S. Korea's bad corporate loans rise to new high

All Headlines 10:56 October 03, 2016

SEOUL, Oct. 3 (Yonhap) -- Soured loans to South Korea's conglomerates held by major banks rose to the highest level yet seen, as major shipyards and shipping companies undergo restructuring amid falling demand, data showed Monday.

Nonperforming loans by major enterprises reached 19.72 trillion won (US$17.87 billion) in the January-June period, growing 1.37 trillion won from the end of 2015, the Financial Supervisory Service (FSS) said.

It is the first time that bad corporate loans surpassed 19 trillion won since the data were first compiled in March 2008.

The combined corporate debt at local banks was 427.85 trillion won as of the end of June, 8.92 trillion won less than six months earlier, the FSS said.

While major commercial banks cut corporate debts in the first half, the ratio of bad loans rose from 4.05 percent in December to 4.46 percent in June. Among them, soured loans to large enterprises accounted for 63.2 percent of the total, the financial watchdog said.

The worsening quality of debt was mostly attributable to the corporate overhaul in the shipyard and shipping industry grappling with slumping global demand.

The nation's big three shipyards -- Daewoo Shipbuilding & Marine Engineering Co., Hyundai Heavy Industries Co. and Samsung Heavy Industries Co. -- suffered a combined operating loss of 8.5 trillion won last year due largely to increased costs stemming from a delay in the construction of offshore facilities and an industrywide slump.

Hanjin Shipping Co. and Hyundai Merchant Marine Co. also added to banking woes as the cash-strapped shipping companies failed to repay their snowballing debts due to sluggish business.