South Korean banks see mixed loan risks as bad debt rises in late 2022
South Korean banks faced a slight rise in troubled loans at the end of 2022. While the overall bad-loan ratio stayed steady, lenders wrote off more debt and saw an uptick in newly classified soured loans. The figures highlight ongoing challenges in managing credit risks. By December 2022, the total value of substandard or below (SBL) loans held by local banks climbed to 16.6 trillion won ($11.1 billion). This marked a 200 billion won increase from the previous quarter. The bad-loan ratio, however, remained unchanged at 0.57%.
Newly identified soured loans in the fourth quarter reached 5.9 trillion won, up 400 billion won from the prior three months. Banks responded by writing off 5.7 trillion won in bad debt, a 100 billion won rise from the previous quarter.
Household loans classified as SBLs edged higher to 0.31% by the end of December. In contrast, the ratio for business loans classified as SBLs fell to 0.70%. No specific industries were reported as heavily impacted by non-performing loans during this period. The data shows a mixed picture for South Korean banks at the close of 2022. While the overall bad-loan ratio held steady, the increase in write-offs and newly classified soured loans points to persistent credit pressures. The figures also reflect differing trends between household and business loan risks.
