Last Year, Mutual Finance Sector's Net Income Reached 2.7 Trillion KRW... 25% Increase Compared to Previous Year

[Asia Economy Reporter Song Seung-seop] Last year, the net income of mutual finance sectors increased by about 25% due to the rise in net income in the financial sector. Financial authorities announced that they will strengthen loss absorption capacity to prepare for external shocks while continuing to implement policies to ease financial burdens.

According to the "2021 Mutual Finance Cooperative Business Performance (Preliminary)" released by the Financial Supervisory Service on the 31st, the mutual finance sector achieved a net income of 2.7413 trillion KRW last year. This is an increase of 564.2 billion KRW (25.9%) from 2.1771 trillion KRW the previous year. Nonghyup recorded the largest net income at 1.9784 trillion KRW, followed by ShinHyup (512.7 billion KRW), SuHyup (158.7 billion KRW), and Sanlim (91.5 billion KRW).

The increase in net income in the mutual finance sector was the result of a significant rise in interest income in the credit business (financial) sector. During the same period, the financial interest income of the mutual finance sector, which was 3.4644 trillion KRW, increased by 582.7 billion KRW to 4.0471 trillion KRW. On the other hand, the deficit in the economic business sector slightly expanded from -1.2873 trillion KRW to -1.3058 trillion KRW.

Total assets increased by 47 trillion KRW (8.0%) from 584.1 trillion KRW a year ago to 631.1 trillion KRW. The average assets of 2,200 cooperatives expanded by 21.8 billion KRW to 284.3 billion KRW compared to the previous year. Total loans amounted to 453.9 trillion KRW, recording an increase of 52.8 trillion KRW (13.2%). Among these, the increase in corporate loans accounted for 37.9 trillion KRW.

Asset soundness also generally improved. The delinquency rate improved by 0.37 percentage points from 1.54% the previous year to 1.17%. The delinquency rates for household loans and corporate loans decreased by 0.37 percentage points and 0.47 percentage points to 0.82% and 1.76%, respectively. The ratio of non-performing loans also decreased by 0.41 percentage points to 1.61%. The allowance for loan losses increased by 783.4 billion KRW (7.9%) to 10.6574 trillion KRW.

The net capital ratio slightly rose by 0.14 percentage points from the end of 2020 to 8.31%, maintaining a high level considering the minimum regulatory ratio.

Financial authorities analyzed that the net income of mutual finance sectors such as ShinHyup increased last year due to the expansion of loan size and the increase in low-cost deposits, which led to an increase in interest income. However, despite improvements in soundness indicators such as delinquency rates due to the increase in loan size and continued financial support, there is a possibility that latent insolvency may materialize due to delayed economic recovery.

Accordingly, the Financial Supervisory Service will strengthen monitoring of the growth rate and soundness of household loans and enhance loss absorption capacity by additionally reserving allowances for corporate loans. It also plans to continue easing financial burdens by timely supplying necessary funds to vulnerable borrowers experiencing temporary financial difficulties due to COVID-19 and proactively adjusting debts.

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