Domestic banks saw their non-performing loans increase by over 1 trillion won in the second quarter of this year. Notably, corporate loan defaults surged to their highest level, with significant increases in new defaults among small businesses.
According to a report released by the Financial Supervisory Service on the status of non-performing loans at domestic banks as of the end of June 2026, the non-performing loan ratio rose to 0.63%, up 0.03 percentage points from 0.60% at the end of March.
The total amount of non-performing loans reached 18.9 trillion won, an increase of 1.2 trillion won from 17.7 trillion won at the end of the previous quarter. Of this, corporate loan defaults amounted to 15.2 trillion won, marking a 1 trillion won increase over three months, the highest level in over seven years since March 2019. Household loans accounted for 3.4 trillion won, up 1 trillion won from the previous quarter, while credit card loans remained stable at 3 trillion won.
New defaults also saw a significant rise. In the second quarter, newly incurred non-performing loans totaled 7.2 trillion won, an increase of 1.7 trillion won from the previous quarter. New corporate loan defaults reached 5.7 trillion won, up 1.6 trillion won from 4.1 trillion won, while household loan defaults increased by 1 trillion won to 1.4 trillion won. New defaults in small businesses rose to 4.5 trillion won, an increase of 1.2 trillion won from the previous quarter, while large corporations saw an increase of 400 billion won to 1.2 trillion won.
During the second quarter, the amount of resolved non-performing loans was 6.1 trillion won, up 1.7 trillion won from the previous quarter. By sector, the non-performing loan ratio for corporate loans rose to 0.77%, an increase of 0.03 percentage points, the highest level since March 2021.
The non-performing loan ratio for large corporate loans increased by 0.03 percentage points to 0.53%, while small business loans rose to 0.92%, up 0.04 percentage points. Notably, the non-performing loan ratio for small corporate loans increased to 1.08%, up 0.05 percentage points, and loans to individual business owners rose to 0.67%, an increase of 0.01 percentage points.
The non-performing loan ratio for household loans was 0.33%, up 0.01 percentage points from the previous quarter. The ratio for mortgage loans remained stable at 0.22%, while other credit loans increased to 0.67%, up 0.01 percentage points. The non-performing loan ratio for credit card loans rose to 1.88%, an increase of 0.06 percentage points.
The balance of loan loss reserves in the banking sector stood at 26.9 trillion won, an increase of 200 billion won from the end of March. However, the loan loss reserve ratio, calculated by dividing the reserve balance by non-performing loans, fell to 142.9%, down 7.5 percentage points from the previous quarter.
The Financial Supervisory Service stated, "The upward trend in the non-performing loan ratio continues, particularly in some vulnerable sectors, and proactive soundness management is necessary considering the prolonged situation in the Middle East and the potential for rising domestic and international interest rates."
* This article has been translated by AI.
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