At the end of the second quarter this year, major commercial banks' household loans arrears rate hit a record high for the first time in 10 years. The industry analyzed that rising market interest rates are making it harder for borrowers to repay.
According to fact books released on the 26th by the five major banks (KB, Shinhan, Hana, Woori, NH Nonghyup), the simple average household loans arrears rate at the end of the second quarter was 0.33%, up 0.01 percentage point (p) from the end of the first quarter (0.32%). It is the highest level in about 10 years since the end of the first quarter of 2016 (0.36%).
The household loans arrears rate has been on the rise, from an average of 0.30% at the end of last year to 0.32% at the end of the first quarter this year and 0.33% at the end of the second quarter.
By bank, Hana Bank's household loans arrears rate was 0.32%, the highest on record since compilation began. It rose 0.04 percentage point from the end of last year (0.28%).
NH Nonghyup Bank's household arrears rate at the end of the second quarter was 0.48%, the highest in 12 years since the end of the second quarter of 2014 (0.54%).
Woori Bank also rose to 0.31% from the end of the first quarter (0.29%), but it was lower than at the end of the second quarter last year (0.33%).
KB Kookmin Bank's household loans arrears rate was 0.27%, edging down from the end of the first quarter this year (0.28%), while Shinhan Bank (0.25%) was unchanged from the previous quarter-end.
Small and midsize enterprise arrears rates have also been climbing this year. The simple average arrears rate for small and midsize enterprises at the five major banks fell from 0.59% at the end of the first quarter last year to 0.49% at the end of last year, then jumped back to 0.57% at the end of the first quarter this year, and rose further to 0.58% at the end of the second quarter.
Woori Bank's small and midsize enterprise arrears rate at the end of the second quarter was 0.75%, the highest since the end of the first quarter of 2019, when fact book data first became available. It rose 0.23 percentage point from the end of last year (0.52%).
Shinhan Bank was at 0.49%, the highest in nine years since the end of the second quarter of 2017 (0.52%).
However, KB Kookmin (0.44→0.37%), Hana (0.61→0.59%), and NH Nonghyup (0.73→0.71%) saw arrears rates fall from the end of the first quarter.
In the banking sector, the view is that sustained high interest rates have increased borrowers' interest repayment burdens, which is showing up as a rise in the household loans arrears rate.