Banks’ asset health improves with bad debts down in first quarter

SEOUL, June 2 (Yonhap) — South Korean banks’ non-performing loans declined in the first quarter of this year, indicating an improvement in their overall asset strength, data showed Thursday.

Local banks’ bad debts stood at 10.8 trillion won ($8.6 billion) at the end of March, down 1 trillion won, or 8.1 percent, from three months earlier, according to preliminary data from the Financial Monitoring Service (FSS).

Their ratio of non-performing loans to outstanding loans fell by 0.05 percentage point to 0.45%. The ratio was also down 0.17 percentage points from a year earlier.

Bad debts refer to loans where interest payments have been past due for three months or more.

Of the total nonperforming loans, business loans accounted for 9.2 trillion won, while household credit stood at 1.5 trillion won, according to the data.

At the end of March, banks’ loan loss reserves stood at 181.6%, up 15.7 percentage points from three months earlier. They were also 44.3 percentage points higher than the previous year.

The FSS said the health of banks’ assets has improved as these latest figures indicate, but this will continue to prompt them to strengthen their shock absorption capacities as market volatility could intensify amid concerns about recent spikes in borrowing costs and a possible economic downturn.

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