we plan to manage non-performing project financing (PF) loan claims by creating a joint fund centered on savings banks alongside auctions and public sales," adding, "We will improve management indicators this year to alleviate concerns in the financial market and fulfill the primary role of institutions supplying financial services to the general public."
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