Asset Quality of Top 5 Financial Holding Companies Remains Sound... Concerns Over 'COVID-19 Support' Defaults Persist

Improvement in All NPL Ratios by the End of September

[Asia Economy Reporter Kim Hyo-jin] Contrary to market concerns due to the impact of the novel coronavirus disease (COVID-19), the five major financial holding companies have maintained sound asset quality.

According to the financial sector on the 31st, the non-performing loan (NPL) ratios of the five companies?KB Financial, Shinhan Financial, Hana Financial, Woori Financial, and NH Nonghyup Financial?as of the end of September have generally shown improvement.

The NPL ratio is a soundness indicator representing the status of non-performing loans; a lower ratio means the credit held by the bank is in better condition.

At this time, the NPL ratios of KB Financial and Shinhan Financial were 0.46% and 0.54%, respectively, both improving by 0.02 percentage points compared to the end of June.

Hana Financial and Nonghyup Financial also improved by 0.04 percentage points compared to the previous quarter, recording 0.41% and 0.45%, respectively. Woori Financial also decreased by 0.03 percentage points from 0.43% at the end of the second quarter to 0.40%.

However, the financial holding companies are on high alert regarding when and to what extent the COVID-19 financial support will become a burden, as it could act as a trigger for deterioration in asset quality.

In particular, there are growing concerns that a significant portion of the extended loans related to COVID-19, which are set to expire by March next year, could become delinquent immediately after the extension measures end.

According to financial authorities and the financial sector, as of the 23rd of this month, the scale of loan maturity extensions conducted by commercial banks is about 238,000 cases, totaling 68 trillion won. COVID-19 related commercial bank loans amounted to 725,000 cases, with 43.2 trillion won disbursed.

This content was produced with the assistance of AI translation services.