0.51% as of the end of February, the highest level in 5 years
The mid-term is 0.7%… Household loan delinquency also increases
Although it is lower than during COVID-19, the sense of crisis still remains.
Last February, the delinquency rate of domestic bank won-denominated loans rose to the 0.5% range, reaching the highest level in four years and nine months. In particular, the delinquency rate of businesses, especially small and medium-sized businesses, is rising at a faster rate than that of households.
According to data released by the Financial Supervisory Service on the 24th, the delinquency rate of Korean won loans at domestic banks at the end of February was 0.51%, an increase of 0.06 percentage points compared to the previous month. The Korean won loan delinquency rate, which is calculated based on loans with principal and interest overdue for more than one month, has been on the rise since the second half of 2022.
Newly incurred delinquencies, or ‘new delinquent claims’, amounted to 2.9 trillion won in February, the same as the previous month. The amount of overdue receivables cleared by the bank is also 1.3 trillion won, the same as the previous month. New delinquent bonds rose from 900 billion won in February 2022 to 1900 billion won in just one year, and have been recording in the 2 trillion won range every month since September of last year.
The ‘new delinquency rate’, which is calculated by dividing the amount of new delinquencies in a given month by the loan balance as of the end of the previous month, is also steadily increasing. The new delinquency rate, which was only 0.09% in February of last year, has recorded 0.13% for two consecutive months since January of this year.
By loan type, both the size and increase in delinquency rates for corporate loans were larger than those for households. The household loan delinquency rate was 0.42%, up 0.04 percentage points from the end of the previous month (0.38%), and corporate loans were 0.59%, up 0.09 percentage points.
In particular, the delinquency rate of small and medium-sized enterprises with poor financing conditions is at a serious level. It recorded 0.7% in February, an increase of 0.1 percentage points compared to the previous month. The delinquency rate for small and medium-sized businesses hovered around 0.5-0.6% in the second half of last year, but rose to 0.7% in February. On the other hand, the delinquency rate of large companies was only 0.18%, up 0.06 percentage points from the previous month.
Among household loans, delinquency on credit loans is worse than on housing mortgage loans. The credit loan delinquency rate was 0.84% in February, up 0.1 percentage points from the previous month. The mortgage loan delinquency rate rose 0.02 percentage points to 0.27%.
The Financial Supervisory Service believes that the delinquency rate of banks’ won-denominated loans is low compared to the long-term average (0.78%) before COVID-19. Considering that banks usually clear delinquent receivables at the end of each quarter, it was predicted that the delinquency rate could drop significantly at the end of March.
The Financial Supervisory Service said, “We will encourage the activation of debt restructuring for vulnerable borrowers and strengthen asset soundness management through offloading and selling non-performing loans,” and “In a situation where internal and external uncertainties are increasing, we will encourage the expansion of loss absorption capacity, such as expanding loan loss reserves.” “I will do it,” he said.
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Tags: Domestic bank loan delinquency rate rises .. Small mediumsized enterprises vulnerability financing
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