Bank Loan Delinquency Rate at 0.28% Due to 'Corona Maturity Extension'... "All-Time Low"

"Quarter-End Non-Performing Loan Cleanup Effect Due to Loan Moratorium Policy"

▲Trend of Won-denominated loan delinquency rates. (=Financial Supervisory Service)

[Asia Economy Reporter Wondara] The delinquency rate in the banking sector has dropped to its lowest level. This is interpreted as the effect of quarter-end adjustments for non-performing loans and the impact of COVID-19 policies such as loan repayment deferrals.

The Financial Supervisory Service announced on the 9th that the delinquency rate for domestic bank won-denominated loans was 0.28% as of December last year. During the same period, the delinquency rate for won-denominated loans was 0.4% in 2018 and 0.36% in 2019.

The delinquency rate for corporate loans (0.34%) fell by 0.08 percentage points from last month (0.43%) and by 0.08 percentage points compared to the same period last year (0.45%). The delinquency rate for large corporate loans (0.27%) decreased by 0.01 percentage points compared to the end of last month and by 0.23 percentage points compared to the same period last year (0.5%). The delinquency rate for small and medium-sized enterprise loans (0.48%) dropped by 0.14 percentage points from the end of last month (0.62%) and by 0.09 percentage points compared to the same period last year (0.44%).

The delinquency rate for individual business loans, which have a high proportion of self-employed borrowers, was 0.21%, down 0.06 percentage points from the end of last month (0.27%) and down 0.08 percentage points compared to the same period last year (0.29%). The delinquency rate for small and medium-sized corporations (0.48%) fell by 0.06 percentage points compared to the end of the previous month (0.62%) and by 0.08 percentage points compared to the same period last year (0.29%).

The delinquency rate for household loans (0.2%) also decreased by 0.04 percentage points from the previous month (0.24%) and by 0.06 percentage points compared to one year ago (0.26%). The delinquency rate for mortgage loans was 0.14%, down 0.02 percentage points from the end of last month (0.16%) and down 0.06 percentage points compared to the same period last year (0.2%). The delinquency rate for household loans excluding mortgage loans (such as credit loans) was 0.34%, down 0.09 percentage points from the end of last month (0.42%) and down 0.07 percentage points compared to the same period last year (0.41%).

The amount of newly incurred delinquencies also decreased. In December last year, the amount of new delinquencies was 800 billion KRW, down 200 billion KRW from the previous month, while the amount of non-performing loan disposals increased by 1.1 trillion KRW from the previous month to 2.1 trillion KRW.

However, this decline in delinquency rates is analyzed as a visual effect due to loan maturity extensions. A financial authority official said, "The COVID-19 loan repayment deferrals likely influenced the decrease in delinquency rates." The loan maturity and interest repayment deferral measures, which began in April last year, were initially scheduled to continue until September but were extended once until March this year. The financial authorities are discussing further extensions of loan maturities. So far, the total loan maturity extension amount across the entire financial sector, including banks and secondary financial institutions, is 116 trillion KRW, the principal repayment deferral amount is 8.5 trillion KRW, and the interest repayment deferral amount is 150 billion KRW.

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