Banks are accelerating sales of nonperforming loans in the third quarter. The "three highs" of high inflation, high interest rates, and a strong dollar-won exchange rate persist, sharply increasing the number of borrowers who cannot repay loan interest. Industrial Bank of Korea (IBK), which has many loans to small and midsize companies, plans to sell 1.2 trillion won in nonperforming loans in the second half.
According to the financial sector on the 6th, Shinhan Bank is working to sell about 300 billion won in nonperforming loans in the third quarter. Shinhan Bank plans to select an advisor, assess the appropriate value of the nonperforming loans, and proceed with the sale. KB Kookmin Bank will also sell 300 billion won in nonperforming loans in the same period. Woori Bank and Hana Bank are also said to be preparing sales of nonperforming loans at a similar level.
Industrial Bank of Korea (IBK) plans to dispose of up to 1.2 trillion won in nonperforming loans in the second half of this year. As of the end of the first quarter, Industrial Bank of Korea (IBK)'s nonperforming loan ratio was 1.28%. That is about four times higher than the average of KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup Bank (0.374%).
Nonperforming loans refer to debts in which individuals or corporations have failed to repay loan principal and interest for a certain period. Banks judge that the likelihood of recovering the loans is low and sell them at prices below principal to the Korea Asset Management Corporation (KAMCO) or to debt collection firms. They clear nonperforming loans to manage soundness indicators such as the arrears rate.
With the prolonged economic downturn, nonperforming loans at domestic banks have been steadily increasing. According to the Financial Supervisory Service, as of the end of the first quarter, domestic banks' nonperforming loans totaled 17.7 trillion won, up 1.1 trillion won from the previous quarter. Corporate loan nonperforming loans were 14.2 trillion won, accounting for 80% of the total. The volume of nonperforming loans is on the rise, reaching 15 trillion won in 2024 and 16.6 trillion won in 2025.
A financial industry official said, "Nonperforming loans are increasing mainly among local small business owners and small and midsize companies, accelerating the pace of growth," and added, "As banks continue to raise the volume of nonperforming loan sales, market purchase prices are trending lower."