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Bad debt ratio among S.Korean banks rises on higher rates

2018-06-11 16:25

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Bad debt ratio among South Korean banks rose in April amid higher lending rates caused by expectations for the central bank's rate increase, financial watchdog data showed Monday.

Bank loans, overdue at least one month, stood at 0.59 percent of the total as of the end of April, up 0.17 percentage points from a month earlier, according to the Financial Supervisory Service (FSS).

It came as rising expectations for the Bank of Korea (BOK)'s policy rate hike in the foreseeable future led to higher market rates, driving up the bank lending rate.

The delinquency ratio for household debts came to 0.27 percent as of end-April, up 0.02 percentage points from a month earlier.

The bad debt ratio for mortgage loans inched up 0.01 percentage point to 0.19 percent, while the figure for credit loans advanced 0.06 percentage points to 0.46 percent.

Households moved to credit loans as banks tightened standard for home-backed loans. The record-low benchmark rate encouraged households to purchase new home with borrowed money.

The BOK raised its target rate in November last year to 1.50 percent from an all-time low of 1.25 percent, marking the first rate hike in almost six and a half years.

The target rate hovered below the U.S. Federal Reserve's benchmark rate ranging from 1.50 to 1.75 percent, boosting expectations for the BOK's rate hike in the near future as the Fed was forecast to tighten its monetary policy stance further as early as June.

Meanwhile, the bad debt ratio for corporate loans extended by banks stood at 0.86 percent as of end-April, up 0.3 percentage points from a month earlier.

The delinquency ratio for bank loans to big companies advanced 1.31 percentage points to 1.76 percent, while the figure for loans to small companies gained 0.05 percentage points to 0.64 percent.

The fast rise among big companies came as a local mid-sized shipbuilder applied for a rehabilitation process that increased bad debts.
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