Savings banks have reported a significant improvement in their financial health by actively resolving bad debts, resulting in a drop in delinquency rates to 6% and a return to profitability last year.
Savings banks in South Korea have experienced a notable turnaround, as they turned a profit last year for the first time after addressing problematic debts, with net income reaching 417.3 billion KRW. This is a stark contrast to the previous year's loss of 423.2 billion KRW. Despite a decrease in interest income of 42.7 billion KRW, savings banks managed a 4.55 trillion KRW reduction in bad debt costs, leading to a significant improvement in asset quality, as evidenced by a drop in the delinquency rate to 6.04% from 8.52% the year before.
Furthermore, while household loan delinquency rates slightly ticked up to 4.67%, corporate loans saw a drastic decline, falling by 4.81 percentage points to 8.00%. The Financial Supervisory Service attributed these improvements to collaborative efforts within the savings bank sector to expedite the resolution of project financing-related bad debts. The fixed asset delinquency ratio also fell from 10.68% to 8.43%, further demonstrating the progress being made in combating financial instability through active debt management and recovery strategies.
On the other hand, mutual financial cooperatives, such as those associated with agricultural, credit, and fisheries sectors, reported a decrease in net income, which totaled 886.1 billion KRW, down from over 1 trillion KRW the previous year. The decrease was mainly due to a reduction in interest income, resulting in an overall financial income decline of 10.1%. The mutual financial sector's delinquency rate also saw a slight increase, showing that while some areas are improving, others face ongoing challenges.
