October Bank Loan Delinquency Rate Rises to 0.58%, Up 0.07%p from Previous Month

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 for bank loans showed a slight increase compared to the previous month.

According to the "Status of Delinquency Rates on KRW Loans by Domestic Banks (Provisional)" report released by the Financial Supervisory Service on December 26, as of the end of October, the delinquency rate for KRW-denominated loans at domestic banks (based on loans overdue by more than one month) was 0.58%. This represents a 0.07 percentage point increase from the end of the previous month and a 0.10 percentage point rise compared to the same month last year.

The bank loan delinquency rate 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 fell to as low as 0.24% in 2022, rose to the 0.4% range in 2023, remained in the 0.5% range last year, and has now increased to around 0.6% this year.

An official from the Financial Supervisory Service commented, "Delinquency rates are rising, particularly among vulnerable sectors such as individual business owners, as well as in industries experiencing continued downturns like construction and local real estate. There are concerns that bad debts may expand."

In October, new delinquent loans amounted to 2.9 trillion won, an increase of 400 billion won compared to the previous month. The amount of resolved delinquent loans was 1.3 trillion won, a decrease of 3.5 trillion won from the previous month. The new delinquency rate for 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 rose by 0.02 percentage points to 0.14%, while the rate for small and medium-sized enterprises increased by 0.09 percentage points to 0.84%. The delinquency rate for individual business owner loans climbed 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 increased by 0.02 percentage points to 0.29% over the same period.

The Financial Supervisory Service official stated, "In October, the increase in newly delinquent loans and the decrease in the resolution of delinquent loans led to a higher overall delinquency rate. To prepare for the potential expansion of delinquencies and bad debts, we will encourage banks to maintain sufficient loss-absorbing capacity through the sale of non-performing loans and the expansion of loan loss provisions."