Five major banks, bad debts in the first half of the year, non-performing loans, 3.8 trillion won… Nonghyup and Kookmin Bank increase significantly
Internet Banking 3 Companies 537.8 Billion Won… Kakao Bank 40.4%, K Bank 39.5% Surge
It has been calculated that the non-performing loans of commercial banks, which are bad debts that do not even receive interest, amount to close to 4 trillion won. The non-performing loans of the three Internet-only banks (Kakao, K, and Toss Bank) in the first half of this year exceeded 500 billion won, which is more than their net income for the period (341.3 billion won). It seems that the increase in bad loans due to the economic downturn and the prolonged high interest rates is also having a negative impact on the soundness of banks.
According to an analysis of the management disclosure data of the five major commercial banks, including KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup, the non-performing loan balance as of the end of June this year was tallied at KRW 3,794.6 billion. This is an increase of KRW 547.3 billion (16.9%) compared to the same period last year (KRW 3,247.3 billion).
The total loans of the five major commercial banks in the first half of this year amounted to KRW 1,727.3362 trillion, which is a larger increase compared to the 7.9% (KRW 125.868 trillion) increase in the same period last year (KRW 1,601.4682 trillion).
Bad debt, non-performing loans, are called ’empty loans’ that cannot even repay interest. They refer to loans that are overdue for more than three months or have no interest income due to debt restructuring or court receivership.
By bank, KB Kookmin Bank (KRW 946.6 billion) had the most, followed by Nonghyup Bank (KRW 848.1 billion), Hana Bank (KRW 805.6 billion), Shinhan Bank (KRW 651.3 billion), and Woori Bank (KRW 543 billion).
The growth of Nonghyup Bank and Kookmin Bank was remarkable. Nonghyup Bank increased by 51.7% (KRW 289.2 billion) compared to the same period last year (KRW 558.9 billion), and Kookmin Bank increased by 35.4% (KRW 247.5 billion) compared to the same period last year (KRW 699.1 billion). Hana Bank also increased by 18.0% (KRW 123.0 billion) compared to a year ago (KRW 682.6 billion).
The proportion of non-performing loans among the total loans of the three banks increased by 0.09 percentage points (p) year-on-year to 0.28% for Nonghyup Bank, 0.05 percentage points (p) to 0.24% for Kookmin Bank, and 0.02 percentage points to 0.23% for Hana Bank.
On the other hand, Shinhan Bank and Woori Bank decreased by KRW 31.4 billion and KRW 81 billion, respectively, compared to the same period last year (KRW 682.7 billion and KRW 624 billion). The non-performing loan ratio also decreased by 0.02%p (0.21% → 0.19%) and 0.04%p (0.21% → 0.17%), respectively.
It is analyzed that the increase in non-performing loans of the five major banks was influenced by a significant increase in corporate loans.
Among the total loans of the five major banks in the first half of this year, the balance of corporate loans was KRW 1,007.207 trillion, up 10.5% (KRW 95.3127 trillion) from the same period last year (KRW 911.708 trillion). The increase in corporate loans exceeded the increase in total loans (7.9%).
The problem is that non-performing loans are increasing along with corporate loans. The balance of non-performing loans for corporate loans at the five major banks in the first half of this year was 2.5807 trillion won, up 17.9% (391.4 billion won) from a year ago (2.1893 trillion won).
In the case of Nonghyup Bank, where non-performing loans increased significantly, the balance of non-performing loans from companies increased by 55.3% (KRW 214.3 billion) from a year ago (KRW 387.4 billion) to KRW 601.7 billion as of the end of June. Kookmin Bank also saw its balance of non-performing loans from companies increase by 47.0% (KRW 208.2 billion) from the same period last year (KRW 442.9 billion) to KRW 651.1 billion.
The banking industry explains that the increase in such non-performing corporate loans is due to the increase in marginal and insolvent companies such as small and medium-sized enterprises and construction companies due to increased global economic uncertainty and a domestic economic slowdown.
A Nonghyup Bank official said, “The prolonged period of high interest rates, high exchange rates, and high prices has delayed the recovery of domestic demand, while the management conditions and repayment burden of corporate borrowers are worsening simultaneously, leading to an increase in bank delinquency rates and non-performing loans.”
The official explained, “As prolonged delinquency will soon lead to an increase in defaults and marginal borrowers, we are doing our best to improve soundness by strengthening delinquent receivables and related KPIs in order to respond to the early stages of delinquency, improving the write-off/sale criteria and expanding the volume for large-sum receivables, forming a TF to improve soundness and the non-performing loan ratio.”
Internet-only banks are also seeing an increase in non-performing loans. As of the end of June this year, the non-performing loan balance of the three Internet banks was 537.8 billion won, up 30.5% (125.7 billion won) from the same period last year (412.1 billion won).
By bank, Kakao Bank surged 40.4% (KRW 57.1 billion) to KRW 198.6 billion compared to the same period last year (KRW 141.5 billion). During the same period, K Bank increased 39.5% (KRW 57.4 billion) from KRW 145.3 billion to KRW 202.7 billion, and Toss Bank increased 8.9% (KRW 11.2 billion) from KRW 125.3 billion to KRW 136.5 billion.
The increase in non-performing loans at internet-only banks occurred mainly in the household sector.
Kakao Bank’s non-performing loan balance in the household sector in the first half of this year increased by 35.5% (KRW 50.1 billion) compared to the same period last year (KRW 141.1 billion), and K Bank’s non-performing loan balance increased by KRW 50.7 billion from KRW 143.7 billion to KRW 194.4 billion during the same period.
The household sector accounted for 87.7% (KRW 50.1 billion out of KRW 57.1 billion) and 88.3% (KRW 50.7 billion out of KRW 57.4 billion) of the increase in non-performing loans for Kakao Bank and K Bank, respectively.
However, Toss Bank’s non-performing loans in the household sector decreased by 11.8% (KRW 12.5 billion) from KRW 105.7 billion to KRW 93.2 billion, while those in the corporate sector increased by 120.9% (KRW 23.7 billion) from KRW 19.6 billion to KRW 43.3 billion.
Internet-only banks are explaining that the expansion of loans to low- and mid-credit borrowers as part of inclusive finance has had an impact on the increase in non-performing loans.
The target ratio of credit loans to low- and medium-credit borrowers set by financial authorities for internet banks is 30%, but as of the end of June this year, Toss Bank maintained a ratio of credit loans to low- and medium-credit borrowers of 34.9%, K Bank 33.3%, and Kakao Bank 32.4%.
In the case of Internet banks, although non-performing loans are increasing, the banks unanimously agree that there is no need to worry too much about asset soundness as the overall loan size is increasing and the delinquency rate is at a stable level.
An official from an internet bank said, “There has been an increase in non-performing loans as internet banks have been actively providing loans to low- and mid-credit borrowers and small business owners (self-employed) as part of inclusive finance,” adding, “However, banks are steadily monitoring delinquency rates and macroeconomic conditions and adjusting policies through risk management to manage soundness stably.”
Another official said, “Internet banks have significantly increased their loan loss reserves and have sufficient loss absorption capacity,” and “As banks are making various efforts to reduce bad debts both before and after loan execution, these efforts will gradually bear fruit.”
(Seoul = News 1)
2024-09-09 09:27:32