Savings Banks See Rising Delinquency Rates in Real Estate Loans

As the real estate market continues to stagnate, the delinquency rates for real estate loans at mid-sized and large savings banks have risen. While the resolution of troubled real estate project financing (PF) has improved asset quality indicators, concerns are growing over the management of delinquencies in other areas, such as real estate loans.

According to disclosures from the top five savings banks—SBI, Korea Investment, Welcome, OK, and Accuon—on May 31, SBI, Korea Investment, and OK Savings Banks have seen increases in delinquency rates despite reducing their real estate loan volumes.

SBI Savings Bank reported a delinquency rate of 17.88%, up 10.5 percentage points from 7.38% in the same period last year. Although its real estate loan amount decreased from 1.2035 trillion won to 671.3 billion won, the delinquent amount rose from 88.8 billion won to 120 billion won.

Korea Investment Savings Bank and OK Savings Bank also experienced increases in delinquency rates, rising from 13.87% to 17.54% and from 14.10% to 17.03%, respectively. Despite reductions in loan amounts of 370.2 billion won and 180.8 billion won, their delinquent amounts increased by 7.7 billion won to 281.6 billion won and by 17.8 billion won to 251.7 billion won.

Welcome Savings Bank saw a slight decrease in its delinquency rate from 44.39% in the first quarter of last year to 43.61% this year, maintaining the highest rate among the top five banks. In contrast, Accuon Savings Bank improved its delinquency rate from 14.01% to 1.35%, with delinquent amounts dropping from 29 billion won to 3.7 billion won.

In contrast, the delinquency rates for construction loans fell during the same period: OK from 19.22% to 5.25%, Korea Investment from 18.20% to 7.51%, Accuon from 9.76% to 2.09%, Welcome from 18.06% to 13.35%, and SBI from 8.63% to 7.83%. All five banks reported improvements in delinquency rates for real estate PF loans, except for SBI.

Industry analysts note that while the resolution of non-performing loans in real estate PF has eased issues related to PF and construction, the burden of soundness has increased for real estate loans to rental and development companies due to a sluggish rental market and delays in development projects.

A similar trend is emerging in credit loans, raising concerns that savings banks, having resolved PF issues, now face new challenges in maintaining soundness. According to data submitted to lawmaker Yang Soo from the People Power Party by the Financial Supervisory Service, the balance of credit loans at 31 domestic mid-sized and large savings banks was 25.63 trillion won in the first quarter of this year, a decrease of 1.76 trillion won compared to the same period last year. Meanwhile, the number of borrowers increased by 88,000, and the average delinquency rate rose to 6.93%, up 0.54 percentage points, indicating a decline in the repayment capacity of multiple debtors due to the economic downturn.