Bank loan defaults rise on business slump

SEOUL, May 27 (Yonhap) -- Defaults by local companies and households on bank loans climbed in April as smaller firms failed to service debts due to a slumping economy, the financial watchdog said Wednesday.

The overall delinquency rate of bank loans came in at 1.58 percent as of the end
of last month, up 0.59 percentage point from a year earlier, according to the
Financial Supervisory Service. The rate compared with 1.46 percent registered in
March.
The growth in the default rate has eased somewhat since March, however, snapping
an upward trend that began in September when the collapse of Lehman Brothers
Holdings Inc. battered global financial markets. In February, the rate climbed
0.66 percentage point from the previous year.
The watchdog attributed the gain to more defaults by small and medium-sized
enterprises (SMEs) struggling to secure cash amid deteriorating business
conditions.
The default rate of bank loans to SMEs stood at 2.59 percent in April, up from
2.32 percent a month earlier, the watchdog said.
The data comes as the South Korean economy grew 0.1 percent in the first quarter
from three months earlier, buffeted by falling exports and sluggish domestic
demand. Asia's fourth-largest economy shrank 5.1 percent in the last quarter of
2008.
Local banks' problem loans are piling up amid the economic slowdown and the
corporate revamp process, compromising their financial soundness.
sooyeon@yna.co.kr
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