Domestic bank NPLs hit KRW 14.8tn — highest since Mar 2020
NPL ratio steady at 0.53%, but household loan NPLs rose from 0.27% to 0.29%
Loan-loss provisions reached KRW 27.8tn, with a healthy coverage ratio of 187.7%
Opinion
The uptick in household loan delinquency highlights the growing importance of asset quality and risk control in the financial sector.
Core Sell Point
With rising NPLs — especially in retail credit — investors should assess banks’ asset quality management capabilities more closely when evaluating financial stocks.
According to the Financial Supervisory Service (FSS), non-performing loans (NPLs) at domestic banks reached KRW 14.8 trillion as of December 2024, the highest level since March 2020 (KRW 15 trillion). While the NPL ratio remained flat quarter-over-quarter at 0.53%, it increased by 6bps YoY. Notably, the household loan NPL ratio rose from 0.27% to 0.29%, signaling growing stress in consumer credit.
Following post-COVID credit support measures, the overall NPL ratio had stabilized, but began climbing again from Q3 2022. Although the pace of deterioration has recently moderated, the uptick in household loan delinquencies warrants closer investor scrutiny. Meanwhile, corporate loan NPLs held steady at 0.65%.
To brace for prolonged economic weakness and policy uncertainty, banks have expanded their loan-loss provisions to KRW 27.8 trillion, with their reserve coverage ratio inching up 0.3pp to 187.7% from the previous quarter. The FSS noted it will continue strengthening asset quality oversight across the banking sector.
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