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Deferred loan payments for businesses total W108tr under COVID relief program

Third deadline extension likely in fourth wave of pandemic

a customer visits a bank in Seoul for loan consultation (Yonhap)
a customer visits a bank in Seoul for loan consultation (Yonhap)
Deferred loan and interest payments owed by businesses hit by the COVID-19 pandemic in South Korea added up to an alarming 108 trillion won ($97 billion) this month, data showed Sunday.

Since the launch of the deferral program in February last year, the combined amount of loans yet to be repaid totaled 99.7 trillion won as of Friday, data provided by the five major commercial banks here showed. Additionally, overdue payments set to be paid in installments amounted to 8.4 trillion won and overdue interest payments totaled 54.9 billion won.

The five major banks are KB Kookmin, Shinhan, Hana, Woori and NH NongHyup, all of which began offering businesses a grace period at the government’s “request” last year.

The data comes amid growing concerns that banks could face large-scale loan delinquencies and defaults with a third deadline extension on the table under the deferral program.

The deadline has already been pushed back twice, first in September last year and again in March this year, due to ongoing risks from the pandemic.

The fourth wave of the coronavirus, which started early this month and has pushed the tally of new cases above 1,000 every day since July 7, has spurred talks of another six-month deadline extension as the end-September due date approaches.

The policymaking Financial Services Commission, which had been leaning toward wrapping up the program in September, was reportedly considering another deadline extension amid the fourth wave. The FSC in March said it would prepare “soft landing” measures to help businesses cope with loan repayments.

Onlookers say that with the banks and their holding companies reporting record performance figures for the first half of the year, it would be difficult to refuse a government request for a third deadline extension. Due to high commissions from their brokerage businesses, prompted by investors flocking to the stock and housing markets amid ultralow interest rates, banking groups have been raking in money since last year.

The banking groups now look to pay rare interim dividends, after last week they began posting record-high net profits for the first half of the year.

KB Financial Group’s net profit for the January-June period gained 44.6 percent on-year to 2.4 trillion won, while Woori Financial Group’s jumped 114.9 percent to 1.4 trillion won in the cited period. Hana Financial Group’s net profit gained 30.2 percent to 1.7 trillion won, and NH Financial Group saw its figures grow 19 percent to 1.2 trillion won in the same period.

Shinhan has yet to announce its performance figures, but market watchers say its net profit for the cited period could surpass 2 trillion won for the first time.