Bank loan delinquency ratio rises at fastest pace

South Korean banks’ loan delinquency rate rose at the fastest clip in 15 months in October due mainly to increased defaults by construction firms and shipbuilders, the financial watchdog said Monday.

The overall delinquency rate of bank loans to companies and households reached 1.28 percent as of the end of October, up 0.24 percentage points from the previous month, according to the Financial Supervisory Service. The rate is measured based on loans that are overdue for more than one day.

The rise marked the biggest monthly gain since July 2010, when the ratio jumped 0.28 percentage points. The October figure also marked the highest level since 1.30 percent logged in June.

The increase was mostly attributed to a rise in delinquent corporate loans. The default rate of bank corporate loans surged 0.40 percentage points on-month to 1.73 percent, according to the watchdog.

The delinquency ratio of loans to major firms skyrocketed 0.86 percentage point to 1.36 percent, hitting a near five-year high.

The figure marked the highest level since the 1.6 percent recorded in November 2006.

Fresh delinquent loans held by companies in the shipbuilding, construction and real estate industries more than doubled to 3.7 trillion won ($3.3 billion) from 1.8 trillion won a month ago.

The delinquency rate of banks’ household lending, meanwhile, inched up 0.04 percentage points to 0.75 percent as of end-October, according to the watchdog.

“The FSS will strengthen monitoring of the risk of delinquency in vulnerable sectors and encourage banks to resolve delinquent and non-performing loans to achieve the year-end target ratio,” the regulator said.

Banks are expected to reduce the ratio of non-performing loans to below 1.5 percent by the end of the year. 

(Yonhap News)