Loan Delinquencies Rise Among Koreans in Their 20s and 30s

Bank loan delinquency rates among Koreans in their 20s and 30s are rising as volatility in the domestic stock market expands. The market suspects a growing number of borrowers either took out excessive credit loans to invest in stocks or have been unable to repay debt amid slowing growth and rising interest rates.

According to the financial industry on the 19th, the credit loan delinquency rate for customers in their 20s at one major commercial bank, referred to as Bank A, roughly doubled in a single quarter, climbing from around 0.3% at the end of last year to about 0.6% at the end of March. “Compared with the bank’s overall delinquency rate, the absolute level is still not high,” a credit official at Bank A said. “But an upward trend is clearly emerging, and we are examining it closely.”

Bank B has likewise been keeping a close eye on recent loan delinquency trends among borrowers in their 20s and 30s. “Loan delinquencies have surged recently, particularly among those in their 20s and 30s,” a credit official at Bank B said. “We haven’t conducted a detailed analysis yet, but we suspect that borrowers who took out loans to invest in stocks are struggling to repay them as the economic slowdown and rising interest rates have hit at the same time.”

Indeed, outstanding credit loans at the country’s five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — stood at 106.1523 trillion won as of the 14th of this month, up 1.811 trillion won from the end of April. That marks a jump of more than 1.8 trillion won in less than half a month.

The concern is that recurring shocks in global benchmark interest rates could push domestic market rates even higher going forward. Borrowers in their 20s and 30s are especially vulnerable to falling stock prices and higher rate burdens, given their thinner accumulated assets and weaker income base relative to other age groups. According to the Financial Supervisory Service, the household credit loan delinquency rate at banks has climbed steadily, from 0.75% at the end of December last year to 0.84% in January and 0.90% in February.

For this reason, the banking sector views that delinquency rates could continue to rise, particularly among young, vulnerable borrowers, if debt-fueled investing continues to grow. “Delinquencies among the younger generation can become a social problem, so they need to be properly managed,” an industry official said.