At the End of September, Bank Non-Performing Loan Ratio Hits 0.38% Again 'Lowest'... Financial Support Illusion Persists

[Asia Economy Reporter Song Hwajeong] The non-performing loan (NPL) ratio of banks recorded another all-time low in the third quarter.

According to the Financial Supervisory Service (FSS) on the 7th, the NPL ratio of domestic banks as of the end of September stood at 0.38%, down 0.03 percentage points from the end of the previous quarter. Compared to the same month last year, it decreased by 0.13 percentage points.

The amount of non-performing loans was 9.7 trillion won, a decrease of 600 billion won (5.5%) from the end of the previous quarter, while total loans increased, leading to a decline in the NPL ratio.

Corporate loans accounted for 8 trillion won, representing 82.8% of total non-performing loans, while household loans amounted to 1.5 trillion won, and credit card loans reached 100 billion won.

Newly generated non-performing loans in the third quarter totaled 2.5 trillion won, an increase of 100 billion won compared to the previous quarter. Newly non-performing corporate loans were 1.8 trillion won, and newly non-performing household loans were 600 billion won, each rising by 100 billion won from the previous quarter.

By sector, the NPL ratio for corporate loans was 0.5%, down 0.06 percentage points from the end of the previous quarter, while the NPL ratio for household loans remained similar at 0.17%. The NPL ratio for credit card loans was 0.83%, down 0.04 percentage points from the end of the previous quarter.

The scale of non-performing loan disposals in the third quarter was 3 trillion won, an increase of 200 billion won from the previous quarter.

As of the end of September, the loan loss provision coverage ratio of banks was 223.9%, up 18.3 percentage points from the end of the previous quarter. Compared to the same month last year, it rose by 67.2 percentage points.

The FSS evaluated that the asset soundness indicators of domestic banks remain at a favorable level. It analyzed that the balance of loan loss provisions, which indicates the ability to absorb credit losses, has steadily increased, leading to a continuous rise in the provision coverage ratio. However, it also pointed out the need for proactive preparation against possible distortions in indicators due to COVID-19 financial support measures and the potential expansion of credit losses amid worsening domestic and international economic conditions.

An FSS official stated, "Despite domestic and international economic shocks, we plan to encourage banks to expand their loss absorption capacity so that they can maintain soundness and faithfully perform their fundamental function of supplying funds." He added, "We will review banks' loan loss provision details quarterly and especially ensure that banks with insufficient provisions at year-end closing accumulate adequate provisions."

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