Saemaeul Geumgo's Overdue Loan Ratio Soars to 10%, Raising Red Flags

[Asia Economy Reporter Eunju Lee] The delinquency ratio of loans at some Saemaeul Geumgo branches has soared to as high as 12.9%. This means that about 13% of the total loans held by these credit unions are currently delinquent. As the high-interest rate trend continues for a prolonged period, concerns are rising that the delinquency ratio at Saemaeul Geumgo may increase further, highlighting the urgent need for risk management.

Daehakro Saemaeul Geumgo Records 12.91% Delinquency Ratio... Yongsan (10.53%), Noryangjin (10.23%) Also High

On the 3rd, Asia Economy reviewed the Q2 regular disclosures of all 236 Saemaeul Geumgo branches in Seoul and found that some branches recorded significantly high delinquency ratios. For instance, the Daehakro branch recorded a delinquency ratio of 12.91%. The delinquency ratio refers to the proportion of delinquent loans out of the total loans held by each credit union.

Among all 236 Seoul branches, following the Daehakro branch with the highest delinquency ratio, branches such as Yongsan (10.53%), Noryangjin (10.23%), Jangwi 2-dong (9.73%), Gwangjin Jungang (9.34%), Deungchon-dong (8.14%), Gwanghwamun branch (7.93%), Yeonsinnae (7.93%), and Seongsu (7.92%) also recorded high delinquency ratios. This indicates that the number of borrowers unable to repay their debts is increasing significantly at these credit unions, resulting in substantial delinquencies.

There were a total of 43 branches where more than 5% of the loans held were delinquent. This accounts for 18% of all credit unions in Seoul. For example, the Jongno Jungbu branch's delinquency ratio increased by 7.37 percentage points from 1.33% in Q2 2021 to 8.7% in the recent Q2. Similarly, the Jongno 3·4-ga branch saw a sharp rise from 0.01% in the previous year to 6.13% in Q2, an increase of 6.12 percentage points.

The average delinquency ratio across all 236 branches also slightly increased compared to Q2 2021. The average delinquency ratio for all Seoul branches in Q2 was 2.83%, up 0.41 percentage points from 2.47% in Q2 last year. With the high-interest rate environment expected to persist for some time, forecasts suggest that the delinquency ratio for Q3, to be announced in mid-November, will rise significantly.

"Most Credit Unions with Over 5% Delinquency Ratios Have High Proportions of Business Loans"

Saemaeul Geumgo explained that branches with delinquency ratios over 5% mostly have a higher proportion of business loans compared to other branches. Due to the interest rate hikes sustained this year, self-employed individuals and small business owners have been directly affected, hitting these credit unions hard. A Saemaeul Geumgo official stated, “These credit unions have a high proportion of individual business owners, landlords, and self-employed borrowers, so they inevitably react sensitively when the economy starts to deteriorate.”

However, it is necessary to closely monitor some branches where delinquency ratios exceed 10%. Although the situation was challenging due to the COVID-19 impact in Q2 2021, only 32 branches among all Saemaeul Geumgo branches in Seoul recorded delinquency ratios above 5%. In just over a year, the risk has increased in 12 more credit unions. According to the Financial Supervisory Service, the average delinquency ratio for household loans in the financial sector was 0.16% in 2021, and for corporate loans, it was 0.26%.

Saemaeul Geumgo stated that it is strengthening delinquency management. A Saemaeul Geumgo official said, “We are guiding a conservative approach to new loans going forward,” adding, “Delinquency rates tend to fluctuate throughout the year but stabilize toward the end of the year, so meaningful figures can be confirmed by year-end.”

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