Bank loan delinquency hits 9-year high in May

The Financial Supervisory Service reported that the delinquency rate on won-denominated bank loans rose to 0.67% at end-May, the highest in roughly nine years, driven by a surge in newly overdue corporate loans as domestic demand slows. SME lending delinquency climbed to 1.00%, the highest in about 11 years, with small corporations particularly hit, while large corporate delinquencies rose to 0.27% and overall household loan defaults edged up to 0.45%. New delinquencies totaled 3.3 trillion won in May, up from April, but write-offs declined to 1.5 trillion won, putting upward pressure on the overall rate. The uptick is linked to a combination of continued expansion in corporate lending, high interest rates, and a slowing economy that strains borrowers, including self-employed individuals. Analysts caution the trend could persist if lending remains expansive and rates stay elevated, underscoring heightened concerns about banks' asset quality amid the slowdown. The figures indicate a widening gap between growing corporate credit activity and borrowers' ability to service debt, with SMEs and small firms bearing the brunt.