Seoul: Some 3 trillion won (US$2 billion) worth of loans extended by South Korea's four major financial groups have been classified as "estimated loss" in the first quarter, financial sector data showed Sunday. A total of 2.9 trillion won of loans held by these groups were deemed largely unrecoverable as of the end of March, reflecting a 5.8 percent increase from the same period a year earlier.
According to Yonhap News Agency, the four major financiers-KB Financial Group, Shinhan Financial Group, Hana Financial Group, and Woori Financial Group-are grappling with the rising tide of non-performing loans. South Korean banks classify their loans into five categories based on asset soundness: normal, precautionary, substandard, doubtful, and estimated loss. The "estimated loss" category signifies that banks have almost no hope of recovering the loans.
An official from one of the commercial banks noted that the burden of high interest rates has significantly weakened the repayment capacity of self-employed individuals and small to medium-sized business owners, who initially took out loans during periods of low interest rates. Additionally, market watchers have pointed out that the ongoing conflict in the Middle East has exacerbated the situation. The rise in oil prices and subsequent inflation have added pressure to the local real estate market, causing more real estate project financing loans to become delinquent.
By company, KB Financial Group's exposure to such non-performing loans surged by 27.2 percent from the same period a year earlier. Hana Financial Group experienced a dramatic 30.3 percent increase, while Woori Financial Group saw a 12.4 percent rise. In contrast, Shinhan Financial Group reported a 20.1 percent decline in "estimated losses" on-year.