Suhyup, Woori, KDB top in bad loans

By Kang Seung-woo

Suhyup, Woori Bank and the Korea Development Bank (KDB) posted the highest bad-loan ratio in the second quarter of this year, hovering well above the average ratio of 18 lenders, the financial watchdog said Thursday.

According to a report by the Financial Supervisory Service (FSS), Suhyup put up the highest number among the major local banks at 2.75 percent, followed by state-run financial institutions Woori and KDB, whose ratio stood at 2.42 percent and 2.33 percent, respectively. The bad-loan ratio refers to the portion of loans overdue for more than three months.

The Korean banks’ non-performing loan ratio came to 1.73 percent as of the end of June.

Among the commercial banks, Kookmin Bank came in second at 1.84 percent and Citibank Korea had the third-highest ratio of 1.45 percent. Shinhan Bank and Hana Bank posted 1.28 percent and 1.22 percent apiece.

Among regional banks, Jeju Bank, an affiliate of Shinhan Financial, put up a 2.52 percent ratio, despite its relatively fewer loans of 2.2 trillion won, compared with Shinhan Bank’s 159.6 trillion won.

Along with Suhyup and KDB, the National Agricultural Cooperative Federation, better known as Nonghyup, had its bad-loan ratio over the 2 percent mark at 2.27 percent among five specialized lenders.

Thanks to banks’ efforts to clear bad loans, they fell by 3.2 trillion to 23 trillion won as of the end of June, accounting for 1.73 percent of total lending. The previous quarter reading was 2 percent.

The FSS said that the fall in the ratio came after 9.5 trillion won in sour loans were resolved in the second quarter, up 5.6 trillion won from 3.9 trillion cleared in the previous three-month period.

In addition, the ratio of sour construction loans, which have plagued banks, declined to 12.8 percent, compared with 18.19 in the previous quarter and 16.44 at the end of last year.

The FSS plans to closely monitor potential bad debts, particularly project financing (PF) loans, and strengthen the supervision of banks with a focus on asset quality classification.

“The likelihood of new bad debt still exists in vulnerable sectors such as the construction industry and PF loans,” said an official of the FSS.

The FSS also said that it will check the adequacy of the standards and levels of loan-loss provision.