While Bank Delinquency Rates Rise... Household Loan Growth Continues

August Domestic Bank Delinquency Rate Hits Highest in 3.5 Years

Household Loans at 5 Major Banks Increase by 3 Trillion Won in About 20 Days

On the 23rd, as domestic market interest rates and bank loan interest rates rapidly rise, a banner displaying loan interest rates is hung on the exterior wall of a commercial bank in Seoul. Photo by Jinhyung Kang aymsdream@

The delinquency rate on loans at domestic banks has risen to the highest level in 3 years and 6 months. Meanwhile, household loans at banks are increasing at an even faster pace.

According to the Financial Supervisory Service on the 28th, as of the end of August, the delinquency rate on won-denominated loans at domestic banks (based on principal and interest overdue by more than one month) was 0.43%. This is an increase of 0.04 percentage points from the previous month and 0.19 percentage points higher than a year ago (0.24%). The delinquency rate rose for two consecutive months following July. The 0.43% rate is the highest level in three and a half years since February 2020 (0.43%).

Looking at the breakdown by sector, the delinquency rate on household loans rose by 0.02 percentage points from the previous month (0.36%). Among these, the delinquency rate on mortgage loans increased by 0.01 percentage points to 0.24%. The delinquency rate on unsecured loans such as credit loans rose by 0.05 percentage points to 0.76%.

The increase in delinquency rates was larger for corporate loans than for households. At the end of August, the delinquency rate on corporate loans was 0.47%, up 0.06 percentage points from the end of the previous month (0.41%). The delinquency rate on large corporate loans rose by 0.01 percentage points to 0.13%, while that on small and medium-sized enterprise loans increased by 0.06 percentage points to 0.55%. The delinquency rate on loans to individual business owners rose by 0.05 percentage points to 0.50%.

The amount of new delinquencies in August was 2.2 trillion won, an increase of 200 billion won compared to the previous month. The amount of delinquent loans resolved was 1.4 trillion won, up 300 billion won.

The Financial Supervisory Service stated, "Although the delinquency rate at domestic banks remains at a stable level lower than the long-term average in the past, we must prepare for the possibility of further increases due to the continued high interest rate environment and expanding domestic and external economic uncertainties."

Meanwhile, the outstanding balance of household loans at the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) as of October 19 was 685.7321 trillion won. This is an increase of 3.4027 trillion won compared to the end of September (682.3294 trillion won). The increase in just over 20 days this month has already set the largest record in two years since October 2021 (3.438 trillion won increase).

Mortgage loans increased by 2.6814 trillion won (from 517.8588 trillion won to 520.5402 trillion won). Credit loans, which had decreased by 1.0762 trillion won last month, rose by 887.1 billion won this month. If this trend continues, credit loans will increase for the first time in 1 year and 11 months since November 2021 (30.59 billion won increase).

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