Credit Card Delinquency Rate Hits 11-Year High Amid Sluggish Domestic Demand

Bank of Korea: "Vulnerability of Card Loan Borrowers Increasing... Monitoring Needs to be Strengthened"

 [Yonhap News Photo]

The delinquency rate for credit card companies' loans has reached its highest point in 11 years, the Bank of Korea announced on the 25th.

In its "Financial Stability Situation" report released today, the central bank stated that the delinquency rate for credit card loan assets, based on specialized credit card companies, was 2.3% as of the end of the first quarter of this year, the highest since 2014.

Loan assets include credit card loans such as card loans, revolving credit, and cash advances, as well as non-card loans such as project financing (PF) and corporate loans.

The sharp increase in non-card loan delinquencies was identified as the primary factor behind the deterioration of overall loan asset quality.

The delinquency rate for non-card loans, mainly comprising corporate loans, surged from 0.6% at the end of 2021 to 3.0% at the end of the second quarter of this year.

This is attributed to a significant rise in delinquency rates for cyclical industries such as wholesale and retail trade, and accommodation and food services, due to the delayed recovery of domestic demand, as well as an increase in delinquency rates for construction and real estate sectors owing to failures in real estate PF.

The delinquency rate for card loans, which constitute more than half of loan assets, rose from 1.7% at the end of 2021 to 2.4% at the end of the second quarter of this year, influenced by worsening income conditions for households.

Notably, since last year, the proportion of low-income earners among new card loan borrowers has increased, and average income has generally declined.

The Bank of Korea stated, "The sensitivity and vulnerability of loan borrowers to economic conditions have increased, primarily centered on card loans." It added, "Given the heightened concern of additional defaults, monitoring needs to be strengthened with attention to asset quality." Yonhap News