The five major banks write off 3.2 trillion won in non-performing loans in the first half of the year... Concerns over worsening soundness

 

 

 

The five major domestic banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) have cleaned up a total of 3.2704 trillion won worth of non-performing loans in the first half of this year.

This figure is 1.47 times higher than the same period last year, with the economic downturn and the end of the COVID-19 loan repayment deferral cited as major reasons.

According to the financial sector, high interest rates and high inflation have led to a continued slump in domestic demand, reducing the ability of households and businesses to repay their debts.

As a result, banks are classifying loans that are delinquent for more than three months as non-performing loans (NPLs) and are removing them from their books by writing them off or selling them when the likelihood of recovery is low.

Notably, the scale of write-offs and sales of non-performing loans in the first half of this year was higher than in the second half of last year.

Unsecured credit loans are primarily subject to write-offs, while mortgage loans are handled through sales.

Last year's non-performing loan cleanup, which surged to 5.4544 trillion won, is expected to continue increasing this year.

A bank official stated, "As the delinquency rate continues to accelerate, the cleanup of non-performing loans will continue to enhance asset soundness."

Thanks to large-scale write-offs and sales last month, the delinquency rate and NPL ratio of the five major banks in June slightly decreased to 0.31% and 0.29%, respectively.

However, the new delinquency rate remains at a high level.

In particular, the delinquency rate of small and medium-sized enterprises (SMEs) rose to 0.56% in May, experiencing greater difficulties compared to households and large corporations.

Bank officials explained, "The recent delinquency rate is at its highest level since 2019, before COVID-19," adding that high inflation and high interest rates are exacerbating the debt burden on households and businesses due to sluggish domestic recovery.

The banking sector expects non-performing loans to increase further due to the economic slowdown and plans to implement thorough soundness management measures in response.

Additionally, they emphasized strengthening on-site soundness management systems to implement efficient management measures.

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The five major banks write off 3.2 trillion won in non-performing loans in the first half of the year... Concerns over worsening