Bank Delinquency Rate Rises Again... "Delinquency Rate Expected to Continue Rising"

Financial Supervisory Service Announces "January Won-Denominated Loan Delinquency Rate"
Won-Denominated Loan Delinquency Rate at 0.53% at End of January
Both Household and Corporate Loan Delinquency Rates Rise

The Financial Supervisory Service announced on the 28th that the delinquency rate of Korean won loans at domestic banks (based on principal and interest overdue by more than one month) rose by 0.09 percentage points to 0.53% at the end of January this year, compared to 0.44% at the end of the previous month.

In January of this year, the delinquency rate on won-denominated loans at domestic banks reversed to an upward trend after a decline at the end of last year due to a base effect. Financial authorities expect the delinquency rate to continue rising for the time being.

According to the "Status of Won-Denominated Loan Delinquency Rates at Domestic Banks (Provisional)" data released by the Financial Supervisory Service on the 28th, the delinquency rate on won-denominated loans (based on principal and interest overdue for more than one month) at domestic banks at the end of January this year was 0.53%, up 0.09 percentage points from 0.44% at the end of the previous month. The delinquency rate on won-denominated loans had turned to a downward trend in December last year after three months but reversed to an upward trend again after one month.

The amount of new delinquencies in January (3.2 trillion won) increased by 700 billion won compared to the previous month (2.5 trillion won), while the amount of delinquent loan resolution (1 trillion won) decreased by 3.3 trillion won compared to the previous month (4.3 trillion won). The new delinquency rate in January was 0.13%, down 0.03 percentage points from 0.10% in the previous month.

Looking at the delinquency rate by sector, both household and corporate loans showed an upward trend. As of the end of January, the delinquency rate on household loans (0.43%) rose 0.05 percentage points from 0.38% at the end of the previous month.

The delinquency rate on mortgage loans (0.29%) increased by 0.03 percentage points from 0.26% at the end of the previous month, while the delinquency rate on household loans excluding mortgage loans (such as credit loans) (0.84%) jumped 0.10 percentage points from 0.74% at the end of the previous month.

During the same period, the delinquency rate on corporate loans (0.61%) rose 0.11 percentage points from 0.50% at the end of the previous month. The delinquency rate on large corporate loans (0.05%) increased by 0.02 percentage points from 0.03% at the end of the previous month, and the delinquency rate on small and medium-sized enterprise loans (0.77%) rose 0.17 percentage points from 0.62% at the end of the previous month.

The delinquency rate at the end of January (0.53%) remains lower than the long-term average before COVID-19 (0.78%), but the new delinquency rate (0.13 percentage points) is similar to that of the same month last year (0.13%), indicating that the upward trend in delinquency rates is likely to continue for the time being.

An official from the Financial Supervisory Service stated, "To prepare for domestic and external uncertainties, we plan to support the alleviation of debt burdens by encouraging the expansion of loan loss provisions to maintain sufficient loss absorption capacity and by activating self-debt restructuring for vulnerable borrowers such as individual business owners who are at risk of delinquency."