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Photo courtesy of Yonhap News |
[Alpha Biz= Paul Lee] The amount of loans effectively deemed unrecoverable by South Korea’s four major financial groups has surged to nearly KRW 3 trillion, marking a record high.
According to disclosures from KB Financial Group, Shinhan Financial Group, Hana Financial Group, and Woori Financial Group, total “estimated losses” reached KRW 2.996 trillion as of the end of the first quarter.
The increase reflects mounting non-performing loans as prolonged high interest rates have weakened the repayment capacity of small business owners and SMEs that borrowed heavily during the low-rate era.
Additional pressure has come from delayed recovery in the real estate market, partly due to high oil prices and inflation linked to Middle East tensions. This has exacerbated risks in project financing (PF), further increasing banks’ loss estimates.
The combined estimated losses rose 5.8% year-on-year and 16.8% from the previous quarter.
By group:
KB Financial Group saw estimated losses climb 27.2% to KRW 807.2 billion.
Hana Financial Group increased 30.3% to KRW 503.0 billion.
Woori Financial Group rose 12.4% to KRW 826.0 billion.
Shinhan Financial Group reduced its figure by 20.1% to KRW 860.1 billion, largely through write-offs and active management of bad assets.
Loan assets in Korea are categorized into five tiers—normal, precautionary, substandard, doubtful, and estimated loss—with the last category representing loans considered effectively uncollectible.
The trend underscores growing stress in the financial system as higher borrowing costs and macroeconomic uncertainty continue to weigh on credit quality.
Alphabiz Reporter Paul Lee(hoondork1977@alphabiz.co.kr)
