Loan defaults are spreading at regional banks and non-banking financial institutions amid high interest rates. As the pace of increase in regional banks' delinquency rates on small and medium-sized enterprise (SME) loans has accelerated this year, delinquency rates and non-performing loan (NPL) indicators are also deteriorating at capital firms and savings banks, raising the burden of managing asset quality.
According to the financial industry on the 26th, Jeonbuk Bank's SME loan delinquency rate stood at 1.90% as of the end of June this year, up 0.25 percentage points from the end of last year (1.65%). Having continued its upward trend since the end of the first half of last year (1.60%), the rate has seen its increase widen this year.
Gwangju Bank also showed a marked rise in its SME loan delinquency rate. The rate, which was 0.81% at the end of the first half of last year, exceeded the 1% level by year-end (1.20%). Six months later, it rose an additional 0.25 percentage points to reach 1.45% at the end of the first half.
Industry analysts say that the difficulties facing regional SMEs are appearing more acutely amid "K-shaped polarization," in which the gap widens between certain export sectors such as semiconductors and domestic demand sectors. Regional banks have a relatively high proportion of loans to smaller local SMEs and small business owners, making a regional economic slowdown relatively more likely to lead to rising delinquencies.
Non-banking financial institutions are also seeing growing asset-quality pressure this year, centered on SME loans. JB Woori Capital's SME loan delinquency rate rose from 1.71% at the end of last year to 2.17% at the end of the first half of this year. As a result, its overall delinquency rate climbed from 2.21% to 2.69% over the same period. Hana Capital's overall delinquency rate also rose from 1.62% to 1.70%.
Savings banks are likewise facing continued asset-quality pressure. Hana Savings Bank's delinquency rate rose from 6.92% at the end of last year to 7.26% at the end of the first half of this year. Its NPL ratio edged down from 10.61% at the end of last year to 9.97% but remained close to 10%. NH Savings Bank's NPL ratio also fell from 13.54% to 11.88% over the same period, but stayed at a double-digit level.
The financial industry is concerned that the repayment burden on vulnerable borrowers is growing as high interest rates and the economic slowdown drag on. Analysts say that SMEs and self-employed business owners, whose profitability has worsened due to rising raw material prices, labor cost burdens and weak domestic demand, are seeing their capacity to repay loans decline as financing costs also increase. "Large corporations and some export sectors are showing signs of recovery, but domestic-demand-based SMEs and self-employed business owners are still in a difficult situation," a financial industry official said. "If delinquencies become prolonged, there is a possibility that non-performing loans will increase significantly, so asset-quality management will become important in the second half."
