IBK Corporate Bank, SME loan delinquency rate hits 13-year high, sending a warning signal

The overdue rate for small and medium-sized enterprise real estate and leasing loans at IBK Corporate Bank rose to 1.28% at the end of the first quarter of this year, reaching the highest level in 13 years since the first quarter of 2013. This is interpreted as indicating that, under the dual pressures of a prolonged downturn in the real estate economy and increased interest rate burdens, the financial condition of small and medium-sized enterprises in the industry is rapidly deteriorating.

According to Financial界 on the 29th, the overdue rate for small and medium-sized enterprise real estate and leasing loans at Corporate Bank is based on loans with principal and interest unpaid for more than one month. It increased by 0.74 percentage points compared to the first quarter of last year, and by 0.41 percentage points compared to the fourth quarter of last year. Since Corporate Bank is a policy bank with a relatively large proportion of SME finance, this indicator is considered to directly reflect the difficulties faced by small and medium-sized operating entities. Bank officials explained that, amid ongoing domestic and international economic uncertainties, overall weak domestic demand has also put pressure on the real estate leasing market.

Overdue burdens are not limited to the real estate industry. The overdue rate for small and medium-sized enterprise construction industry was 1.64% at the end of the first quarter of this year, up 0.30 percentage points from the first quarter of last year. At the end of the fourth quarter of last year, it surged to 1.71%, setting a record for the highest year-end level since 2011, when Corporate Bank’s enterprise data was retained. Although it slightly declined in the first quarter of this year, it remains at a relatively high level. The wholesale and retail industry was 1.07%, and the accommodation and catering industry was 1.40%, confirming that the overall repayment capacity of various industries closely related to domestic demand has weakened.

This phenomenon is not unique to Corporate Bank. Overdue rates for real estate and leasing loans at major commercial banks have also risen simultaneously. Shinhan Bank’s overdue rate at the end of the first quarter was 0.35%, the highest since relevant statistics began in 2021; Hana Bank was 0.57%, approaching the approximately 10-year high of 0.58% since the second quarter of 2016; Woori Bank was 0.41%, the highest since statistics began in 2019. This indicates that the creditworthiness of borrowers related to real estate is deteriorating. Rather than being a problem of specific banks’ credit management, it is more likely a structural pressure caused by the overall industry downturn and rising financial costs.

The real estate and leasing industries are directly affected during economic slowdown phases by rising vacancy rates, stagnant rents, and decreased transactions. Moreover, if market interest rates remain high, small and medium-sized operators relying on high borrowing will find it even more difficult to bear interest expenses. Financial界 believes that while it is premature to assert that rising overdue rates will immediately develop into large-scale non-performing assets, if domestic demand recovery is slow and the real estate market rebounds are delayed, the burden of credit management for small and medium-sized enterprise loans is likely to persist for some time.