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Photo courtesy of Yonhap News |
[Alpha Biz= Ellie Kim] South Korea’s banking sector saw a slight deterioration in asset quality in the first quarter of 2026, with non-performing loan (NPL) ratios rising and provisioning coverage declining.
According to data released on May 29 by the Financial Supervisory Service, the NPL ratio of domestic banks stood at 0.60% at end-March, up 0.03 percentage points from the previous quarter and slightly higher than a year earlier.
The total volume of NPLs increased by KRW 1.1 trillion to KRW 17.7 trillion, as the pace of NPL resolution slowed more sharply than the decline in newly generated bad loans. New NPL formation fell to KRW 5.5 trillion during the quarter, while NPL disposals dropped to KRW 4.4 trillion.
Corporate loans accounted for the majority of NPLs at KRW 14.2 trillion, followed by household loans at KRW 3.3 trillion and credit card receivables at KRW 0.3 trillion. Notably, the NPL ratio for corporate lending rose to 0.74%, with small and medium-sized enterprises showing a sharper increase.
Provisioning coverage also weakened. Loan-loss reserves remained unchanged at KRW 26.7 trillion, while the coverage ratio declined to 150.4%, down 9.9 percentage points from the previous quarter and over 20 percentage points year-on-year.
The regulator noted that continued domestic and global uncertainties warrant close monitoring of asset quality indicators, including NPL and delinquency ratios, and said it will encourage banks to strengthen risk management through increased provisioning and active disposal of bad loans.
Alphabiz Ellie Kim 인턴기자(press@alphabiz.co.kr)
