Due to the worsening real estate market, bank loans are rapidly increasing… “High interest rates and rising construction costs”

It is interpreted that the recession in the construction and real estate industries has had a direct impact as the amount of money lent by banks and not returned is rapidly increasing.

According to the Korea Federation of Banks’ management disclosure on the 17th, the non-performing loans of the five major banks (KB, Shinhan, Hana, Woori, and Nonghyup) at the end of last year totaled KRW 3.5207 trillion.

It increased by 26.2% from 2.79 trillion won at the end of 2022.

Non-performing loans are the sum of overdue loans and loans with unaccounted interest, and are commonly referred to as ‘tin loans’.

Loans for which interest is not accounted for include loans to bankrupt companies, loans with worsening debt repayment ability, and loans for bond restructuring.

Looking at each company, non-performing loans for all banks except Shinhan Bank increased significantly.

KB Kookmin Bank increased by 43.6% from 522.1 billion won to 749.8 billion won, and Hana Bank increased by 33.1% from 652.1 billion won to 867.8 billion won.

In addition, Woori Bank increased by 12.5% ​​from 470.1 billion won to 528.9 billion won, and NH Nonghyup Bank increased by 49.7% from 513 billion won to 768.2 billion won.

Shinhan Bank alone decreased by 4.2% from 632.7 billion won to 606 billion won.

Looking at the ‘Status of companies with an increase in large amounts of non-performing loans’ released by each bank, we can see that the bankruptcy or default of companies in the construction and real estate industries led to the overall increase in non-performing loans.

Although the specific company name was kept confidential, the borrowers with the largest increase in non-performing loans among the five major banks were, without exception, classified as companies in the construction and real estate industries.

For example, at KB Kookmin Bank, non-performing loans to company A in the real estate business increased by 64.5 billion won in one year. This was due to the occurrence of loans with unaccounted interest due to the deterioration of debt repayment ability.

At Shinhan Bank, non-performing loans to Company B, which was in the rental business of residential buildings, increased by 34.7 billion won, and it was revealed that this was due to the default of the bankrupt company.

At Hana Bank, non-performing loans of 60.4 billion won were incurred by Company C, which is engaged in the construction of other civil engineering facilities. This was a case where debt repayment was not possible due to worsening liquidity.

At Woori Bank, the non-performing loan to Company D, an apartment construction company, was set at 72 billion won. This was the result of receiving a D grade in corporate credit evaluation and bond rebalancing.

Nonghyup Bank also saw the largest increase in non-performing loans at 42 billion won, a construction company whose bonds were restructured through workouts.

Previously, the Bank of Korea diagnosed in its March monetary and credit policy report, “With the recent contraction in the sales market, there is a possibility that the financial risks of the construction and real estate industries will expand due to the increased cost burden due to continued high interest rates and rising construction costs.”

Reporter Yang Da-hoon [email protected]

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