Rising bad loans hit internet banks

By Kim Bo-eun

The nation's two internet-only banks ― K bank and Kakao Bank ― are experiencing a steady increase in bad loans amid the economic slowdown.

As a result, their non-performing loan ratios have jumped over the past few months. In particular, K bank's ratio has been growing at a faster pace.

A bad loan refers to one that is unlikely to be repaid.

According to data from the Financial Supervisory Service (FSS), K bank's bad loan ratio was 0.8 percent in March, up from 0.67 percent a year ago.

It was one of the highest among the 14 commercial banks and second only to Daegu Bank, whose ratio was 0.94 percent. This was the highest growth rate among private-sector banks.

The commercial banks' average for the first quarter was 0.55 percent.

Kakao Bank also saw an increase in its problem loan ratio, but the numbers appear well under control.

Kakao's percentage was 0.18 percent, up from 0.14 percent in the same period a year ago.

K bank earlier halted loan services due to a lack of capital. This is one reason the bank's bad loan ratio rose, as the total amount of loans brings down the percentage.

Its outstanding loans stood at 1 trillion won in the first quarter of last year and 1.5 trillion won in the same period this year. Total loans were 5.9 trillion won in the first quarter of last year and 9.7 trillion won in the same period this year.

K bank had sought to secure fresh capital by making the telecommunications giant KT its major stakeholder this year.

In March, KT requested the financial authorities review its eligibility, but they halted the review process the following month.

This is because KT faces allegations of violating fair trade regulations through collusion with other telecommunications firms in a circuit line business project.

For KT to be eligible as a major stakeholder, it needs to be clear of violating regulations on fair trade, finance and taxation, unless authorities deem the violations minor.

It appears it will take time for K bank to increase its capital. In the meantime, the bank is seeking additional capital by issuing more shares.

Meanwhile, the bad loan ratio of 19 local banks, including state-run institutions, was 0.98 percent, up 0.2 percent from the same period a year earlier.