'Savings Banks Reduce Delinquency Rate to 6% Range Through Non-Performing Loan Resolution... Achieve Profit for Third Consecutive Quarter'

Korea Federation of Savings Banks Announces Q3 Results
Substandard and Below Loan Ratio Falls to 8% Range
Profitability and Soundness Show Gradual Recovery

In the third quarter, savings banks accelerated the resolution of non-performing real estate project financing (PF) loans, achieving a profit for the third consecutive quarter. Key soundness indicators, such as delinquency and substandard loan ratios, also improved.

According to the Korea Federation of Savings Banks, 79 domestic savings banks posted a net profit of 422.1 billion won in the third quarter, marking a profit for the third consecutive quarter, as announced on November 13.

The federation explained that this achievement was due to the reduction in provisions for bad debts, resulting from the resolution of non-performing loans and proactive accumulation of loan loss reserves.

The amount set aside for loan loss reserves decreased from 900 billion won at the end of March to 700 billion won at the end of June, remaining at a similar level at the end of September.

Total assets as of the end of September stood at 124.9 trillion won, an increase of 6.1 trillion won (5.1%) compared to 118.8 trillion won at the end of June.

Deposits recovered to the 100 trillion won range, reaching 105 trillion won. This represents an increase of 5.5 trillion won (5.5%) from 99.5 trillion won at the end of June.

Loans amounted to 93.4 trillion won, a decrease of 1.5 trillion won (1.6%) compared to 94.9 trillion won at the end of June.

Corporate loans stood at 45.6 trillion won, down 2.4% from the end of June. Household loans totaled 40.3 trillion won, a 1.9% decrease over the same period.

Equity capital reached 15 trillion won, up 0.7% from the end of June.

Soundness indicators improved. As of the end of September, the delinquency rate was 6.9%, down 0.63 percentage points from 7.53% at the end of June. As recently as the end of March, the delinquency rate had soared to 9%, the highest since the end of 2015 (9.2%), but has been on a downward trend since the end of the first half.

The delinquency rate for corporate loans, including PF loans, was 9.57%. This is 4.08 percentage points lower than the 13.65% at the end of March, and 1.25 percentage points lower than the 10.82% at the end of June. The delinquency rate for household loans was 4.76%, up 0.16 percentage points from 4.6% at the end of June.

As of the end of September, the substandard and below loan ratio was 8.79%, down 1.8 percentage points from 10.59% at the end of March and 0.7 percentage points from 9.49% at the end of June.

The Bank for International Settlements (BIS) capital adequacy ratio reached an all-time high of 15.67%, about twice the legal requirement. This was due to an increase in equity capital, including retained earnings, as a result of the net profit.

The liquidity ratio was 122.31%, exceeding the legal standard (100%) by 22.31 percentage points. The loan loss reserve ratio was 110.83%, surpassing the legal standard (100%) by 10.83 percentage points.

A federation official stated, "By actively resolving non-performing loans, asset soundness is recovering, and profitability has improved with three consecutive quarters of net profit, resulting in stable management."

The federation assessed that, despite these improvements, operational constraints remain due to the continued tightening of household debt management by financial authorities and growing uncertainties in the real estate market.

A federation official explained, "While we will prioritize strengthening internal capabilities such as improving soundness, we also plan to enhance business competitiveness by expanding online investment-linked loan products and improving credit evaluation capabilities through the expansion of alternative credit information."

According to the federation, the balance of savings bank Sunshine Loans continued to increase, rising from 6.1 trillion won at the end of March to 6.3 trillion won at the end of June, and 6.5 trillion won at the end of September.

The balance of mid-interest rate loans decreased. It rose from 18.8 trillion won at the end of March to 19.5 trillion won at the end of June, but fell to 17.4 trillion won at the end of September. This is because the upper limit of savings bank mid-interest rate loans in the second half of the year dropped by 0.63 percentage points to 16.51% compared to the first half.

A federation official stated, "To fulfill our role as a financial institution for the public, we will continue to expand financial support for small and medium-sized enterprises, small business owners, and individuals with mid- to low credit scores. If household debt stabilizes in the future, we also expect the supply of mid-interest rate loans to gradually increase."