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The default rate on Korean bank's household loans dropped to the lowest level in more than eight years in 2015 as low interest rates helped reduce debt service burdens, data showed Monday.
In contrast, the delinquency rate of bank corporate loans soared to the highest level since the 2008 global financial crisis, apparently reflecting difficulties that faced local firms due to sluggish sales here and abroad.
According to industry data, the delinquency rate for household loans extended by five major lenders ranged from 0.19 percent to 0.49 percent, the lowest level since the 2008 financial crisis, amid abundant liquidity afforded by record-low interest rates.
The average delinquency rate of Shinhan Bank came to 0.19 percent in 2015, with that of market leader KEB Hana dipping to 0.26 percent. Those of Woori and Nonghyup were tallied at 0.39 percent and 0.49 percent, respectively, but they both still marked the lowest levels since 2008, according to the data.
"Low interest rates helped lighten the burden on households, apparently leading to the drop in the delinquency rate in turn," a local bank official said, speaking on condition of anonymity.
Loans extended by banks to households skyrocketed to a record high in 2015 as the country's central bank kept its key interest rate steady at a record low 1.5 percent since June in an attempt to bolster spending and economic growth.
As of the end of September, household credit reached a record high of 1,166.4 trillion won ($945.99 billion). Household credit represents the total borrowing by households as it includes both loans and credit purchases extended by financial institutions. The fourth quarter tally is due on Wednesday.
Unlike households, local companies struggled to honor their debts even with record low interest rates as they continued to face worsening conditions throughout the year. In 2015, Korea's exports dipped every single month.
The delinquency rate of Nonghyup Bank on loans extended to companies spiked 1.06 percentage points from the previous year in 2015, while that of Shinhan Bank added 0.55 percentage point on-year, both marking the fastest rate of increase since 2008.
The banks themselves, however, suffered little loss as increased earnings on household debts helped nearly offset their losses from corporate loans.
The combined interest earnings of the top five local lenders came to 21.93 trillion won last year, down 1.4 percent from a year earlier, the market data showed. (Yonhap)
