[Exclusive] Regional Banks Rapidly Expand Lending, Delinquency Risks Rise... Jeonbuk, Gwangju Hit "4% NPL" [The Shadows of K-Finance for Foreign Nationals] (2)

Jeonbuk and Gwangju Banks Drive Surge in Banking Sector NPLs
Jeonbuk Bank's NPL Balance: KRW 5.5 Billion in 2024 to KRW 27.4 Billion at the End of June
Gwangju Bank's NPL Balance Also Surges More Than 30-Fold

Editor's NoteAs the number of foreign nationals staying in Korea long term grows, banks are competing fiercely to attract them as new drivers of growth. In May, this newspaper examined the heated race among banks to gain an early foothold and what foreign nationals actually want from financial services in a series titled "The Current State of K-Finance for Foreign Nationals." This time, we look at the "shadows" obscured by the sector's impressive growth. Over five installments, we will examine the state of bad loans in the foreign-national lending market, which has surged in a short period, the structural causes behind them, and possible solutions.

The level of bad loans to foreign nationals varied markedly from bank to bank. Banks that primarily offer secured loans to foreign nationals had relatively sound asset quality, while banks that have recently expanded such lending aggressively saw bad loans rise sharply and their NPL ratios deteriorate rapidly.

An analysis of data titled "Foreign-National Lending and Bad Loans by Bank," submitted by the Financial Supervisory Service to the office of Choi Eun-seok, a People Power Party member of the National Assembly's Political Affairs Committee, found that Woori Bank had the largest outstanding balance of loans to foreign nationals among 16 banks. As of the end of June this year, the balance stood at KRW 1.2085 trillion. It was followed by Shinhan Bank (KRW 990 billion), Hana Bank (KRW 796.2 billion), Jeonbuk Bank (KRW 664.8 billion), and KB Kookmin Bank (KRW 597.5 billion).

Despite having the largest portfolio of loans to foreign nationals, Woori Bank had a relatively low nonperforming loan (NPL) ratio. Its NPL volume rose from KRW 521 million in 2021 to KRW 1.865 billion at the end of last year, before falling to KRW 1.135 billion at the end of June this year. Its NPL ratio edged up only slightly, from 0.07% in 2021 to 0.09% at the end of June this year.

Woori Bank's foreign-national loans have remained relatively sound because it primarily offers secured loans. The bank has no loan products exclusively for foreign nationals, and it assesses income, assets, and other factors for its general loan products under the same conditions as for Korean nationals. A banking industry official said, "I understand that loans to low-wage foreign workers are mainly provided through policy-finance programs such as the New Hope Seed Loan," adding, "General loans are likely to have a high proportion of borrowers with stable incomes who have stayed in Korea long term."

Jeonbuk Bank saw a sharp surge in bad loans. As it expanded its lending rapidly over a short period, its NPL volume also grew quickly. The bank's outstanding balance of loans to foreign nationals reached KRW 664.808 billion at the end of June this year, about 11.5 times the KRW 58.055 billion recorded in 2021. The increase was particularly steep in the short term, with the balance rising by about KRW 233 billion in 2025 alone.

During this period, the bank's NPL volume also grew rapidly, driving up the banking sector's total bad loans to foreign nationals. Jeonbuk Bank's NPL volume for such loans reached KRW 27.436 billion at the end of June this year, more than 20 times the KRW 1.305 billion recorded in 2021. It stood at about KRW 5.5 billion in 2024, then surged to KRW 21.645 billion at the end of last year. As a result, its NPL ratio reached 4.13% at the end of June this year, climbing above 4%.

Gwangju Bank, another subsidiary of JB Financial Group, like Jeonbuk Bank, has also seen its NPL volume rise rapidly. It increased from KRW 136 million in 2024 to KRW 4.421 billion at the end of June this year. While the outstanding loan balance grew about ninefold, from KRW 10.944 billion to KRW 99.149 billion, bad loans expanded by more than 30 times. As a result, the NPL ratio soared from 1.24% to 4.46%, far exceeding Gwangju Bank's overall NPL ratio of 1.20% at the end of June this year. A Gwangju Bank official said, "We began operating a financial center for foreign nationals in Gwangju last year, and lending has increased as well," adding, "As loans have grown significantly, bad loans have also increased."

Another cause for concern is that most of the bad loans at Jeonbuk Bank and Gwangju Bank are classified as doubtful or estimated loss. Jeonbuk Bank has no substandard loans among its NPLs; the entire amount consists of doubtful loans (KRW 20.818 billion) and estimated losses (KRW 6.618 billion). At Gwangju Bank, doubtful loans and estimated losses account for 92.6% (KRW 4.092 billion) of its KRW 4.421 billion in NPLs.

Among commercial banks, Hana Bank also saw bad loans to foreign nationals rise rapidly. Its NPL volume increased from KRW 670 million in 2024 to KRW 1.486 billion at the end of last year, then surged to KRW 7.422 billion at the end of June this year. This contrasts with its outstanding loan balance of KRW 796.154 billion, which was about KRW 10.8 billion lower than at the end of last year. In other words, bad loans rose rapidly even as the overall loan portfolio shrank. The NPL ratio climbed from 0.18% at the end of last year to 0.93% at the end of June this year. Most NPLs were classified as substandard, making their composition different from those at Jeonbuk Bank and Gwangju Bank.

At Shinhan Bank, the outstanding balance of loans to foreign nationals fell 4.3% (KRW 44.4 billion), from KRW 1.0344 trillion in 2021 to KRW 990 billion at the end of June this year. However, its NPL volume increased by 134.6% (KRW 1.677 billion) over the same period. Its NPL ratio rose from 0.12% to 0.3%.

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