Seoul, Korea - The main reason for Korea's commercial banks to see their non-performing loan balance rise to the 7-trillion-won level was blamed on insolvency of several large corporations including STX Group. The Financial Supervisory Service said on February 28 that the ratio of non-performing loans in total loans outstanding as of the end of 2013 was 1.77 percent, up 0.44 percentage point from the previous year's 1.33 percent.

 

The volume of non-performing loans was 25.5 trillion won, 7 trillion won (37.8%) higher than 18.5 trillion won at the end of 2012. The rapid rise in non-performing loans was largely due to the weak performance of highly cyclical industrial sectors such as shipbuilding and construction that led to near bankruptcies of companies such as STX Group affiliates (aggregate non-performing balance of 2.6 trillion won), Sungdong, Daesun, and SPP Shipbuilding (3.5 trillion won), Ssangyong Construction (600 million won), and Keangnam Enterprises and Tongyang Group companies (500 billion won). Meanwhile, the amount of non-performing loans in the household lending segment and credit card loans has shrunk.

 

The balance of new non-performing loans in 2013 was 31.3 trillion won, up 6.9 trillion won from the end of 2012. Of all the commercial banks, Woori Bank had the highest non-performing loan ratio at 2.99 percent.