Korean banks’ loan delinquency rate fell to its lowest level in two years in December, thanks to a massive settlement of sour loans last month, the country’s financial watchdog said Thursday.

The overall delinquency rate of bank loans to companies and households reached 0.89 percent as of the end of December, down 0.54 percentage point from the previous month, according to the Financial Supervisory Service. The rate is measured based on loans that are overdue for more than one day.

The December figure marks the lowest level since December 2009, when the default rate fell to 0.74 percent as local lenders cleared delinquent loans ahead of year-end closings.

The decline was largely attributed to a fall in delinquent corporate loans. The default rate of bank corporate loans nosedived 0.9 percentage point on-month to 1.09 percent, as banks settled sour loans worth 8.2 trillion won ($7.3 billion), according to the watchdog.

The delinquency rate of loans to large companies plunged 1.68 percentage points after soaring to a record high of 1.93 percent in November, the FSS said.

The watchdog, meanwhile, also attributed the fall to declining delinquency numbers of vulnerable sectors such as the real estate and the shipbuilding industry. The default rate of the two sectors fell 1.54 percentage points and 15.18 percentage points, respectively.

The delinquency rate of banks’ household lending slipped 0.12 percentage point to 0.67 percent as of end-December, according to the watchdog. 

(Yonhap News)