Banks’ bad loan ratio rises, says FSS

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Banks’ bad loan ratio rises, says FSS

The bad loan ratio of banks in Korea rose in April from the previous month due to a rise in fresh loan delinquency numbers caused by the sluggish economy and weak property market, the financial watchdog said yesterday.

Local banks’ nonperforming loans accounted for 1.21 percent of their total lending as of the end of April, up 0.12 percentage point from a month earlier, according to the Financial Supervisory Service.

It said there was a 700 billion won increase in new bad loans along with an overall rise in outstanding delinquent loans, which rose to 13.1 trillion won from the 11.7 trillion won recorded the previous month.

Local banks were also able to resolve 1.9 trillion won worth of bad loans last month compared to 2.9 trillion won in March.

The latest report showed the delinquency ratio for both corporate and household loans went up.

The delinquency rate for corporate loans stood at 1.49 percent last month, a 0.17 percentage point gain on a month prior, with the comparable figure for household loans edging up 0.05 percentage point to 0.89 percent.

The data comes as Seoul moves to control loans to the private sector that could destabilize Asia’s fourth-largest economy. Excessive debt affects consumption, which can hurt production and business investment.

“Economic uncertainties and the likelihood of persistent sluggishness in the property market is affecting bad loan numbers and should continue to exert influence for the rest of the year,” the FSS said.

It said every effort would be made to reduce exposure to delinquent loans and to encourage banks to better manage bad loans. Yonhap

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