South Korean banks are saddled with questionable loans of more than 31 trillion won ($26.2 billion), a 15-year high amid troubles at major shipping and shipbuilding companies.

According to the preliminary data from the Financial Supervisory Service on Thursday, substandard- or lower-grade loans at local banks stood at 31.3 trillion won in the first quarter ended March this year, adding 1.3 trillion won from the previous quarter and 6.6 trillion won from the same period last year. The last time doubtful loans were so big was in March 2001 when the figure hit 38.1 trillion won.

The ratio of substandard- or lower-grade loans against total bank lending reached 1.87 percent as of the end of March, hitting a five-year high. Korean banks’ bad debt ratio was found to be higher than that of the U.S. with 1.54 percent as of late last year and Japan with 1.53 percent as of late September last year.

Large companies were the major culprits of the soured loans at the banking sector. Doubtful corporate lending totaled 29.2 trillion won, accounting for 93.3 percent of the total bad debt load. The bad ratio in loans held by companies jumped to 2.67 percent as of the end of Marchfrom 2.56 percent in the previous quarter and 2.09 percent in the fourth quarter in 2014.

The bad debt ratio for large companies rose by 0.31 percentage point from three months earlier to 4.07 percent, while the ratio for small and medium-sized enterprises (SMEs) fell by 0.03 percentage point to 1.61 percent over the same period.

By industry, shipbuilding took up the highest share of 12.03 percent in bad debt, followed by shipping with 11.43 percent and construction with 4.27 percent.

State-run Korea Development Bank reported the biggest ratio of nonperforming loans of 6.7 percent due to its high exposure to troubled shipbuilding companies like STX Offshore & Shipbuilding, Hyundai Merchant Marine, and Hanjin Shipping, followed by other state-run Export-Import Bank of Korea with 3.35 percent and National Agricultural Cooperative Federation with 2.15 percent. Local commercial banks held around 1 percent of bad debt, with Woori Bank holding 1.38 percent, Hana Bank 1.24 percent, KB 1.08 percent and Shinhan holding 0.86 percent.

By Chung Seok-woo

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]