Delinquent loans hit 15-month high

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Delinquent loans hit 15-month high

Korean banks’ loan delinquency rate climbed to its highest level in 15 months in November due mainly to an increase in sour loans in the construction and shipbuilding sectors, the country’s financial watchdog said yesterday.

The overall delinquency rate of bank loans to companies and households reached 1.43 percent as of the end of November, growing 0.15 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 November figure marks the highest level since August 2010, when the default rate hit 1.5 percent on a major corporate overhaul of large-cap companies and a sharp increase in fresh delinquent loans in the real estate and construction sector.

The increase was mostly attributed to a rise in delinquent corporate loans. The default rate of bank corporate loans rose 0.26 percentage points on-month to 1.99 percent, according to the watchdog.

The delinquency ratio of loans to major firms surged 0.57 percentage points to 1.93 percent, hitting a record high since the FSS began tallying the data in September 2003.

Fresh delinquent loans, mostly in shipbuilding and real-estate project-financing loans, gained 3.4 trillion won ($2.96 billion).

The delinquency rate of banks’ household lending, meanwhile, inched up 0.04 percentage points to 0.79 percent as of end-November, according to the watchdog.

“The FSS will strengthen its monitoring of delinquency risks in vulnerable sectors such as shipbuilding and real estate project-financing loans, and better supervise banks over delinquent loan management,” the watchdog said. It said the ratio may further increase this year.


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