Bank Non-Performing Loan Ratio Hits Record Low for 7 Consecutive Quarters Amid Financial Support Illusion Effect

[Asia Economy Reporter Song Hwajeong] The non-performing loan (NPL) ratio of domestic banks in the first quarter of this year hit a record low for the seventh consecutive quarter. This is due to a visual effect caused by the extension of maturity and repayment deferral measures for small business owners, maintaining the lowest level ever recorded.

According to the Financial Supervisory Service on the 4th, the NPL ratio of domestic banks in the first quarter of this year was tentatively estimated at 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. It marked the lowest level for seven consecutive quarters since the third quarter of 2020.

The NPL ratios of major commercial banks were ▲Kookmin Bank 0.20%, ▲Shinhan Bank 0.26%, ▲Hana Bank 0.24%, ▲Woori Bank 0.19%, and ▲NongHyup Bank 0.23%.

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

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 was 2.8 trillion KRW, an increase of 1 trillion KRW compared to the previous quarter. The breakdown was sales and disposals (write-offs of 600 billion KRW, sales of 300 billion KRW), loan recovery through collateral disposal (900 billion KRW), debt-to-equity swaps (500 billion KRW), and loan normalization (300 billion 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 were 0.8%, down 0.18 percentage points, and small and medium-sized enterprise loans were 0.52%, down 0.05 percentage points. Individual business loans remained at a similar level of 0.19% compared to the end of the previous quarter. The NPL ratio for household loans was 0.17%, up 0.01 percentage points from the end of the previous quarter. Mortgage loans were 0.11%, showing a similar level to the previous quarter, while other unsecured loans rose 0.03 percentage points to 0.28%. The NPL ratio for credit card loans increased by 0.10 percentage points to 0.87% compared to the end of the previous quarter.

The loan loss provision coverage ratio, which represents the balance of loan loss reserves relative to NPLs, 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 44.3 percentage points. The loan loss provision coverage ratios of major banks were 176.0% for Shinhan Bank, up 12.9 percentage points from the previous quarter; 220.2% for Woori Bank, up 14.7 percentage points; 179.2% for Hana Bank, up 15.2 percentage points; and 231.2% for Kookmin Bank, up 5.9 percentage points.

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