Nonghyup's mutual finance arm is absorbing bigger losses when it sells off bad loans. In the first half of this year, losses amounted to 6.3% of the value of non-performing loans sold, more than five times the ratio in 2024.
Nonghyup mutual finance sold 1.14 trillion won ($800 million) of non-performing loans in the first half and booked 72.3 billion won ($50 million) in losses on those sales, according to data submitted by the National Agricultural Cooperative Federation to Rep. Song Ok-ju of the Democratic Party of Korea, a member of the National Assembly's Agriculture, Food, Rural Affairs, Oceans and Fisheries Committee, on the 15th. Losses equaled 6.3% of the amount sold.
Nonghyup mutual finance posted gains on bad-loan sales of 19.8 billion won in 2022 and 28.4 billion won in 2023, then swung to a loss of 27.8 billion won in 2024. Last year it sold 3.16 trillion won of non-performing loans and recorded a 97.7 billion won loss. The loss ratio has risen every year, from 1.2% in 2024 to 3.1% last year and 6.3% in the first half of this year.
The first-half loss alone equals 74% of last year's full-year figure. Cumulative losses from the start of 2024 through June of this year total 197.8 billion won. The scale of losses the lender must swallow to clear bad loans off its books is growing.
Asset quality deteriorated even as the bad loans were worked down. Substandard-or-below loans at Nonghyup mutual finance rose to 23.86 trillion won at the end of June from 20.71 trillion won at the end of last year, an increase of 3.15 trillion won, or 15.2%. The ratio of such loans to total lending climbed 0.63 percentage points to 5.71% from 5.08%. The overall delinquency rate rose to 5.22% from 4.61%.
Corporate loans and joint loans showed particularly high delinquency. The corporate loan delinquency rate stood at 7.98% at the end of June, up 0.97 percentage points from 7.01% at the end of last year. The joint loan delinquency rate rose to 17.70% from 17.40% over the same period. That rate has climbed more than ninefold from 1.88% at the end of 2022 in little more than four years. Delinquencies kept rising despite the bad-loan sales.
Performance indicators at individual cooperatives also worsened. The number of cooperatives rated top grade in management assessments fell to 482 at the end of June from 643 at the end of last year, a drop of 161, or 25.0%. Cooperatives with a return on assets below 0.3% increased to 532 from 459 over the same period, accounting for 48.0% of all 1,108 cooperatives.
With losses on bad-loan sales widening and the stock of non-performing loans still growing, clearing bad debt and managing asset quality have become key tasks for Nonghyup's mutual finance operations.