Status of Korean Won Loan Delinquency Rates at Domestic Banks as of End-October
October Delinquency Rate at 0.58%, Up 0.07 Percentage Points from Previous Month
Delinquency Rates Rising, Especially Among Vulnerable Sectors Amid Economic Downturn
In October, the delinquency rate on bank loans showed a slight increase compared to the previous month.
According to the "Status of Delinquency Rates on Korean Won Loans at Domestic Banks (Provisional)" report released by the Financial Supervisory Service on December 26, as of the end of October, the delinquency rate on Korean won loans at domestic banks (based on principal and interest overdue for more than one month) stood at 0.58%. This represents an increase of 0.07 percentage points from the end of the previous month and a rise of 0.10 percentage points from the same month last year.
The bank loan delinquency rate had reached a yearly high of 0.64% in May, then dropped to 0.51% in September, but turned upward again in October. Looking at the longer-term trend, the delinquency rate once fell to 0.24% in 2022, but rose to the 0.4% range in 2023, exceeded 0.5% last year, and has now approached around 0.6% this year.
An official from the Financial Supervisory Service stated, "Delinquency rates are rising, particularly among vulnerable sectors such as individual business owners, as well as in construction and local real estate, where business conditions remain sluggish. There are concerns that bad loans could increase."
In October, the amount of new delinquencies reached 2.9 trillion won, up by 400 billion won from the previous month, while the amount of resolved delinquent loans was 1.3 trillion won, a decrease of 3.5 trillion won compared to the previous month. The new delinquency rate in October was 0.12%, up 0.02 percentage points from the previous month.
By sector, the corporate loan delinquency rate stood at 0.69% at the end of October, up 0.08 percentage points from the previous month. The delinquency rate for large corporate loans increased by 0.02 percentage points to 0.14%, while the rate for small and medium-sized enterprises rose by 0.09 percentage points to 0.84%. The delinquency rate for individual business owner loans increased by 0.07 percentage points to 0.72%.
As of the end of October, the household loan delinquency rate was 0.42%, up 0.03 percentage points from the previous month. The mortgage loan delinquency rate rose by 0.02 percentage points to 0.29%.
The Financial Supervisory Service official emphasized, "In October, the increase in newly delinquent loans and the decrease in the amount of resolved delinquent loans led to a higher overall delinquency rate. To prepare for the possibility of expanding delinquencies and bad loans, we will encourage banks to maintain sufficient loss-absorbing capacity through the sale of non-performing loans and by increasing loan loss provisions."
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