Loan Receivables Written Off by Four Major Financial Groups Hit Record High of 3 Trillion Won

Repayment Capacity of the Self-Employed and SMEs Weakens Amid Prolonged High Interest Rates

The amount of loan receivables written off as uncollectible by the four major domestic financial groups has reached a record high of 3 trillion won. As non-performing loans continue to increase, assets with a high probability of being written off as losses are also expanding rapidly.

According to the financial sector on May 3, the estimated loss for the end of the first quarter this year, as disclosed by KB Financial Group, Shinhan Financial Group, Hana Financial Group, and Woori Financial Group, totaled 2.9963 trillion won. These are loan receivables deemed virtually impossible to recover, marking an all-time high.

The estimated losses of the four major financial groups for the first quarter increased by 5.8% compared to the same period last year (2.8325 trillion won), and by 16.8% compared to the previous quarter (2.5656 trillion won). This is interpreted as a sign that the risk of non-performing assets is gradually expanding.

Generally, loan receivables are classified by asset quality as normal, precautionary, substandard, doubtful, and estimated loss. Among these, “estimated loss,” which indicates the lowest asset quality, refers to assets for which the borrower's repayment ability has significantly deteriorated to the point where recovery is virtually impossible, or assets that must be written off due to long-term delinquency, default, or bankruptcy.

By financial group, KB Financial Group's estimated losses reached 807.2 billion won at the end of the first quarter this year, up 27.2% from a year earlier. Hana Financial Group recorded 503 billion won, an increase of 30.3%. Woori Financial Group posted 826 billion won, up 12.4%.

In contrast, Shinhan Financial Group's figure was 860.1 billion won, down 20.1% from the same period last year. This is interpreted as the result of proactive asset clean-up, such as charge-offs, to manage asset quality.

An industry official said, "As the high interest rate trend persists, the repayment ability of relatively vulnerable self-employed individuals and small and medium-sized enterprises is weakening.” The official added, “The combination of high oil prices and inflation due to the Middle East crisis, as well as delays in the recovery of the real estate market, is leading to defaults in real estate project financing (PF), and the estimated losses for banks are also increasing."

This content was produced with the assistance of AI translation services.