Bank delinquency rate highest in 4 years and 9 months… Saemaul Geumgo ‘Emergency Light’

Both corporate and household loan delinquency rates rise. Financial authorities say they are at a “manageable level.” If high interest rates continue, it could become serious. Saemaul Geumgo soars to the 7% level… Promotion of sale of 200 billion worth of non-performing loans

The delinquency rate of domestic banks soared to the highest level in four years and nine months, exceeding 0.5% as of the end of February this year. Financial authorities view the current situation as ‘manageable’, but some are concerned that high interest rates and the economic downturn may be prolonged. Saemaul Geumgo, whose delinquency rate exceeds 7%, is pursuing a plan to sell additional non-performing loans worth 200 billion won.

● “I can’t repay my debt due to high interest rates”… Corporate loan ‘anxiety’

According to the Financial Supervisory Service on the 24th, as of the end of February this year, the delinquency rate (delinquency of principal and interest for more than 1 month) of domestic banks’ Korean won loans was 0.51%, up 0.06 percentage points from the end of the previous month (0.45%). It is the highest since May 2019 (0.51%). By sector, the increase in delinquency rates was noticeable in corporate loans. As of the end of February, it was 0.59%, an increase of 0.09 percentage points compared to the end of the previous month (0.50%). In particular, the delinquency rate for small and medium-sized businesses (0.70%) increased by 0.10 percentage points, and the delinquency rate for large business loans (0.18%) also increased by 0.06 percentage points.

The household loan delinquency rate was also found to be 0.42%, up 0.04 percentage points from the end of the previous month (0.38%). Although the increase (0.02 percentage points) in the delinquency rate for home mortgage loans (0.27%) was relatively small, the delinquency rate for household loans (credit loans, etc.) excluding home loans jumped 0.10 percentage points to 0.84%.

● High interest rates and prolonged economic downturn are key.

The Financial Supervisory Service’s position is that the delinquency rate of domestic banks is at a manageable level. This is because compared to before the novel coronavirus infection (Corona 19) incident, the delinquency rate is low and the ability to absorb losses has greatly improved. In fact, the loan loss reserve ratio, which shows the loss absorption capacity of domestic banks, was 214% as of the end of last year, more than double the rate at the end of 2017 (93.6%).

An official from the Financial Supervisory Service said, “Compared to the long-term average delinquency rate (0.78%) from 2010 to 2019, the delinquency rate is still low. As banks usually strengthen the resolution of delinquent claims at the end of each quarter, the delinquency rate is expected to go down at the end of March.” He said.

The problem is that as the possibility that the interest rate cut will be delayed further than expected increases, the economic downturn due to high interest rates and high inflation is prolonging. Kim Sang-bong, a professor of economics at Hansung University, said, “With income remaining stagnant due to the economic downturn, prices are rising every day and interest rates are continuing to remain high.” warned.

● “Saemaul Geumgo, savings banks, etc. must be managed specially.”

Meanwhile, Saemaul Geumgo, whose delinquency rate is known to have soared to the 7% level in February of this year, is pursuing the sale of 200 billion won worth of non-performing loans to Korea Asset Management Corporation (CAMCO). An official from the financial authorities said, “At the request of Saemaeul Geumgo, we are reviewing the acquisition of non-performing loans from KAMCO,” and added, “The specific size has not yet been decided.”

Saemaul Geumgo attempted to resolve bad real estate project financing (PF) loans in order to manage the delinquency rate, but is unable to reap any significant income due to differences in price opinions with prospective buyers. Last year, KAMCO also helped reduce the delinquency rate by acquiring Saemaul Geumgo’s non-performing loans worth about 1 trillion won. As Saemaeul Geumgo’s delinquency rate continued to rise this year, KAMCO stepped in as a relief pitcher once again.

Seok Byeong-hoon, professor of economics at Ewha Womans University, said, “If you look at the average indicators of the entire banking sector, it is sufficiently manageable, but the shadow banking sector (non-banking sector), where the impact of bad PF loans such as Saemaeul Geumgo and savings banks is large and the delinquency rate is rapidly rising, requires special management from the authorities. “He emphasized.

Reporter Jeong Soon-gu [email protected]