Korean banks` bad loan ratio rises in Q1

SEOUL, May 4 (Yonhap) -- South Korean banks' bad loan ratio rose in the first
quarter as defaults among smaller firms increased amid the slowing economy and a
corporate revamp drive, the financial watchdog said Monday.
The ratio of 18 local lenders' nonperforming loans to total lending reached 1.47
percent as of the end of March, up 0.33 percentage point from three months
earlier, according to the Financial Supervisory Service. The ratio for lending to
small and medium enterprises (SMEs) came in at 2.46 percent as of end-March, up
from 1.93 percent at the end of last year.
Nonperforming loans, or bad loans, are those that are three months or more
overdue. Bank's bad loans totaled 19.3 trillion won (US$15.1 billion), up from
14.7 trillion won three months earlier, the watchdog said.
"The rate rose as the economic situation at home and abroad continues to
deteriorate and bad debts are increasing, mostly among smaller firms," the
watchdog said.
In the first quarter, local banks cleared 4.7 trillion won in bad loans, down 500
billion won from the preceding quarter, it added.
The data comes as problem loans are piling up amid the economic slowdown and the
corporate revamp process, compromising local banks' financial soundness.
Some local lenders have raised capital by tapping a 20 trillion won bank
recapitalization fund which is designed to boost their lending capacity.
They are also set to launch a private bad bank to clear bad debts from their
balance sheets. Currently, state-run Korea Asset Management Corp. has a near
monopoly on the country's debt-clearing market.
"As the bad loan ratio is on the rise, the watchdog plans to advise local banks
to swiftly clear non-performing loans and to boost their capital base," the
regulator said.
sooyeon@yna.co.kr
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