It has been found that most of the burden attributable to the upcoming restructuring of South Korean shipbuilders and shipping companies is on state-run banks.
According to industry sources, the five companies in the sectors about to be restructured have a total loan amount of approximately 20 trillion won (US$17 billion). The Korea Development Bank (KDB) has lent 7.2847 trillion won (US$6.3 billion), including 3.5688 trillion won (US$3.1 billion) to Daewoo Shipbuilding & Marine Engineering (DSME). It is followed by the Export-Import Bank of Korea (4.7167 trillion won), KEB Hana Bank (3.7431 trillion won), Woori Bank (335.6 billion won), Kookmin Bank (226 billion won) and NH Bank (109 billion won).
In addition, more than half of the companies’ non-performing loans (NPLs) are from government-run and special-purpose banks. According to Dongbu Securities, these types of banks, such as the KDB and the Export-Import Bank of Korea, account for 53.1% of their NPLs. “The overall NPL ratio in the banking sector is as high as 1.8% but the percentage drops to 1.16% when the government-run and special-purpose banks are excluded from the calculation, which means the restructuring in the industries is likely to have a limited impact on private banks,” it said.
This seems to be because private banks have been more nimble in coping with their insolvent states. “Private banks’ exposure to the marginal companies is rather limited as of now with a large portion of their debts already having been classified as losses,” Hana Financial Investment explained, continuing, “The banks have piled up a large amount of allowances and thus are unlikely to take a direct hit.”