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37102
Tue, 12/23/2008 - 13:56
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http://m.oananews.org//node/37102
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Bad loan ratio rises to 3-year high in Nov.
SEOUL, Dec. 23 (Yonhap) -- More bank loans extended to companies turned sour in November as a deepening economic slump aggravated their financial woes, the nation's financial watchdog said Tuesday, adding to worries over lenders' soundness.
The loan default rate by companies and households stood at 1.18 percent at the
end of November, compared with 1.14 percent a month ago, according to the
Financial Supervisory Service (FSS).
The November figure is the highest since the end of 2005 when the corresponding
rate was 1.24 percent.
The delinquency rate of loans extended to small and medium enterprises (SMEs)
came to 1.86 percent, the highest since May 2006 and up from 1.79 percent in
October, as they felt the pinch of deteriorating business conditions, the FSS
said.
According to the watchdog, outstanding bank loans to SMEs reached 424 trillion won
(US$315 billion) at the end of November, about 7.9 trillion won of which are
classified as bad loans.
On the other hand, the bad loan ratio for households fell slightly to 0.66
percent from 0.67 percent, it said.
Bad loans or loans classified "substandard and below" are debts that have been
overdue for over three months. The bad loan ratio refers to the ratio of bad
loans to aggregate lending.
South Korean companies, smaller ones in particular, are suffering from a cash
shortage as banks have become increasingly reluctant to extend loans amid
increased concerns over an economic slump.
Lenders such as Kookmin Bank are also struggling to raise capital to provide a
cushion against bad loans, as an increasing number of assets are expected to turn
sour.
The local economy, Asia's fourth-largest, grew 0.5 percent in the third quarter
of the year, the slowest pace in four years, as domestic demand remained weak and
exports tumbled.
"Bad loan ratios are expected to further fall in the first half of next year as
economic growth slows further," said Lee Jun-jae, an analyst at Korea Investment
& Securities Co.
The government said last week it plans to launch a 20 trillion won (US$15
billion) fund to recapitalize banks, hoping to encourage them to lend and help
prevent the economy from sliding further.
The move comes as South Korean lenders are struggling to bolster their falling
capital adequacy ratio, a key barometer of financial soundness, since the slowing
economy and a credit squeeze are increasing bad loans.
The average capital adequacy ratio of 18 commercial and state banks came in at
10.79 percent as of the end of September, the lowest in more than seven years and
down from 11.36 percent three months earlier. The ratio measures the percentage
of a bank's capital to its risk-weighted credit.
sam@yna.co.kr
(END)
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The loan default rate by companies and households stood at 1.18 percent at the
end of November, compared with 1.14 percent a month ago, according to the
Financial Supervisory Service (FSS).
The November figure is the highest since the end of 2005 when the corresponding
rate was 1.24 percent.
The delinquency rate of loans extended to small and medium enterprises (SMEs)
came to 1.86 percent, the highest since May 2006 and up from 1.79 percent in
October, as they felt the pinch of deteriorating business conditions, the FSS
said.
According to the watchdog, outstanding bank loans to SMEs reached 424 trillion won
(US$315 billion) at the end of November, about 7.9 trillion won of which are
classified as bad loans.
On the other hand, the bad loan ratio for households fell slightly to 0.66
percent from 0.67 percent, it said.
Bad loans or loans classified "substandard and below" are debts that have been
overdue for over three months. The bad loan ratio refers to the ratio of bad
loans to aggregate lending.
South Korean companies, smaller ones in particular, are suffering from a cash
shortage as banks have become increasingly reluctant to extend loans amid
increased concerns over an economic slump.
Lenders such as Kookmin Bank are also struggling to raise capital to provide a
cushion against bad loans, as an increasing number of assets are expected to turn
sour.
The local economy, Asia's fourth-largest, grew 0.5 percent in the third quarter
of the year, the slowest pace in four years, as domestic demand remained weak and
exports tumbled.
"Bad loan ratios are expected to further fall in the first half of next year as
economic growth slows further," said Lee Jun-jae, an analyst at Korea Investment
& Securities Co.
The government said last week it plans to launch a 20 trillion won (US$15
billion) fund to recapitalize banks, hoping to encourage them to lend and help
prevent the economy from sliding further.
The move comes as South Korean lenders are struggling to bolster their falling
capital adequacy ratio, a key barometer of financial soundness, since the slowing
economy and a credit squeeze are increasing bad loans.
The average capital adequacy ratio of 18 commercial and state banks came in at
10.79 percent as of the end of September, the lowest in more than seven years and
down from 11.36 percent three months earlier. The ratio measures the percentage
of a bank's capital to its risk-weighted credit.
sam@yna.co.kr
(END)
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