Banks' non-performing loans 18.9 trillion won...the largest in 8 years

At the end of June this year, the total amount of bad loans in domestic banks reached 18.9 trillion won, marking the highest level in 8 years. The significant increase was largely due to new bad loans issued to medium and small enterprises, which surged by 1.2 trillion won compared to the previous quarter. According to the Financial Supervisory Service, as of June 2nd, the total amount of bad loans in domestic banks stood at 18.9 trillion won, up from 1.2 trillion won compared to March last year. This marked the highest level since June 2018, when the figure was 19.4 trillion won.

Bad loans refer to loans where banks find it difficult to recover the principal. Banks may write off or sell off new bad loans, or recover them through asset disposals. The size of bad loans is determined after such proceedings have been carried out. The recent rise in bad loans was driven by corporate borrowers. Corporate bad loans jumped to 15.2 trillion won, accounting for the majority of the overall increase in bad loans.

Corporate bad loan levels were also at their highest in 7 years and 3 months since March 2019. Consumer bad loans increased to 3.4 trillion won, while credit card loans remained steady at 3 trillion won. The increase in bad loan amounts was mainly driven by new corporate bad loans. Overall new bad loans increased by 7.2 trillion won compared to the previous quarter, with corporate new bad loans rising by 4.5 trillion won, or 70.6% of the total increase.

Large enterprises' new bad loans grew by 1.2 trillion won to 1.2 trillion won, while consumer bad loans rose by 1 trillion won to 1.4 trillion won. The bad loan ratio for domestic banks increased to 0.63% from 0.60% last March, a 0.03 percentage point rise. The bad loan ratio for corporate borrowers rose to 0.77% from 0.60% in the previous quarter, also a 0.03 percentage point increase. Consumer bad loan ratios were up by 0.01 percentage points to 0.33%.