Korean banking groups see record-high loan losses in 2023

South Korea’s top four financial services groups – KB, Shinhan, Hana and Woori -- booked 1.97 trillion won ($1.5 billion) of loans as losses in 2023, their largest-ever loan loss estimates in aggregate, data from the companies showed on Tuesday.

The loans they classified as unretrievable snowballed 49% from a year earlier due to a surge in loan defaults on the back of high interest rates amid the slowing economy.

They estimated loans, on which principal and interest repayments are more than one year in arrears, as losses.

The figure encompasses business and personal loans, including loans on real estate projects and overseas commercial property investments, as well as credit card loans.

The debt workout for Taeyoung Engineering & Construction Co. late last year also lifted their loan loss estimates.

Last year, the four financial services groups set aside a total of 8.9 trillion won to cover the soured loans, up 73.7% on-year.

By company, KB Financial Group classified 392.6 billion won of loans as losses, up 85% on-year. That marked its sharpest rate of loan loss increase.

Shinhan Financial Group suffered a 30.5% rise to 751.4 billion won in estimated loan losses in 2023, the largest amount among the four financial services firms. It blamed its strict standards on loan classification, particularly on project financing, for the spike in bad loans. 

Hana Financial Group booked 343.0 billion won of loans as losses, a 46.0% rise on-year. Woori Financial Group wrote off 479.0 won of loans, up 60.7% over the same period.

The NACF, or the National Agricultural Cooperative Federation, has not released its bad loans estimate. But its main arm Nonghyup Bank, among the country's five leading banks, saw a 13.2% increase on-year in estimated loan losses to 133.5 billion won in 2023.

Loans are classified into normal, precautionary, substandard, doubtful and estimated losses.

Loans under the category of substandard or below are defined as non-performing or bad loans. They are more than three months overdue on principal and interest repayments.

Write to Bo-Hyung Kim at kph21c@hankyung.com
 

Yeonhee Kim edited this article.