Delinquency Rate Soars in Banks: February Figures Highest in 4 Years and 9 Months

February 0.51%, highest in 4 years and 9 months

Savings banks are also growing rapidly, exceeding 6.5%.

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The delinquency rate of domestic banks has risen to the highest level in 4 years and 9 months. This is because the delinquency rate of SMEs, which were identified as ‘weak links’, has risen significantly as the high interest rate trend has not been broken.

According to the Financial Supervision Service on the 24th, the delinquency rate of loans obtained by domestic banks in February this year was 0.51%, up 0.06 percentage points from the previous month. This is the highest since May 2019 (0.51%). The reason why the delinquency rate rose significantly in February this year is because new delinquent bonds worth 2.9 trillion won were created. The new arrears, which were less than 2 trillion won a year ago, have now increased to almost 3 trillion won. Banks began to control delinquency rates by liquidating 1.3 trillion worth of bonds won in February, but it was not enough to offset the sharp increase in new delinquencies.

The increase in delinquency rates for corporate loans was evident. The corporate loan delinquency rate (0.59%) in February rose by 0.09 percentage points compared to the previous month, outpacing the increase in the overall delinquency rate. This is because the delinquency rate (0.7%) of small and medium-sized businesses (small and medium-sized corporations + sole business owners) with poor repayment capacity among borrowers has increased by 0.1 percentage point. In particular, the delinquency rate for small and medium-sized businesses was 0.76%, a sharp increase of 0.14 percentage points compared to the previous month. The delinquency rate for home loans (home mortgage loans + credit loans) was 0.42%, up 0.04 percentage points from the previous month. The credit loan delinquency rate increased by 0.1 percentage point to 0.84%, which had a significant impact.

An emergency light has also turned on in the delinquency rate of secondary financial institutions. At the end of last year, the savings banks’ delinquency rate (6.55%) was the highest in eight years, and the credit card companies’ rate (1.63%) was the highest in nine years. Kim Yong-jin, professor of business administration at Sogang University, said, “The trend of rising delinquency rates in the entire financial sector, including banks, has been steadily advancing since last year, but it is difficult to say has reached its peak again.” He expressed concern that “as the crime rate increases, we will face the biggest crisis in the second half of this year or the first half of next year.”

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