According to the financial sector on the 29th, the Industrial Bank of Korea said its delinquency rate for small and medium-sized enterprises in real estate and leasing stood at 1.28% at the end of the first quarter, based on principal and interest overdue by at least one month. That was up 0.74 percentage points from a year earlier and the highest level in 13 years since the first quarter of 2013 (1.36%).
The rise is attributed to a combination of growing vacancies in commercial properties, stagnant rents and heavier interest burdens. Borrowers who once relied on rising collateral values are now facing shrinking rental income and mounting financing costs, eroding repayment capacity.
Major commercial banks reported similar increases. Shinhan Bank’s delinquency rate in the sector was 0.35% at the end of the first quarter, the highest since it began compiling related data in 2021. Hana Bank’s was 0.57%, the highest in about 10 years since the second quarter of 2016, and Woori Bank’s was 0.41%, the highest since its data series began in 2019. The figures point to growing repayment pressure across domestic-demand sectors.
An IBK official said, “The prolonged uncertainty in the domestic and global economy and worsening business conditions have weighed on overall domestic demand, which has also hurt the real estate leasing market.”
Delinquency rates were also elevated in other sectors tied to domestic demand. IBK’s SME construction delinquency rate was 1.64% at the end of the first quarter, up 0.30 percentage points from 1.34% a year earlier. Wholesale and retail (1.07%) and food and lodging (1.40%) were also above 1%.
Manufacturing, however, remained relatively stable. IBK’s delinquency rate for SME manufacturers fell to 0.86% in the first quarter from 0.92% a year earlier. The improvement in export-driven industries appears to have eased funding conditions for smaller suppliers, and some analysts said the weaker won has benefited certain exporters.
A financial industry official said, “Even among small businesses, the on-the-ground economy feels completely different between manufacturing and domestic-demand sectors,” adding that polarization is deepening as the export rebound has not spread to local commercial districts, self-employed businesses and real estate leasing.
* This article has been translated by AI.
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