[THE INVESTOR] The loan delinquency rate of South Korean banks slightly rose from a month earlier in May, mainly on account of an increase in bad corporate loans, the financial watchdog said on July 6.

The average delinquency rate for bank loans came to 0.74 percent in May, up 0.1 percentage point from the previous month, according to the Financial Supervisory Service.

The May tally hit the highest level since November.

The increase, however, was largely attributed to a rise in corporate loans, especially those extended to large conglomerates, going sour.

The average delinquency rate of loans extended to local firms came to 1.04 percent in May, up 0.17 percentage point from a month before, while the delinquency rate of loans taken out by large companies spiked 0.5 percentage point to 1.36 percent over the cited period, according to the FSS.

Such an increase came as local lenders agreed to extend the maturity of a 1.4 trillion won (US$1.2 billion) debt to a local investor for taking over a cable TV operator, D’Live, while also writing off an additional 800 billion won in a debt-to-equity swap, the watchdog noted.

The average delinquency rate for household loans, on the other hand, gained only 0.01 percentage point to 0.37 percent in May, while the overdue rate of home-backed household loans slipped 0.01 percentage point to 0.27 percent.

Household debt remains a potential threat to Asia’s fourth-largest economy as it has been growing at a record pace amid record low interest rates.

As of end-March, overall household debt, which includes credit borrowing, came to 1,223.7 trillion won, breaching 1,200 trillion won for the first time in the country’s history.

(theinvestor@heraldcorp.com)