Four Major Financial Groups Recover Over 600 Billion Won in Written-Off Receivables in First Half of Year

Recovered Written-Off Loan Receivables Up 31.3%
KB's Overseas Collateral Recovery, Woori's Corporate Loans Drive Growth
Concerns Mount Over Asset Quality Amid Economic Slump
Credit-Impaired Financial Assets Rise 16.8%

The four major financial holding companies have recovered approximately 600 billion won in written-off loan receivables in the first half of this year that were previously deemed unrecoverable and removed from their books. This figure is up 31% from the same period last year. The upward trend was primarily driven by the recovery of overseas collateral assets at KB Financial Group and additional corporate loan recoveries at Woori Financial Group. As economic downturn has led to a rise in bad loans and increased pressure on the financial sector's asset quality, strengthened efforts to recover written-off assets appear to have served as a buffer against further losses.

According to the semiannual reports of each financial holding company released on August 26, the total amount of recovered written-off loan receivables by KB, Shinhan, Hana, and Woori Financial Group in the first half of this year was 589.626 billion won. This represents an increase of 140.393 billion won (31.3%) compared to 449.233 billion won in the first half of last year.

Written-off receivables refer to claims that financial companies, judging them to have little chance of recovery, have removed from their accounting books after offsetting with loan loss provisions. Even when they are removed from the books, if legal claim rights remain, these receivables are separately managed as special receivables and efforts to recover—by disposing of collateral, litigation, or debt restructuring—continue. Once any money is recovered, it reduces credit loss expenses or is reflected as profit related to receivable recovery, thereby helping defend earnings for financial institutions.

By holding company, KB Financial Group recorded the highest recovery amount. Its recovered written-off loan receivables jumped from 184.905 billion won in the first half of last year to 251.393 billion won in the first half of this year, an increase of 66.488 billion won (36.0%).

The spike at KB Financial Group was mainly attributable to the recovery of overseas collateral assets amounting to approximately 60 billion won. Overseas real estate and other foreign assets, even if used as collateral, are subject to restrictions regarding their recognition for accounting purposes, leading to their immediate write-off as special receivables should defaults occur. When the collateral is later sold, the recovered amount is reflected accordingly. A KB Financial Group representative explained, "The most notable development was the recovery of around 60 billion won by disposing of collateral for some foreign non-performing assets."

Shinhan Financial Group’s recovery rose from 154.853 billion won in the first half of last year to 197.915 billion won in the first half of this year, an increase of 43.062 billion won (27.8%). Including deposits and other financial assets, the total recovered amount for written-off receivables was 199.204 billion won.

Shinhan Financial Group observed that as the economy deteriorated, the scale of written-off receivables accumulated, leading to a corresponding increase in recoveries. "With the worsening economy, the scale of loan write-offs increased, and thus recoveries also climbed," a Shinhan Financial Group spokesperson said. "This is a phenomenon seen across the entire financial sector."

Woori Financial Group posted the largest rate of increase. Its recovered written-off receivables totaled 82.992 billion won in the first half of this year, up 33.689 billion won (68.3%) from 49.303 billion won in the first half of last year.

Notably, corporate loan recoveries more than tripled, soaring from 14.815 billion won to 46.059 billion won. The increase in corporate loan recoveries—31.244 billion won—accounted for 92.7% of Woori Financial Group’s total increase in recoveries. Household loan recoveries edged up by 7.2%, from 22.436 billion won to 24.056 billion won, and card loan recoveries climbed 6.8%, from 12.052 billion won to 12.877 billion won.

According to Woori Financial Group, most of the increased recoveries occurred at the bank, largely driven by additional recoveries from certain corporate loans under special management. The positive impact of selling written-off receivables held by overseas subsidiaries was also reflected.

A representative from Woori Financial Group stated, "The recovery increase was not due to structural factors linked to a specific industry or borrower," adding, "The main reasons were additional collections from some corporate loans and the sale of written-off assets at overseas subsidiaries."

Hana Financial Group was the only one among the four whose recovered amount declined. Its recovered written-off receivables fell by 2.846 billion won (4.7%), from 60.172 billion won in the first half of last year to 57.326 billion won in the first half of this year. Hana Financial Group has explained that the decline was caused by a reduction in the overall scale of special receivables subject to recovery, resulting from last year’s sale of long-term delinquent receivables to the New Leap Fund and this year’s internal write-offs for financial inclusion purposes. The fall in recovered amounts is described as the result of receivable clean-up through the sale and write-off of long-term delinquent loans.

As non-performing assets increased due to the sluggish economy, the importance of recovering written-off receivables has grown in the financial sector. The four major financial holding companies reported that their credit-impaired financial assets disclosed in their semiannual reports rose by 2.5078 trillion won (16.8%) from 14.9104 trillion won at the end of last year to 17.4182 trillion won as of the end of June this year. Credit-impaired financial assets refer to those where overdue payments have occurred or the borrower’s ability to repay debt has deteriorated, significantly increasing collectability risks.

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