According to the financial industry on April 29, BNK Financial Group is expected to report first-quarter net profit of 224.6 billion won, up 30.7% from a year earlier. JB Financial Group posted 166.1 billion won, up 2.1%, and iM Financial Group reported 154.5 billion won, up 0.1%. All three improved results on the back of noninterest businesses, but they are also facing rising delinquencies.
JB Financial’s first-quarter delinquency rate rose to 1.63%, up 0.50 percentage points from the end of last year. iM Financial’s rate also increased to 0.86%. By bank, Jeonbuk Bank’s delinquency rate reached 1.65% and Gwangju Bank’s rose to 1.27%. BNK Financial has also been on an upward trend, posting a 1.14% delinquency rate in the fourth quarter of last year. That compares with an average 0.40% for five major commercial banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — meaning regional groups are running as high as four times that level.
The strain is building in both household and corporate lending. At Jeonbuk Bank, the household-loan delinquency rate rose to 1.74%, while corporate-loan delinquencies jumped to 1.67%. Gwangju Bank’s corporate-loan delinquency rate climbed to 1.27%.
Analysts link the trend to structural features of regional banks. Their small- and midsize-business lending accounts for about half of total loans, and their operations are concentrated outside the Seoul metropolitan area, making them more sensitive to local economic conditions. With weakness in real estate project financing and a manufacturing slowdown overlapping, the recovery in regional economies has been delayed, feeding into higher delinquencies.
Rather than a new risk, the rise in delinquencies is being seen as a clearer expression of existing vulnerabilities during a regional slowdown. Delinquency rates have topped 1% across major industries including real estate and leasing, manufacturing and construction, with some sectors exceeding 2%.
Financial industry officials expect conditions could worsen in the near term. If the slowdown persists and regional recoveries lag, delinquency rates may continue to rise.
“Rising delinquency rates are unavoidable for the time being,” a financial industry official said. “There is a need to increase provisions to prepare for additional bad loans.”
* This article has been translated by AI.
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