Woori, Citibank Struggle Under Pile of Bad Loans
By Kim Tae-gyu
Staff Reporter
Woori Bank and Citibank Korea are suffering from a pile of non-performing loans with the government-imposed deadline to slash bad-loan ratios to under 1 percent fast approaching.
The Financial Supervisory Service (FSS) said Tuesday that they are the two commercial banks in Seoul whose non-performing loans make up more than 1.6 percent of their total lending.
As of the end of this September, the bad loan ratio for Woori was 1.91 percent, up 0.11 percentage points from three months ago, and that for Citibank stood at 1.64 percent.
The hitch is that they have to diminish the rate substantially by the end of this year ― 1.3 percent for Woori and 1 percent for Citibank ― as stipulated by the government earlier.
This means that Woori is required to do away with more than 1 trillion won in bad loans from its balance sheet, while the amount for Citibank is hundreds of billions of won.
``We are encouraging domestic lenders such as Woori and Citibank to reach the pre-set guidelines this year. I hope that they will abide by them,'' said an FSS official who declined to be named.
The guidelines are not compulsory but the FSS is considering penalties for lenders that fail to reach the set goals.
When contacted, Woori said it would reduce the ratio to 1.3 percent by December.
``Currently, we cannot disclose whether we will write off the debts or sell them. But we will be sure to meet the 1.3-percent target levied by the government,'' a Woori spokesman said.
Citibank Korea also said that it would comply with the FSS instruction, which many claim is practically equivalent to a mandatory regulation.
In the meanwhile, the FSS noted that the overall amount of non-performing loans at domestic banks were 19.2 trillion won in September, accounting for 1.48 percent of the total.
The ratio was a mere 0.7 percent last June but it soared amid the global financial crisis to 0.82 percent last September, 1.14 percent last December and 1.51 percent this June.
In this climate, financial policymakers vowed midway through the year that they would push banks to cut the ratio to below 1 percent this year to shore up their financial status.