Loan Delinquency Rate at Domestic Banks Hits 0.58% in February, Highest in Over Six Years
Delinquency Rate for SME Loans Surges Amid Economic Downturn
As the economic downturn continues, the number of companies borrowing money from banks and failing to repay on time has increased. The rise in delinquency rates is centered on small and medium-sized enterprises (SMEs) rather than large corporations, leading to the interpretation that more SMEs are struggling due to the sluggish economy.
According to the Financial Supervisory Service's report, "Status of Delinquency Rates on Won-denominated Loans at Domestic Banks (Provisional)," released on April 25, the delinquency rate for won-denominated loans at domestic banks as of the end of February?measured by loans overdue by one month or more?stood at 0.58%. This is the highest level in six years and three months, since the 0.60% recorded in November 2018. Compared to the end of the previous month, the rate rose by 0.05 percentage points, and compared to the same period last year, it increased by 0.07 percentage points.
By sector, the increase in delinquency rates for corporate loans was greater than that for household loans, driving up the overall delinquency rate. As of the end of February, the delinquency rate for corporate loans was 0.68%, up 0.07 percentage points from the 0.61% recorded at the end of the previous month.
The delinquency rate for SME loans was 0.84%, an increase of 0.07 percentage points from the end of the previous month. In particular, the delinquency rate for small and medium-sized corporations reached 0.90%. The delinquency rate for individual business owner loans was also relatively high at 0.76%, while the delinquency rate for large corporations was comparatively low at 0.10%.
The Financial Supervisory Service explained that the overall delinquency rate was driven up by a relatively significant increase in delinquency rates among SMEs. A Financial Supervisory Service official stated, "In absolute terms, the loan delinquency rate is not high enough to threaten the soundness of banks," but added, "We are closely monitoring the situation as the delinquency rate is rising among SMEs amid the economic downturn."
As of the end of February, the household loan delinquency rate was 0.43%, unchanged from the end of the previous month. The delinquency rate for mortgage loans remained at 0.29%, but the delinquency rate for household loans excluding mortgages (such as unsecured loans) rose to 0.89%, up 0.05 percentage points from the end of the previous month. Newly occurring delinquencies in February amounted to 2.9 trillion won, a decrease of 300 billion won from the previous month. The amount of resolved delinquent bonds was 1.8 trillion won, an increase of 800 billion won from the previous month.
A Financial Supervisory Service official emphasized, "We will guide banks to maintain sufficient loss-absorbing capacity in preparation for the possibility of increased credit risk in the future," and added, "We plan to strengthen asset quality management through active delinquency rate control and the write-off or sale of non-performing loans."
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