Amount of NPLs in Corporate Sector Increased Last Year

The Financial Supervisory Service announced on March 1 that the domestic banking sector’s non-performing loan (NPL) ratio reached 1.71% at the end of last year, 0.16 percentage points higher than a year ago. As of the end of September 2015, U.S. commercial banks recorded a NPL ratio of 1.59% and that of Japanese banks was 1.53%.

Specifically, the amount of Korean banks’ NPLs increased 4.3 trillion won year on year to end up at 28.5 trillion won at the end of December last year. 92.6% of the total, 26.4 trillion won or so, was corporate credit whereas household credit and credit card-based ones were limited to approximately 1.9 trillion won and 100 billion won, respectively. The size of the non-performing household loans decreased 300 billion won from a year earlier.

 The ratio of non-performing business loans rose by 0.33 percentage points to 2.42% between the end of 2014 and the end of last year and by 0.51 percentage points compared to the end of the third quarter of last year. The construction and shipbuilding sectors showed especially high ratios, 4.35% and 12.92% to be specific.

 By company size, large corporations posted 3.45%, 1.17 percentage points higher than a year earlier, while small and medium enterprises’ figure dropped by 0.31 percentage points to 1.63%. Households’ figure and that related to credit cards fell from 0.45% to 0.35% and from 1.17% to 1.14%, respectively. By bank, the Korea Development Bank (4.55%), the Export-Import Bank of Korea (3.29%) and NH Bank (2.27%) showed higher NPL ratios.

 Last year, the amount of new NPLs increased by 2.9 trillion won to 26.5 trillion won. 88.1% of the total, equivalent to about 23.4 trillion won, was generated in the corporate sector with an increment of 4.1 trillion won. The amount of new non-performing household loans decreased 1.1 trillion won to 2.7 trillion won and the amount of the bad loans disposed of by banks last year decreased 2.8 trillion won from a year ago.