South Korean banks' delinquency rate shrinks in June: report

But this was due to more lending out rather than a decline in overdue loans.

The delinquency rate for South Korean banks’ loans that is more than 30 days overdue, against total lending from the five major banks, stood at 0.21%-0.33% as of end-June, industry data showed. This is lower than the 0.25%-0.4% a month earlier, reports Yonhap News Agency.

But industry watchers cautioned against reading too much into the data as the fall was mainly attributed to the lenders' expansion of loans to households and companies amidst the new coronavirus outbreak, not to a decline in overdue loans.

"Total loans sharply rose amid the virus outbreak, but overdue lending has yet to be reflected in a full-fledged manner (in calculating the loan delinquency)," a bank official stated.

Local banks' household loans reached $773.4b (KRW928.t) as of end-June, up to more than $6.74b (KRW8.1t) from the previous month, according to central bank data. The June data marked the third-largest monthly rise this year.

Corporate lending gained about $1.25b (KRW1.5t) month-on-month to $788b (KRW946.7t) as of the end of June.

Experts voiced concerns about banks' financial soundness after September as the effect of overdue loans will likely begin to be felt then.

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