Korea's loan delinquency rate up in August

 South Korean banks' loan delinquency rate rose for the second straight month in August from a month earlier.

This is due mainly to seasonal factors and a rise in credit risks held by ailing firms, according to South Korea's Financial Supervisory Service.

The overall delinquency rate of bank loans to companies and households stood at 1.22 percent as of the end of August, up 0.09 percentage point from the previous month, the FSS stated.

The rate is measured based on loans that are overdue for more than one day.

According to a rep[ort by Yonhap News, the increase came after the loan delinquency rate hit a six-month low of 0.97 percent in June, when banks tend to clean up their balance sheets at the end of the first half. The delinquency rate also rose due to an increase in credit risks held by ailing firms.
The delinquency rate on banks' household lending came in at 0.8 percent as of the end of August, up 0.03 percentage point from the previous month, the watchdog said. The data marked the highest level since 0.88 percent in February 2009.

The default rate of bank corporate loans rose 0.15 percentage point to 1.59 percent. The corresponding rate for lending to larger companies stood at 0.59 percent, up 0.2 percentage point from July. The delinquency rate of loans to smaller firms gained 0.14 percentage point on-month to 1.85 percent, the watchdog said.

"The FSS will keep monitoring potential distress in vulnerable sectors such as real estate project financing loans and delinquency ratio by sector and encourage banks to proactively resolve delinquent and non-performing loans," the watchdog said in a press release.