Unprofitable Loans Approach 3 Trillion Won

Due to high interest rates and an economic downturn, both households and businesses are experiencing a significant increase in being unable to even repay loan interest.

According to banking sources on Nov. 20, the non-profitable loan balances of KB Kookmin, Shinhan, Hana, and Woori Bank surged by 27.3 percent from 2.28 trillion won (US$1.76 billion) at the end of last year to 2.9 trillion won at the end of the third quarter this year. This notable increase contrasts with a mere 3.0 percent growth in the total loans of the four major banks during the same period, rising from 1,295.78 trillion won to 1,334.27 trillion won.

As a result, the proportion of non-profitable loans to total loans increased from 0.18 percent to 0.22 percent. Non-profitable loans refer to loans where banks cannot recover both the principal and interest. Banks calculate the balance of non-profitable loans by adding non-performing loans to those where principal repayment has been overdue for more than three months.

The issue of non-profitable loans is particularly more severe in corporate loans than in household loans. In the household loan sector of the four major banks, non-profitable loans increased by 23.7 percent, rising from 746.2 billion won to 923.4 billion won. In contrast, the corporate loan sector witnessed a more substantial increase in non-profitable loans, growing by 29.0 percent from 1.53 trillion won at the end of last year to 1.98 trillion won at the end of the third quarter this year.

Indeed, corporate bankruptcies are experiencing a sharp increase. According to the monthly statistics report from the courts, the number of corporate bankruptcy cases filed with courts nationwide reached 1,213 as of the third quarter of this year, indicating a significant surge of 64.4 percent compared to the corresponding period last year, when there were 738 cases. In contrast, the cumulative individual bankruptcy filings totaled 31,012 as of the third quarter of this year, exhibiting a marginal difference from last year’s figure of 31,026.