As the slump in the construction sector drags on, the financial sector's real estate project financing (PF) loan arrears rate has hit a record high for the first time in about 10 years. Although the financial sector's PF outstanding loan balance has declined, PF exposures flagged as "watch" or "concerned about insolvency" in feasibility assessments have turned to an increase this year.
According to data submitted by People Power Party lawmaker Park Seong-hun, a member of the National Policy Committee, from the Financial Supervisory Service on the 17th, the overall financial sector PF loan arrears rate stood at 4.65% at the end of the first quarter this year, up 0.77 percentage points (p) from 3.88% at the end of last year. This is the highest level since 4.95% at the end of the third quarter of 2016.
By industry, securities firms' PF loan arrears rate rose 2.05 percentage points from 28.38% at the end of last year to 30.43% at the end of the first quarter this year. The arrears rate on securities firms' bridge loans was 46.93%, and the arrears rate on main PF loans was 23.18%.
Banks' PF arrears rate also climbed from 0.82% at the end of last year to 1.32% at the end of the first quarter this year, the highest since 1.36% at the end of 2017. Over the same period, insurers rose from 1.68% to 2.27%, hitting a record high in about 11 years since 2.39% at the end of 2014.
In mutual finance institutions, the PF arrears rate jumped from 0.17% to 5.51%, the highest since 6.54% at the end of 2015, while savings banks rose from 1.82% to 3.12%, and specialized credit finance companies climbed from 4.00% to 4.91%.
The financial sector's PF outstanding loan balance continued to fall. The overall financial sector PF outstanding loan balance decreased steadily from 134.2 trillion won at the end of the first quarter of 2024 to 128.1 trillion won at the end of that year, 116 trillion won at the end of last year, and 115.5 trillion won at the end of the first quarter this year. It fell by 18.7 trillion won over two years.
However, PF exposures classified as "watch" or "concerned about insolvency" in feasibility assessments increased by 1.7 trillion won from 14.7 trillion won at the end of last year to 16.4 trillion won at the end of the first quarter this year. Exposures in the watch/concerned-about-insolvency category (watch or below) hit 21 trillion won at the end of the second quarter of 2024 and then gradually declined through the end of last year, but rose again this year.
The cleanup and restructuring of distressed PF business sites also decreased this year. The cleanup/restructuring volume fell from 3.8 trillion won in the third quarter of last year to 2 trillion won in the fourth quarter, and dropped sharply to 400 billion won in the first quarter this year.