Financial assets held by South Korea's specialized non-performing loan (NPL) firms rose by about 650 billion won ($470 million) in six months, as banks stepped up both the recognition and disposal of bad loans.
Financial assets measured at amortized cost at four major NPL firms — Woori Financial F&I, Hana F&I, Daishin F&I and Kiwoom F&I — totaled 8.42 trillion won on a consolidated basis at the end of June, according to financial industry sources on the 21st. That is up 652.1 billion won, or 8.4%, from 7.77 trillion won at the end of last year.
Woori Financial F&I posted the sharpest gain, with assets measured at amortized cost rising 322.2 billion won, or 27.8%, over the six months. Daishin F&I added 228.8 billion won, or 8.9%, and Hana F&I gained 106.9 billion won, or 4.4%. Kiwoom F&I declined 5.8 billion won, or 0.4%. Woori Financial F&I and Daishin F&I alone accounted for 551 billion won, or 84.5%, of the four firms' combined net increase.
The asset growth tracks a broader trend in which bad loans are being created and cleared at the same time. Outstanding non-performing loans at domestic banks approached 19 trillion won at the end of June, according to the Financial Supervisory Service. Banks disposed of a combined 10.5 trillion won in bad loans in the first half, including 4.4 trillion won in the first quarter and 6.1 trillion won in the second, shedding soured assets from their books through sales and write-offs.
Newly soured loans are piling up just as quickly. Banks recognized 7.2 trillion won in new non-performing loans in the second quarter, exceeding the 6.1 trillion won cleared in the same period by 1.1 trillion won. That inflow has kept outstanding bad loans elevated despite the large-scale cleanup. If new defaults continue, the volume of NPLs that banks put up for sale is likely to stay high for some time.
"Pressure across the financial sector to clean up bad debt is feeding into this," an NPL industry official said. "Because continued cleanup is expected, the pace of asset growth will vary from firm to firm depending on their funding capacity and investment strategies."
