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Concerns grow as low-credit borrowers turn to internet-only banks
KakaoBank's Pangyo office in Seongnam, Gyeonggi Province / Yonhap
By Lee Kyung-min
The delinquency rates on loans granted by internet-only banks to low-credit, self-employed borrowers are climbing, a red flag for the IT-oriented lenders established to guarantee access to more affordable financing for customers with weak financial profiles, market watchers said Monday.
The worrisome development poses risks to financial soundness, amplified further by high borrowing costs amid a sustained economic slowdown.
More borrowers are expected to seek loans with internet-only banks in the months to come due to tightening lending rules put in place by the country’s top five commercial lenders over the past two months. The five lenders are seeking repayment of the principal instead of granting maturity extensions, in a collective preemptive move to reduce exposure to risky non-performing loans.
According to market data, Toss Bank registered a delinquency rate of 1.86 percent in the third quarter of last year, up from 0.37 percent in the fourth quarter of 2022.
The figure for Kbank in the same period stood at 0.47 percent, up from 0.06 percent.
KakaoBank’s rate in the third quarter of last year was limited to 0.11 percent, but it soared to 0.35 percent in the fourth quarter of last year.
The spike in the rates is explained in large part due to an over 10-fold increase in low-credit loans granted by the three lenders.
The outstanding balance of the loans extended by KakaoBank came to 950 billion won ($711 million) in the fourth quarter of last year, more than 10 times the 89 billion won in the fourth quarter of 2022.
The figure for Kbank stood at 727.6 billion won, up from 90 billion won in the same period. Toss Bank’s figure was 1.79 trillion won in the third quarter of last year, up from 1.3 trillion won in the fourth quarter of 2022.
The rates are likely to soar, as indicated by rapid drawdowns in lending by the country’s top five commercial lenders — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup.
The lenders in business with higher-credit customers reported 319.2 trillion won in a combined outstanding balance of loans granted to those with low credit and who are self-employed as of January, down 263.2 billion from the month before.
The figure, combined with the previous month-on-month drop of 874.7 billion won last December, raises the total to over 1.13 trillion won.
The five lenders plan to write off 970 billion won worth of non-performing loans before April to fortify financial soundness.
“An increasing number of vulnerable borrowers can be late on their interest payments in the months to come, leading to a corresponding broader risk exposure to lenders mindful of their financial strains brought on and compounded by high borrowing costs and heightened economic uncertainties,” an industry official said.