Delinquent loans to small and medium-sized enterprises (SMEs) and self-employed borrowers at Korea's four major banks have surged, as international oil prices again hover around $100 a barrel and government bond yields climb, data showed. The market expects a sharp rise in bad loans in the second half, factoring in the possibility of an additional base rate hike by the Bank of Korea next month.
According to the financial industry on the 26th, delinquent SME and self-employed loans at KB Kookmin, Shinhan, Hana and Woori banks totaled 3.113 trillion won as of the end of June, up 584.6 billion won, or 23.1%, from the end of last year. The delinquent amount also rose 11.8% compared with a year earlier (2.7845 trillion won).
By bank, delinquencies increased by 268 billion won at Woori, 210 billion won at Hana and 129 billion won at Shinhan. KB Kookmin posted a slight decline.
The delinquency rate at Woori Bank also jumped 0.23 percentage points in half a year to 0.75%. Hana and Shinhan rose 0.12 percentage points and 0.07 percentage points, respectively. At Jeonbuk Bank, a regional lender, the SME loan delinquency rate hit a striking 1.69% as of the end of June. Gwangju Bank also stood at 1.45%, approaching 1.5%. KB Financial said in a conference call, "The aftermath of the Middle East situation still lingers, and high oil prices and a high exchange rate are persisting," adding, "We cannot rule out a decline in the soundness of vulnerable borrowers such as small corporations, small business owners and the self-employed."
Experts see a worsening "K-shaped divide," in which the pace of economic improvement remains slow for sectors other than specific fields such as semiconductors. In the first five months of this year, service industry output rose 4.2%, while output in the lodging and restaurant sector expanded only 0.9%. The exchange rate of around 1,400 to 1,500 won per dollar and agricultural product prices are a burden.
High interest rates also played a part. As of the 24th, the three-year government bond yield stood at 3.959% per year, nearing 4%. Suh Ji-yong, a professor of business administration at Sangmyung University, explained, "The fact that some large companies are booming and posting strong results is separate from SMEs," adding, "Delinquencies are rising due to economic slowdown and rising interest rates."
