
By Jun Ji-hye
The proportion of non-performing corporate loans at major banks has continued to grow, raising concerns about potential future risks regarding the soundness of assets.
The growth of bad corporate loans came as competition in corporate lending operations intensified among the banks since last year after financial authorities began tightening the management of household loans.
According to semi-annual reports disclosed on Wednesday by the four major banks — KB Kookmin, Shinhan, Hana and Woori — the balance of corporate loans as of the first half of this year totaled 885 trillion won ($662 billion), marking a 7.8 percent increase from 784 trillion won at the end of last year.
In comparison to the 2.4 percent increase in household loans, which rose from 563 trillion won to 576 trillion won during the same period, the growth in corporate loans was significantly larger.
The growth in corporate lending has also led to a sharp rise in non-performing loans.
The amount of corporate loans overdue by more than three months at the four banks was 2.8 trillion won as of the first half, a 16.2 percent increase from 2.4 trillion won at the end of last year.
In comparison, during the same period, the amount of household loans overdue by more than three months increased by 12 percent from 969 billion won to 1 trillion won.
The ratio of these bad corporate loans came to 0.33 percent as of the first half, higher than the 0.19 percent ratio for household loans.
The figure for corporate loans has steadily increased from 0.26 percent in 2022 to 0.31 percent last year and then to 0.33 in the first half of this year.
The ratio for household loans also rose from 0.15 percent to 0.17 percent and then to 0.19 percent, but the increase was relatively smaller.
“The scale of non-performing corporate loans is not yet considered to be at a critical level, but we are paying keen attention to the potential risk of further deterioration in asset quality,” an official from a major bank said.
In its report released in June, the Bank of Korea (BOK) urged financial institutions to rigorously manage risks in response to the rapid growth in corporate loans.
The report particularly pointed out that both large corporations and small- and medium-sized enterprises have experienced a decline in profitability. It also noted that businesses’ ability to pay interest has also fallen, compared to a year ago.
In another report released on Wednesday, the BOK also assessed that the combination of the stagnation in domestic demand and global uncertainties has led to a simultaneous deterioration in the business sentiment of both the manufacturing and non-manufacturing sectors.