媒体复盘：四大韩银不良贷款拨备覆盖率持续下滑，IBK覆盖率降至100%临界线

South Korean banks are losing their capacity to absorb credit losses as loan delinquencies rise while loan-loss provisions shrink. At Industrial Bank of Korea (024110.KS), which carries a heavy load of loans to small and midsize companies that are vulnerable to economic swings, the ratio showing provisions set aside against non-performing loans has fallen to 100%. Industry officials broadly agree that if the trend continues amid rising market interest rates and slowing consumption, lower earnings and weaker asset quality across the banking sector will be unavoidable.
As of the end of September, non-performing loan coverage ratios stood at 100.04% for Industrial Bank of Korea, 106.52% for Hana Bank, 126.70% for Woori Bank and 162.51% for Shinhan Bank, according to financial industry sources on the 27th.
An NPL coverage ratio of 100% means a bank holds 100 won in loan-loss provisions for every 100 won of non-performing loans. A reading below 100% means provisions are smaller than delinquent loans. That leaves less cushion to absorb losses from soured credit. Viewed another way, it also means the bank set aside less in provisions in order to book net profit.
Industrial Bank of Korea's non-performing loan balance rose 26.1 billion won, or 0.6%, from a year earlier to 4.5082 trillion won, the largest among the four banks. Its provision balance fell about 5.1%, pushing its NPL coverage ratio down 5.98 percentage points from 106.02%.
Woori Bank posted the steepest drop in its NPL coverage ratio, falling 54.21 percentage points to 126.70% at the end of September from 180.91% a year earlier. Non-performing loans rose 29.8% while the provision balance backing them fell 9.1%, weakening its capacity to absorb losses. At Hana Bank, non-performing loans rose 41.9% but provisions increased only 11.2%, cutting its coverage ratio by 29.43 percentage points over the year.
The erosion is starker against figures from two years ago. At the end of September 2024, NPL coverage ratios stood at 116.86% for Industrial Bank of Korea, 181.67% for Hana Bank, 270.24% for Woori Bank and 190.37% for Shinhan Bank. Woori's ratio has more than halved in two years and Hana's has moved close to 100%, meaning that cushions against losses shrank even as bad loans piled up.
A sharp increase in soured corporate credit appears to be behind the shift. Hana Bank's substandard-or-below corporate loans rose 65.2% to 1.4918 trillion won at the end of September from 903.1 billion won a year earlier. Household substandard-or-below loans declined but not enough to offset the increase on the corporate side. Woori Bank's substandard-or-below loans to large companies and smaller businesses also rose 29.1% to 970.7 billion won from 752 billion won. Corporate credit accounted for 71.6% of the increase in Woori's total substandard-or-below loan balance.
Combined substandard-or-below loans at the four banks reached 8.808 trillion won at the end of September, up about 900 billion won, or 11.4%, from a year earlier. Compared with the end of September 2024, the figure is up 30.5% over two years. Delinquency rates rose from a year earlier at Industrial Bank of Korea to 1.04%, at Hana Bank to 0.51% and at Woori Bank to 0.46%. Potential problem credit is also sizable. Precautionary loans at the four banks totaled 12.6293 trillion won as of the end of September and are trending higher.
At Shinhan Bank, the delinquency rate improved but the coverage ratio slipped to 162.51% from 164.38%. Its non-performing loan balance rose 2.8% while provisions increased only 1.6%. Its substandard-or-below loan ratio edged down to 0.29% from 0.30%, though that appears to reflect a 4.7% increase in total loans rather than an improvement in credit quality.
Some observers caution that improving asset-quality indicators may not reflect actual loss-absorbing capacity. When loan balances grow quickly, the substandard-or-below loan ratio can decline even without a drop in bad loans, making the burden look smaller than it is.
There is also concern that a continuation of the trend could limit earnings gains at the banks. "Setting aside additional provisions raises costs by that amount, which reduces net profit," one financial industry official said.