Regional Financial Groups Struggle With Bank Delinquency Rates Despite Strong Results... All-Out Push to Improve Profitability

BNK, JB, and iM post record earnings among financial holding companies
Regional banks unable to celebrate as delinquency rates climb
This year: tighter risk management, including stricter screening of sensitive sectors
Expanding customer base via stablecoins and non-face-to-face channels

Although regional financial holding companies posted strong results last year on the back of solid performances by their securities and capital affiliates, their core banking subsidiaries showed mixed results. This is because they continue to struggle with delinquency rates that are two to three times higher than those of nationwide commercial banks, which have been slow to come down. In response, regional banks are tightening their risk management, for example by improving collateral valuation systems, while betting heavily on discovering new growth engines.

According to the 2025 business performance disclosures of BNK, JB, and iM Financial Group on February 10, the combined net profit of the three financial groups last year was 1.9693 trillion won, up 21.5% from 1.6309 trillion won in 2024. BNK Financial Group (815.0 billion won) and JB Financial Group (710.4 billion won) grew by 11.9% and 4.9%, respectively, both achieving record-high results. iM Financial Group recorded 443.9 billion won in net profit attributable to controlling shareholders, more than 106% higher than the previous year’s 214.9 billion won. The improvement was attributed to a decline in provisioning burdens related to the impact of real estate project financing (PF) at non-bank affiliates.

The performances of regional banks (Busan, Kyongnam, Jeonbuk, and Kwangju Bank) and iM Bank, which has been converted into a nationwide commercial bank, were somewhat weaker compared with the growth in the holding companies’ results. At BNK Financial Group, Busan Bank posted net profit of 439.3 billion won, up 7.0% from the previous year, but Kyongnam Bank recorded 292.8 billion won, down 5.6%. At JB Financial Group, Jeonbuk Bank’s net profit rose 4.6% year-on-year to 228.7 billion won, while Kwangju Bank’s fell 5.4% to 272.6 billion won. iM Bank posted 389.5 billion won, up 6.7% from 2024.

High delinquency rates are cited as the cause of weak profitability. From the first and second quarters of last year, provisioning burdens related to real estate PF, along with an economic downturn and a prolonged period of high interest rates, pushed up loan delinquency rates among local households, small business owners, and small and medium-sized enterprises. The rates are close to three to four times those of nationwide commercial banks, whose delinquency rates are typically in the 0.2% to 0.3% range. In the banking sector, a delinquency rate above 1% is regarded as a warning signal.

As of the fourth quarter of 2025, delinquency rates stood at 0.83% for iM Bank, 0.87% for Busan Bank, 0.90% for Kyongnam Bank, 1.02% for Kwangju Bank, and 1.46% for Jeonbuk Bank. All five banks saw their rates rise by 0.21 to 0.45 percentage points compared with the fourth quarter of 2024. Among them, the delinquency rates at Kwangju Bank and Jeonbuk Bank deteriorated further from the third quarter of last year. Kwangju Bank’s rate climbed by 0.16 percentage points from 0.86% in the third quarter of last year to 1.02% in the fourth quarter, while Jeonbuk Bank’s rose by 0.19 percentage points from 1.27% to 1.46%.

The ratio of non-performing loans (NPLs) classified as substandard or below, which are loans delinquent for 3 months or longer, increased at all five banks in the fourth quarter of 2024 compared with the previous quarter, and rose at four banks compared with the third quarter of last year, with Kyongnam Bank being the only exception. In the fourth quarter of last year, iM Bank’s NPL ratio was 0.8%, up 0.06 percentage points from the previous quarter; Busan Bank’s was 1.17%, up 0.22 percentage points; Kwangju Bank’s expanded by 0.15 percentage points to 0.89%; and Jeonbuk Bank’s rose by 0.19 percentage points to 1.12%. Kyongnam Bank alone saw its ratio fall by 0.10 percentage points to 0.90%.

Regional banks plan to align with the government’s inclusive finance policy this year while focusing on improving return on risk-weighted assets (RoRWA) through measures such as rebalancing their loan portfolios. An official at one regional bank said, “The prolonged slump in sectors other than advanced industries has significantly weakened regional economies,” adding, “Many regional banks are moving to strengthen delinquency control and profitability by improving collateral valuation systems and tightening screening for sensitive industries.”

They also plan to expand their customer base by attracting public institution deposit accounts, strengthening non-face-to-face (remote) sales capabilities, and pursuing fintech partnerships related to stablecoins, while accelerating artificial intelligence transformation (AX) to enhance sales and work efficiency. Given the stringent regulations on lending and loan-to-deposit ratios, the aim is to break away from the limitations of their traditional focus on local customers and seek sales effectiveness on a nationwide scale.

Another regional bank official commented, “Our role as a regional hub bank is important, but if we fail to quickly expand our customer base and improve profitability, we will inevitably fall behind in the market,” adding, “Collaboration on stablecoin issuance and distribution, and the use of AX for stable cost and revenue management, are no longer issues exclusive to nationwide commercial banks.”