Korea’s bank delinquency rate hits 4-year high at end of third quarter

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South Korea saw the delinquency rate of Korean won loans from domestic banks hit a four-year high at the end of the third quarter of 2023.

While banks have reduced overdue loans through sales and transfers by this period, resulting in a lower delinquency rate compared to the previous quarter, excluding these seasonal factors, the delinquency rates hit a four-year high in most segments, including mortgage loans and household credit loans. Financial authorities plan to encourage banks to set aside sufficient provisions for bad debts to prepare for a possible further rise in delinquency rates moving forward.

According to data from the Financial Supervisory Service (FSS) on Wednesday, the delinquency rate for Korean won loans in domestic banks stood at 0.39 percent at the end of September 2023, up 0.18 percentage points from 0.21 percent a year ago. Compared to August, the delinquency rate fell by 0.04 percentage points, and the new delinquency rate in September (the number of new delinquencies incurred in September relative to the loan balance at the end of August) was 0.10 percent, up 0.05 percentage points from 0.05 percent during the same month a year ago.

As of the end of September, the delinquency rate of Korean banks in September was the highest in four years since 0.44 percent in 2019.

In September, Korean banks recorded year-on-year increases in delinquency rates across all loan segments. The delinquency rate for home mortgage loans doubled to 0.24 percent from 0.12 percent a year ago, while the delinquency rate for credit loans rose to 0.65 percent from 0.37 percent over the same period. As a result, the delinquency rate for household loans jumped to 0.35 percent from 0.19 percent a year ago.