June Bank Delinquency Rate Falls to 0.56%... Highest June Level in 10 Years

Delinquency Rate on Won Loans in June Up 0.04 Percentage Points Year-over-Year
Increase in Resolution of Delinquent Loans Drives Downturn
Financial Authorities Closely Watch for Potential Rebound Amid Global Interest Rate Hikes

At the end of June this year, the delinquency rate on won-denominated loans at domestic banks recorded 0.56%, marking a return to a downward trend after just one month. This was largely attributed to banks significantly increasing the write-offs and sales of non-performing loans at the end of the quarter. However, there are concerns that the delinquency rate could rise again in the future, as, as of June, it stands at its highest level in 10 years, and uncertainties continue both at home and abroad, including rising global interest rates and prolonged instability in the Middle East.

According to the "Status of Delinquency Rate for Won-denominated Loans at Domestic Banks as of End-June 2026 (Provisional)" released by the Financial Supervisory Service on the 21st, the delinquency rate for won-denominated loans at domestic banks at the end of June stood at 0.56%, down by 0.11 percentage points from the end of the previous month (0.67%). However, compared to the same month last year (0.52%), it was 0.04 percentage points higher.

In terms of June alone, this is the highest delinquency rate recorded in a decade, since the 0.71% in June 2016. Since the beginning of the year, the banks' delinquency rate had been on the rise, before falling back to 0.56% in June.

This trend was driven both by a decrease in new delinquencies and an increase in non-performing loans handled by banks. In June, the amount of new delinquencies was KRW 2.6 trillion, a decrease of KRW 700 billion compared to the previous month (KRW 3.3 trillion). In contrast, the size of resolved non-performing loans was KRW 5.3 trillion, which was a sharp increase of KRW 3.8 trillion from the previous month (KRW 1.5 trillion). As a result, the total stock of non-performing loans fell by KRW 2.7 trillion in June.

The new delinquency rate also declined. In June, the new delinquency rate was 0.10%, which is 0.03 percentage points lower than the previous month (0.13%) and 0.01 percentage points lower compared to the same month last year (0.11%).

By sector, both corporate and household loan delinquency rates fell compared to the previous month. However, the corporate loan delinquency rate saw a slight increase when compared to the same period last year.

As of the end of June, the delinquency rate for corporate loans was 0.68%, down by 0.16 percentage points compared to the end of the previous month (0.84%), but up by 0.08 percentage points compared to the same month last year (0.60%).

The delinquency rate for large corporation loans was 0.22%, 0.05 percentage points lower than the previous month, but likewise up by 0.08 percentage points from the same month last year. The delinquency rate for small and medium-sized enterprise loans was 0.82%, dropping by 0.18 percentage points from the previous month, but showing a 0.08 percentage point increase versus a year ago.

Notably, the delinquency rate for small corporations dropped by 0.19 percentage points month-on-month to 0.92%, but this was 0.13 percentage points higher compared to the same month last year (0.79%). For individual business owners, the delinquency rate was 0.69%, down by 0.15 percentage points from the prior month, but up by 0.03 percentage points compared to a year ago. The increase in interest rates and economic slowdown have combined to increase corporate debt repayment burdens compared to one year prior.

The delinquency rate for household loans demonstrated relatively stable movement. At the end of June, the household loan delinquency rate was 0.40%, down by 0.05 percentage points from the end of the previous month (0.45%) and also 0.01 percentage points lower compared to the same month last year (0.41%).

The delinquency rate for mortgage loans was 0.28%, dropping by 0.03 percentage points month-on-month. For household loans excluding mortgages, such as credit loans, the rate was 0.77%, a decrease of 0.13 percentage points from the previous month (0.90%). Both rates were also lower compared to the same month last year.

The Financial Supervisory Service indicated that there remains a possibility that delinquency rates could rise again, due to external factors such as global interest rate increases, and therefore plans to closely monitor the trends of loan delinquency rates.

An official from the Financial Supervisory Service stated, "While delinquency rates saw a sharp decline in June, this was mainly due to banks increasing the write-off and sale of non-performing loans at the end of the quarter. Given ongoing global interest rate hikes and the prolonged situation in the Middle East, as well as broader economic uncertainties, there remains a possibility that delinquency rates may rebound in the future."

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