[Real Estate PF Crisis] Saemaeul Geumgo Delinquency Rate at 5%... Highest Level Among Mutual Finance Institutions

Corporate Loans at 7.74%... Approaching 8%
Delinquency Rates in Mutual Finance Also Rising
High Interest Rates and Delayed Economic Recovery
Weaken Debt Repayment Ability as Cause

The delinquency rate of Saemaeul Geumgo at the end of last year recorded in the 5% range. This is the highest level among mutual finance sectors such as Credit Unions, NH Nonghyup, and Suhyup.

According to the 'Saemaeul Geumgo 2023 Business Performance' data released by the Ministry of the Interior and Safety on the 22nd, the overall delinquency rate of Saemaeul Geumgo was 5.07%, up 1.48 percentage points from the previous year. Although it slightly decreased compared to the end of June last year (5.41%), it is 2.1 percentage points higher than the delinquency rate of the mutual finance sector (Credit Unions, Nonghyup, Suhyup, and Forestry Cooperatives) at 2.97%. Compared to individual mutual finance cooperatives such as Credit Unions (3.63%), Nonghyup (2.65%), Suhyup (4.14%), and Forestry Cooperatives (3.41%), it is also the highest level.

Saemaeul Geumgo Corporate Loan Delinquency Rate in the 7% Range

The delinquency rate of Saemaeul Geumgo is analyzed to have risen due to increased defaults in corporate loans such as real estate project financing (PF). In this regard, the Ministry of the Interior and Safety explained, "Due to a decrease in loan balances focused on household loans and an increase in delinquencies centered on corporate loans, an overall upward trend was observed."

In particular, the corporate loan delinquency rate at the end of last year was 7.74%, slightly down from 8.34% at the end of June last year, but still close to the 8% level. It rose 2.13 percentage points compared to the previous year. This is more than 3 percentage points higher than the corporate loan delinquency rate of the mutual finance sector (4.31%). Saemaeul Geumgo stated that it increased corporate loans over the past 3 to 4 years, and the delinquency rate rose due to complex reasons such as the impact of high interest rates and the real estate market downturn.

The fixed non-performing loan ratio, a soundness indicator, also worsened. Saemaeul Geumgo's fixed non-performing loan ratio last year was 5.55%, up 2.5 percentage points from the previous year. The fixed non-performing loan ratio of Saemaeul Geumgo has been rising annually: 3.05% at the end of 2022, 5.47% at the end of June last year, and 5.55% at the end of last year.

The Ministry of the Interior and Safety expects the delinquency rate to continue rising this year amid ongoing high interest rates, asset price adjustments, and a slowdown in loan growth as the economy adjusts to a normal trajectory. A ministry official said, "While aligning with the financial authorities' policy to normalize real estate development projects through activation of auctions and foreclosures, we will continue to make special efforts in delinquency management, including expanding loss absorption capacity, actively selling delinquent loans, and debt restructuring."

Saemaeul Geumgo's total loans amounted to 188.1 trillion won, down 13.5 trillion won from the previous year. Corporate loans decreased by 3.2 trillion won to 107.4 trillion won, and household loans decreased by 10.3 trillion won to 80.7 trillion won. Total deposits increased by 3.5 trillion won to 254.9 trillion won. The net income of 1,288 Saemaeul Geumgo nationwide was 86 billion won, down 94% from the end of the previous year. A ministry official explained, "Costs increased due to provisions for loan losses following the interest rate hikes in the first half of the year."

Delinquency Rates Also Rise in Credit Unions, Nonghyup, Suhyup, etc.

The delinquency rate of the mutual finance sector, including Credit Unions, Nonghyup, Suhyup, and Forestry Cooperatives, also rose to 2.97% at the end of last year, up 1.45 percentage points from the previous year. The delinquency rate for household loans increased by 0.62 percentage points to 1.53%. The corporate loan delinquency rate rose 2.08 percentage points to 4.31%.

Looking at each mutual finance cooperative, the delinquency rates of Credit Unions and Nonghyup were 3.63% and 2.65%, respectively, at the end of last year, up 1.16 and 1.47 percentage points from the previous year. The delinquency rate of Forestry Cooperatives rose 1.64 percentage points to 3.41%. Suhyup's delinquency rate exceeded 4%, recording 4.14%. Regarding this, Park Sang-won, Deputy Director of the Financial Supervisory Service's Small and Low-Income Sector, said, "Delinquencies occurred due to loans focused on real estate, and efforts are being made to clean up delinquent loans," adding, "It is not a level higher than savings banks, so it is a manageable level."

The fixed non-performing loan ratio of the mutual finance sector rose 1.57 percentage points to 3.41%. The loan loss provision coverage ratio fell 11.3 percentage points from the end of the previous year to 128.7%.

Total loans of the mutual finance sector increased by 12.1 trillion won to 510.4 trillion won, and total deposits rose by 30.7 trillion won to 619.2 trillion won. Total assets increased by 38.6 trillion won to 726.5 trillion won.

Last year's net income was 2.0407 trillion won, down 1.0869 trillion won (34.8%) from the previous year. Net income from the credit business division decreased by 335.1 billion won compared to the previous year due to increased loan loss expenses and decreased net interest margin, and the economic business division's deficit expanded due to domestic economic sluggishness.

The Financial Supervisory Service stated that it plans to continuously enhance loss absorption capacity through additional loan loss provisions and capital expansion in preparation for domestic and external economic uncertainties such as delayed real estate market recovery. It also added that it will continue to manage soundness by cleaning up delinquent loans through various methods such as restructuring via auctions, foreclosures, Korea Asset Management Corporation (KAMCO), and its own PF funds, as well as debt restructuring.

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