Sudden Jump of the Rate of Overdue Loans to Small and Medium Sized Companies

Banks are under extreme difficulties in receiving the repayments from the small and medium sized companies on due dates.

On the 19th, according to the banking circle the rate of overdue loans to small and medium sized companies is increasing substantially affected by the recent slowdown of economy.

The overdue loan rate of the Woori Bank which had increased its loans to the small and medium sized companies by 8 trillion Won last year reached 2.79% at the end of last month, a rapid increase of 1.87% compared to the end of last year. That is a substantial increase compared to 11.1% in June last and is also higher than 2.71% recorded in October, the highest last year.

The overdue loan rate of the Koram Bank was also hiked substantially to 0.91% from 0.60% last month, which is higher than 0.88% November last year.

The rate of overdue loans of the Hana Bank to the corporate including small and medium companies was hiked by a whopping 0.45% to 1.53% at the end of last month compared to 1.08%.

The rate of overdue loans of the Hana Bank remained at △1.03% in September, △1.02% in October, and △0.94% in November without a great change from 0.98% in June last year, but showed a substantial hike last month.

The overdue loan rate of the Kookmin Bank which supplied a fresh loan of 8 trillion Won to the small and medium sized sector last year is continuing to be increased by recording the level of 3.6% at the end of last month from △3.10% last June, △3.55% last September, and △3.45% last December.

The overdue loan rate of the Industrial Bank of Korea was hiked to 2.23% at the end of last month from 1.98% at the end of last year while the rate of loan of the Shinhan Bank to the corporate was hiked to 1.41% from 1.14% during the same period.

The persons to the banks said, “It is shown that some of the large scaled loans mortgaged by the buildings including the motel and the shopping center become insolvent combined by the slowdown of the real estate business.“ The Bank of Korea had also expressed its apprehension in which loans to the Small Office and Home Office (the small scaled self-employees), and the non-manufacturing sectors including the real estate, restaurant and hotel occupied a whopping 77.% of total loans to the small and medium sized companies made by the local banks.

Mr. Lee Byung-yoon, Researcher of the Korea Institute of Finance pointed out, “The risk management for the small and medium sized companies is not being carried out well.” and added, “The loans to small and medium sized companies can become insolvent due to the household loans since the premium for the risk of creditworthiness has not been to them.”

Chi-Young Shin higgledy@donga.com