Delinquency rate 8.36%… Health management emergency
Corporate loan delinquency rate increased by 3.9%P to 12%
Agricultural-fishery-credit cooperatives also increased by 1.4%P compared to the end of last year
As the aftereffects of real estate project financing (PF) defaults continue, savings banks recorded a deficit of 380 billion won in the first half of this year (January to June). The delinquency rate has jumped to 8%, showing that soundness management is also on high alert.
The Financial Supervisory Service announced the ‘First Half Savings Bank and Mutual Finance Association Operating Performance’ on the 30th and stated that the deficit of the savings bank industry in the first half of this year was tallied at 380.4 billion won due to the burden of reserves. The deficit is 283.9 billion won wider than last year. The net profit of mutual finance associations also plummeted by 954.6 billion won (47.3%) year-on-year to 1.0639 trillion won. All mutual finance associations except Nonghyup turned to deficit status.
The worsening of operating performance is interpreted as a result of the increase in insolvent PF businesses due to the new business evaluation criteria established by the financial authorities. The scale of insolvent businesses increased as the evaluation criteria were subdivided from the existing three stages to four stages (good, average, significant, and likely insolvent), which led to additional reserves being set aside. A senior official from the Financial Supervisory Service explained, “Insolvent PF businesses increased due to the new business evaluation criteria,” and “There is a somewhat unavoidable aspect to it.”
The problem is that it seems difficult to escape the deficit in the future, as the delinquency rate continues to soar due to PF defaults and the prolonged economic downturn. The delinquency rate of savings banks rose 1.81 percentage points year-on-year to 8.36%. While the delinquency rate of household loans fell slightly, that of corporate loans rose 3.90 percentage points from 8.02% to 11.92%. The average delinquency rate of 2,208 cooperatives nationwide, including agricultural, fishery, and credit unions, also rose 1.41 percentage points year-on-year to 4.38%. Like savings banks, the delinquency rate of corporate loans rose 2.15 percentage points to 6.46%, leading the upward trend.
The savings bank industry also presented a gloomy outlook that it would be difficult to escape deficits until the first half of next year. Oh Hwa-kyung, the chairman of the Korea Savings Banks Association, said, “It seems difficult to achieve ‘plus (+)’ until the first half of next year due to the decrease in interest income and reserve accumulation.”
Reporter Kang Woo-seok [email protected]
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2024-09-01 02:50:44