Bank Loan Delinquency Size Decreases for 35 Consecutive Months... Improvement Pace Slows Down

[Asia Economy Reporter Song Hwajeong] Although the delinquency rate of banks continues to improve, the pace of improvement appears to be slowing down.

According to the Financial Supervisory Service on the 17th, the delinquency rate of domestic banks' won-denominated loans (based on principal and interest overdue for more than one month) at the end of February was 0.25%, up 0.02 percentage points from 0.22% at the end of the previous month. Compared to the same month last year, it decreased by 0.08 percentage points.

By sector, the delinquency rate for corporate loans was 0.30%, down 0.12 percentage points from 0.43% at the end of the same month last year. The delinquency rate for large corporate loans was 0.23%, down 0.13 percentage points compared to the same month last year. The delinquency rate for small and medium-sized enterprise (SME) loans was 0.32%, down 0.12 percentage points from the same month last year. The delinquency rate for small and medium-sized corporations was 0.42%, down 0.17 percentage points, and the delinquency rate for individual business owner loans was 0.20%, down 0.07 percentage points, continuing a downward trend since the fourth quarter of 2019.

The delinquency rate for household loans was 0.19%, down 0.03 percentage points compared to the same month last year, marking 25 consecutive months of year-on-year decline.

The delinquent balance in the banking sector has decreased for 35 consecutive months. According to Hanwha Investment & Securities, the size of delinquent loans in the banking sector was 5 trillion won at the end of February, down 19% compared to the same month last year, marking 35 consecutive months of decline. Excluding the delinquency of one shipbuilding company that occurred in April 2018, it has decreased for 64 consecutive months.

Although the scale of delinquency in the banking sector has been decreasing for 35 consecutive months, the pace of improvement is slowing down. Kim Doha, a researcher at Hanwha Investment & Securities, said, "Despite going through the COVID-19 phase, the banking sector's delinquency continues the downward trend since 2013," adding, "There is no change in the one-way direction, but since October 2021, the decline in the delinquency rate of household credit loans has gradually narrowed." He further stated, "Considering the rising market interest rates and the resulting increase in interest repayment burdens, the speed of decline in delinquency rates is expected to slow down throughout the year. However, taking into account the proactive provisioning for loan losses by major banks in preparation for the end of support programs, it is not an environment to raise excessive concerns about soundness."

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