July Delinquency Rate on Won Loans at Domestic Banks Rises After One Month... Large Corporates Reach 5-Year High

Delinquency Rate Reaches 0.63% in July,
Up 0.07 Percentage Points from Previous Month

Large Corporations' Delinquency Rate at 0.36%,
Highest Since July 2021

Joongang Group's Rehabilitation and Workout Drive New Delinquencies

The delinquency rate of Korean won-denominated loans at domestic banks rebounded and turned upward in July. In particular, the delinquency rate for large corporate loans reached its highest level in five years since July 2021, driven by corporate rehabilitation and workout procedures involving affiliates of the JoongAng Group.

According to the "Status of Won-denominated Loan Delinquency Rates at Domestic Banks as of the end of July 2026 (provisional)" released by the Financial Supervisory Service (FSS) on September 22, the delinquency rate on won-denominated loans at domestic banks (based on loans overdue by one month or more) stood at 0.63% at the end of July. This represents an increase of 0.07 percentage points from the previous month (0.56%) and an increase of 0.06 percentage points compared to the same month last year (0.57%). For the month of July, this is the highest level in ten years since July 2016 (0.78%).

The delinquency rate on won-denominated loans often tends to decline at the end of each quarter when banks ramp up their efforts to write off overdue loans, then subsequently rise again. In fact, the delinquency rate, which had risen to 0.67% in May, fell to 0.56% in June due to expanded efforts to clear overdue loans, but rose again in July.

New delinquencies in July totaled 3.2 trillion won, an increase of 600 billion won compared to the previous month (2.6 trillion won). In contrast, the amount of overdue loan resolutions was reduced sharply to 1.4 trillion won, down 3.9 trillion won from the previous month (5.3 trillion won). As a result, the outstanding balance of overdue loans increased by 1.8 trillion won over the month.

The new delinquency rate stood at 0.12%, up 0.02 percentage points from the previous month and 0.01 percentage points higher than the same month last year.

The increase in the delinquency rate for corporate loans was particularly notable. As of the end of July, the delinquency rate for corporate loans was 0.78%, up 0.10 percentage points from the previous month (0.68%). Compared to the same period last year (0.67%), it rose by 0.11 percentage points.

In particular, the delinquency rate for large corporate loans rose to 0.36%, an increase of 0.14 percentage points from the previous month (0.22%). Compared to the same period last year (0.14%), it surged by 0.22 percentage points. This marks the highest level since July 2021 (0.37%), in five years.

The delinquency rate for loans to small and medium-sized enterprises (SMEs) also increased to 0.91%, up 0.09 percentage points from the previous month (0.82%). Within this category, the delinquency rate for incorporated SMEs was 1.00%, up 0.08 percentage points from the previous month (0.92%), and the delinquency rate for individual business owner loans stood at 0.77%, up 0.08 percentage points from the prior month (0.69%). Compared to the same period last year, the delinquency rate for incorporated SMEs was up by 0.10 percentage points and that for individual business owners increased by 0.05 percentage points.

The FSS explained that the delinquency rate increase in July was driven by a reduction in the amount of overdue loan resolutions compared to the previous month, as well as new delinquencies related to the corporate rehabilitation and workout procedures of JoongAng Group affiliates.

An FSS official stated, "Because the loan amounts for large corporations are substantial, even a single company default can have a significant impact on the overall delinquency rate. With JoongAng Group affiliates entering rehabilitation and workout proceedings, related delinquencies have occurred, and there is a possibility of additional delinquencies in the future. Therefore, the delinquency rate for large corporations may continue to rise for some time."

The delinquency rate on household loans also climbed to 0.42%, up 0.02 percentage points from the previous month (0.40%). However, this is 0.01 percentage points lower than the same period last year (0.43%).

The delinquency rate on mortgage loans was 0.29%, up 0.01 percentage points from the previous month, maintaining the same level as the same month last year. Excluding mortgages, the delinquency rate for household loans such as unsecured loans stood at 0.84%, a 0.07 percentage point increase from the previous month (0.77%), but 0.02 percentage points lower compared to the same period last year (0.86%).

The FSS noted that, considering the ongoing rise in market interest rates and persistent uncertainties in external economic conditions, there is a possibility that the upward trend in delinquency rates may continue or even accelerate. In response, the FSS will continue to closely monitor delinquency rates and other indicators of financial soundness, particularly in vulnerable sectors, and will guide banks to take preemptive steps to maintain soundness by securing adequate loan loss provisions and actively writing off or disposing of non-performing loans.

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