Savings Banks and Mutual Finance Cooperatives See Soaring Net Profits in First Half... Sharp Rise in Corporate Loan Delinquency Rates

Savings Banks' Net Profit Surges 198% to KRW 765.8 Billion;
Mutual Finance Cooperatives Also Up 71%
Rising Corporate Loan Delinquencies
Greater Burden on Asset Quality Management in the Second Half

In the first half of this year, net profits of savings banks and mutual finance cooperatives recorded significant growth, showing clear signs of performance improvement. However, the recent upward trend in interest rates has led to higher delinquency rates, particularly for corporate loans, compared to the end of last year. As a result, greater pressure has been placed on managing asset quality.

According to the 'Preliminary Business Results for Savings Banks and Mutual Finance Cooperatives in the First Half of 2026' released by the Financial Supervisory Service on August 28, the net profit of savings banks in the first half of 2026 totaled KRW 765.8 billion. This represents an increase of KRW 508.8 billion (198%) from KRW 257 billion in the same period the previous year, greatly expanding their surplus.

The performance improvement was driven by gains related to securities and a reduction in credit losses. Income from securities-related activities increased by KRW 401.2 billion year-on-year, while credit loss expenses decreased by KRW 260.8 billion due to a reduction in non-performing loans.

The delinquency rate, however, rose during the period. As of the end of June, the delinquency rate for savings banks stood at 6.26%, marking an increase of 0.22 percentage points from 6.04% at the end of last year. The delinquency rate for corporate loans rose from 8.0% to 8.38% during the same period, driving the overall increase in delinquency rates. In contrast, the delinquency rate for household loans fell by 0.07 percentage points, from 4.67% to 4.60%.

The ratio of substandard and below loans dropped to 8.16%, down by 0.27 percentage points from 8.43% at the end of last year. The provision coverage ratio stood at 107.9%, down by 3.4 percentage points from 111.3% at the end of last year, but still above the regulatory standard of 100%. The BIS (Bank for International Settlements) capital adequacy ratio was 15.73%, a decrease of 0.12 percentage points from 15.85% at the end of last year.

Mutual finance cooperatives, including credit unions, Nonghyup, Suhyup, and forestry cooperatives, also experienced a sharp increase in net profit. Their net profit for the first half of the year reached KRW 714.1 billion, up KRW 296.5 billion (71.0%) from KRW 417.6 billion in the same period last year.

The net profit from the credit business segment (financial) was KRW 2.3632 trillion, an increase of KRW 286 billion (13.8%) from KRW 2.0772 trillion during the same period last year. Rising interest income led this improvement in performance. Meanwhile, the deficit in the economic business segment slightly narrowed from KRW 1.6596 trillion to KRW 1.6490 trillion over the same period.

However, asset quality indicators in the mutual finance sector deteriorated. As of the end of June, the delinquency rate stood at 5.39%, up 0.77 percentage points compared to 4.62% at the end of last year.

In particular, corporate loan delinquency rates jumped from 6.83% at the end of last year to 8.03% at the end of June, an increase of 1.20 percentage points. The delinquency rate for household loans also increased by 0.28 percentage points, from 1.93% to 2.21%. The ratio of substandard and below loans climbed by 0.51 percentage points, from 5.55% to 6.06%. The provision coverage ratio fell by 6.5 percentage points, from 115.6% at the end of last year to 109.1%. Meanwhile, the net capital ratio, an indicator of capital adequacy, rose slightly to 8.02%, up 0.07 percentage points from 7.95% at the end of last year.

A representative from the Financial Supervisory Service stated, "Although delinquency rates in both the savings bank and mutual finance sectors have increased compared to the end of last year, they remain below the levels seen in the same period last year, and the ability to absorb losses—such as capital ratios—remains sound." The official added, "Given persistent economic uncertainties both domestically and internationally in the second half, we will seek to enhance asset soundness through measures such as foreclosure auctions and voluntary sales of non-performing assets." The representative further noted, "We plan to strengthen asset quality management by continually improving loss absorption capacity, including maintaining sufficient loan loss provisions and increasing capital reserves."

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