Real Estate PF Financial Sector Loan Balance Surpasses 131 Trillion Won... Delinquency Rate Also at 2%

The outstanding balance of real estate project financing (PF) loans in the financial sector has surpassed 131 trillion won, and the delinquency rate has also exceeded 2%, signaling red flags in various areas.

According to data submitted by the Financial Supervisory Service (FSS) to the office of Yoon Chang-hyun, a member of the People Power Party, as of the end of March this year, the outstanding balance of real estate PF loans in the financial sector was 131.6 trillion won, an increase of 1.3 trillion won in just three months from 130.3 trillion won at the end of December last year.

Until the end of 2020, the loan balance was 92.5 trillion won and had not exceeded 100 trillion won, but it has been rapidly increasing every year.

Furthermore, as the real estate market stagnates, the number of real estate PF projects facing profitability and fund recovery issues is rising, causing the delinquency rate to increase. The delinquency rate of real estate PF loans in the financial sector was 2.01% as of the end of March this year, up 0.82 percentage points from 1.19% at the end of December last year. Until the end of 2021, the delinquency rate was only 0.37%, but it exceeded 2% by the end of March this year.

Compared to the end of December last year, the sector with the largest increase in real estate PF loan balances by the end of March this year was banks, with an increase of 2.2 trillion won, followed by securities firms with an increase of 800 billion won. Insurance companies and savings banks decreased by 400 billion won each, and specialized credit finance companies decreased by 700 billion won.

As of the end of March, the delinquency rate of real estate PF loans in securities firms was at a serious level. The delinquency rate of securities firms’ real estate PF loans surged to 15.88%, up more than 10 percentage points from 3.71% at the end of 2021. It also rose 5.5 percentage points compared to 10.38% at the end of December last year.

At the end of March, the delinquency rates of real estate PF loans for savings banks and specialized credit finance companies were 4.07% and 4.20%, respectively, increasing by 2.02 percentage points and 1.99 percentage points compared to the end of December last year.

However, the delinquency rate of banks’ real estate PF loans was 0% at the end of March, and the delinquency rates for insurance companies and mutual finance were also favorable at 0.66% and 0.10%, respectively.

Hwang Seon-oh, Deputy Director of the Financial Investment Division at the Financial Supervisory Service, is speaking at the "Meeting to Strengthen Real Estate Exposure Risk Management" held on the 20th.
[Image source=Yonhap News]

As the problem of real estate PF loan defaults worsens, financial authorities have launched an all-out response. On this day, the FSS convened chief risk officers (CROs) of securities firms and executives in charge of corporate finance (IB) to urge strengthening risk management of real estate exposure.

Additionally, through the PF lender consortium agreement restarted at the end of April, the financial authorities are conducting a 'sorting out' of distressed projects. The 'Real Estate PF Project Normalization Support Fund' will also be fully launched in September.

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