Bank SME Loan Delinquency Rate Hits 1%, Highest in 11 Years... Total Rate at 9-Year-7-Month High

The delinquency rate on Korean won-denominated loans by domestic banks hit a 9-year-7-month high last May.

In particular, the delinquency rate for small and medium-sized enterprise (SME) loans rose to the 1% range, marking the highest level in 11 years.

According to the Financial Supervisory Service, the delinquency rate on won-denominated loans by domestic banks at the end of May (based on principal and interest overdue for one month or more) stood at 0.67%, up 0.06 percentage points from the previous month (0.61%).

This is the highest level since October 2016 (0.81%).

As the sluggish domestic demand prolonged, delinquencies increased across overall corporate loans, including large corporations, SMEs, and self-employed individuals, driving up the overall delinquency rate.

The corporate loan delinquency rate at the end of May was 0.84%, up 0.10 percentage points from the previous month.

The delinquency rate for large corporate loans rose to 0.27%, up 0.05 percentage points from the previous month and 0.12 percentage points from the same month last year.

This is the highest figure in 4 years and 8 months since the end of September 2021 (0.28%).

The upward trend in SME loan delinquencies was particularly notable.

The SME loan delinquency rate reached 1.00%, hitting its highest level since May 2015 (1.11%).

Among SMEs, the loan delinquency rate for small and medium-sized corporations rose 0.13 percentage points from the previous month to 1.11%, the highest in 9 years since May 2017 (1.17%).

The delinquency rate for sole proprietors stood at 0.84%, up 0.06 percentage points from the previous month.

The household loan delinquency rate rose 0.03 percentage points from the previous month to 0.45%, but the increase was limited compared to corporate loans.

The mortgage delinquency rate edged up 0.01 percentage points to 0.31%, while the household credit loan delinquency rate, including credit loans, rose 0.07 percentage points from the previous month to 0.9%.

In May, the amount of newly generated delinquencies reached 3.3 trillion won, an increase of 400 billion won from the previous month (2.9 trillion won), whereas the volume of written-off or sold delinquent loans decreased by 100 billion won from the previous month (1.6 trillion won) to 1.5 trillion won.

Consequently, the new delinquency rate rose 0.01 percentage points from the previous month to 0.13%.

The Financial Supervisory Service stated, "As market interest rates may rise due to the recent base rate hike impact, we are monitoring the situation with heightened vigilance."

It added, "We also plan to prepare for the possibility that the upward trend in delinquency rates could expand further due to the growth in corporate loans driven by the revitalization of productive finance."

According to the Bank of Korea, the outstanding balance of corporate loans at depository banks stood at 1,408.3 trillion won at the end of May, an increase of 10.6 trillion won from the previous month.
※ Please note: This article was translated by AI and may contain errors.