Some 3 trillion won (about $2 billion) in loans provided by South Korea’s major financial groups have been marked as “estimated loss” in the first quarter, according to financial sector data. The total amount of such loans considered largely irrecoverable by these groups reached 2.9 trillion won by the end of March, showing a 5.8 percent increase from the previous year. The four major lenders involved are KB Financial Group, Shinhan Financial Group, Hana Financial Group, and Woori Financial Group, as per reports from Yonhap news agency.
South Korean banks categorize their loans into five groups based on asset soundness, with “estimated loss” being the most severe category indicating minimal chances of repayment. Factors such as high interest rates affecting the repayment capacity of self-employed individuals and small to medium-sized business owners have contributed to this situation, as highlighted by an official from one of the commercial banks. Additionally, market observers attribute the impact of the Middle East conflict, which led to a surge in oil prices and inflation, thereby straining the local real estate market and resulting in more delinquencies in real estate project financing loans.
KB Financial Group saw a 27.2 percent increase in exposure to non-performing loans compared to the previous year, while Hana Financial Group and Woori Financial Group experienced rises of 30.3 percent and 12.4 percent, respectively. In contrast, Shinhan Financial Group witnessed a 20.1 percent decrease in “estimated losses” year-on-year.
