Due to high interest rates and the economic downturn, there has been a sharp increase in households and businesses unable to meet their loan interest payments.
According to banking sources on Dec. 10, the non-performing loan balance of KB Kookmin, Shinhan, Hana, and Woori Banks increased significantly by 27.3 percent, rising from 2.28 trillion won (US$1.73 billion) at the end of last year to 2.9 trillion won by the end of the third quarter of this year. This notable surge stands out when compared to a mere 3.0 percent increase in the total loans of the four major banks during the same period, from 1,295.78 trillion won to 1,334.27 trillion won.
As a result, the proportion of non-performing loans among total loans rose from 0.18 percent to 0.22 percent. Non-performing loans refer to loans for which banks are not receiving both the principal and the interest. Banks calculate the balance of non-performing loans by including the interest that remains uncollected on loans where the principal repayment has been overdue for more than three months.
The issue of non-performing loans is particularly more severe in corporate loans than in household loans. In the household loan sector of the four major banks, non-performing loans increased by 23.7 percent, rising from 746.2 billion won to 923.4 billion won. On the other hand, non-performing loans in the corporate loan sector saw a whopping 29.0 percent increase, escalating from 1.53 trillion won at the end of last year to 1.98 trillion won by the end of the third quarter of this year.
Indeed, the number of corporate bankruptcies is sharply on the rise. According to court statistics and monthly reports, the total number of corporate bankruptcy cases filed in courts nationwide reached 1,213 in the third quarter of this year, marking a substantial 64.4 percent increase compared to the 738 cases filed during the same period last year. In contrast, personal bankruptcy filings maintain a relatively steady figure, totaling 31,012 cases as of the third quarter of this year, reflecting a marginal difference from the previous year’s total of 31,026 cases.