Domestic Banks' Non-Performing Loan Ratio at 0.45% in Q1... Lowest in 7 Consecutive Quarters

[Asia Economy Reporter Song Hwajeong] In the first quarter of this year, the non-performing loan (NPL) ratio of domestic banks hit a record low for the seventh consecutive quarter, reaching an all-time low.

According to the Financial Supervisory Service's "Status of Non-Performing Loans of Domestic Banks as of the End of March," the NPL ratio of domestic banks in the first quarter of this year was 0.45%, down 0.05 percentage points from 0.50% at the end of the previous quarter. Compared to the same month last year, it decreased by 0.17 percentage points. This marks the lowest level for seven consecutive quarters since the third quarter of 2020.

The amount of non-performing loans stood at 10.8 trillion KRW, down 8.1% from the end of the previous quarter. Corporate loans accounted for 9.2 trillion KRW, representing 84.9% of the total NPLs, followed by household loans (1.5 trillion KRW) and credit card receivables (100 billion KRW).

The loan loss provision coverage ratio as of the end of March was 181.6%, up 15.7 percentage points from 165.9% at the end of the previous quarter. Compared to the same month last year, it rose by 44.3 percentage points.

Newly generated NPLs in the first quarter amounted to 1.8 trillion KRW, down 800 billion KRW from 2.6 trillion KRW in the previous quarter. New household loan NPLs were 600 billion KRW, showing a similar level to the previous quarter.

The amount of NPL resolution in the first quarter was 2.8 trillion KRW, an increase of 1 trillion KRW from the previous quarter. The breakdown was as follows: write-offs and sales (6 trillion KRW in write-offs, 3 trillion KRW in sales), loan recovery through collateral disposal (9 trillion KRW), debt-to-equity swaps (5 trillion KRW), and loan normalization (3 trillion KRW).

By sector, the NPL ratio for corporate loans was 0.62%, down 0.09 percentage points from the end of the previous quarter. Large corporate loans decreased by 0.18 percentage points to 0.8%, and small and medium-sized enterprise loans fell by 0.05 percentage points to 0.52%. Individual business owner loans remained at a similar level of 0.19% compared to the end of the previous quarter. The NPL ratio for household loans rose by 0.01 percentage points to 0.17%. Mortgage loans remained steady at 0.11%, while other unsecured loans increased by 0.03 percentage points to 0.28%. The NPL ratio for credit card receivables rose by 0.10 percentage points to 0.87% compared to the end of the previous quarter.

The Financial Supervisory Service stated, "As of the end of March, banks' asset soundness indicators have improved compared to the end of the previous quarter and are maintaining a favorable level so far. However, given the recent sharp rise in market interest rates, increase in raw material prices, concerns about domestic and international economic downturns, and expanding volatility in financial markets, it is necessary to proactively prepare for the possibility of an increase in non-performing loans during the normalization process of various financial support measures such as maturity extensions and repayment deferrals."

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