Banks' bad loans decline in 2021 amid debt rollovers

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Korean banks' nonperforming loans shrank in 2021 due in part to debt rollovers aimed at helping pandemic-hit businesses, data showed Tuesday.

Bad loans at local banks came to 11.8 trillion won ($9.7 billion) at the end of December, down from the previous year's 13.9 trillion won, according to the preliminary data from the Financial Supervisory Service (FSS).

The regulator attributed the decline to a fall in overdue corporate loans, which totaled 10.2 trillion won as of the end of December, down from 12 trillion won a year earlier.

Overdue household loans also shrank from 1.8 trillion won to 1.4 trillion won over the same period, the data showed.

The decline came despite the fallout from the protracted COVID-19 pandemic, which hit small merchants and households hard.

An FSS official said the drop in bad loans is not due to brisk business conditions but due to banks' debt rollovers aimed at supporting struggling small firms.

As of the end of 2021, banks' outstanding loans stood at 2,371.9 trillion won, of which bad ones made up 0.5 percent, the data showed, down from the previous year's 0.64 percent.

The ratio marked the lowest ever and represented the sixth straight quarter to top the previous records.

The FSS said that banks' asset quality remained sound in terms of the figures but voiced concerns that their bad loans could mount in the process of withdrawing support measures such as continued debt rollovers.

The regulator also worried about banks' "shock-absorbing" capability at a time when the Ukraine-Russia conflict and monetary policy normalization under way in major economies have heightened economic uncertainty at home and abroad. (Yonhap)