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Non-performing loans in South Korea’s banking sector have climbed close to KRW18 trillion ($11.7bn), expanding the market for distressed debt sales even as concerns grow over slower recovery amid a weakening economy, The Chosun Daily reports.
According to the Bank of Korea, domestic banks held KRW17.7 trillion of non-performing loans at the end of March. These are loans overdue by more than three months and deemed unrecoverable.
The figure is the highest since March 2019, when NPLs stood at KRW18.5 trillion. Levels had fallen to KRW9.7 trillion by September 2022 before rising again.
Banks are increasingly opting to sell bad loans to specialist NPL investment firms rather than pursuing direct recovery.
Last year, total resolution of non-performing loans across the banking sector reached KRW22.3 trillion. Sales accounted for the largest share at 36.7%.
Annual NPL disposals by banks have risen sharply, from around KRW2 trillion in 2022 to about KRW8 trillion last year, marking a record high.
The rise in supply has boosted activity among distressed-debt investors. These firms acquire NPLs at a discount and seek returns through collateral recovery and restructuring.
UAMCO’s net profit increased 52.5% and Daeshin F&I rose 49.7%. Hana F&I’s net profit fell 39.9%, reflecting a high base effect from one-off gains last year and losses linked to financial assets.
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