South Korea's five major banks — KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup — reported a combined net profit of 13.1183 trillion won in the first half of 2025, a record high. However, the household loan delinquency rate across these banks reached 0.33% at the end of the second quarter of 2025, the highest level in approximately 10 years since the first quarter of 2016. The Bank of Korea raised the base interest rate from 2.5% to 2.75% on May 16, accelerating its monetary tightening cycle. Analysts attribute the dual trend of rising profitability and deteriorating asset quality to sustained high interest rates, which boost bank margins while increasing borrower repayment burdens. The financial sector faces heightened scrutiny over credit risk management as the central bank signals further rate hikes ahead.
Household and SME Delinquency Rates Reach Multi-Year Highs in Q2 2025
The average household loan delinquency rate for the five major banks stood at 0.33% at the end of the second quarter of 2025, up 0.01 percentage points from 0.32% at the end of the first quarter of 2025. This marks the highest level since the first quarter of 2016, when the rate was 0.36%. NH Nonghyup Bank recorded the highest household delinquency rate at 0.48%, the largest figure since the second quarter of 2014 (0.54%). Hana Bank's household delinquency rate rose to 0.32%, up 0.04 percentage points from 0.28% at year-end 2024, representing its highest level on record. KB Kookmin Bank, Shinhan Bank, and Woori Bank reported household delinquency rates of 0.27%, 0.25%, and 0.29%, respectively.
Small and medium-sized enterprise (SME) delinquency rates also climbed steadily. The average SME delinquency rate for the five banks increased from 0.49% at year-end 2024 to 0.57% at the end of the first quarter of 2025 and 0.58% at the end of the second quarter of 2025. Woori Bank posted the highest SME delinquency rate at 0.75% in the second quarter of 2025, while Shinhan Bank's rate of 0.49% represented its highest level since the second quarter of 2017 (0.52%). Non-performing loans overdue by three months or more totaled 7.4331 trillion won at the end of the second quarter of 2025, the largest amount since the first quarter of 2018 (8.2143 trillion won).
Five Financial Holding Companies Post 6.9201 Trillion Won Q2 Net Profit
The combined net profit of the five financial holding companies reached 6.9201 trillion won in the second quarter of 2025, continuing a record-breaking streak. Interest income for the five holding companies in the second quarter of 2025 totaled 13.1448 trillion won, a 5.29% increase compared to the same period in 2024. Non-interest income surged 30.9% to 6.1428 trillion won, driven by a boom in equity markets that significantly boosted brokerage commission revenues from stock trading.
Bank of Korea Rate Hike on May 16 Signals Continued Tightening
The Bank of Korea's Monetary Policy Committee raised the base interest rate from 2.5% to 2.75% on May 16, an increase of 0.25 percentage points. Governor Shin Hyun-song stated that "there is a need to continue the trend of raising the base interest rate," signaling the possibility of further rate hikes. A financial industry official noted that rising interest rates can positively impact bank profitability but also increase repayment burdens for borrowers, creating a dual effect. The official added that with household loan volume controls remaining in place, asset quality management capabilities will be a key differentiator in second-half performance.
FAQ
What was the household loan delinquency rate for South Korea's five major banks in Q2 2025?
The average household loan delinquency rate for the five major banks stood at 0.33% at the end of the second quarter of 2025, the highest level in approximately 10 years since the first quarter of 2016.
How much net profit did South Korea's five financial holding companies report in the first half of 2025?
The five financial holding companies reported a combined net profit of 13.1183 trillion won in the first half of 2025, with second-quarter net profit reaching 6.9201 trillion won.
