Key Summary

The Financial Supervisory Service reported on the 2nd that the domestic bank non-performing loan ratio rose to 0.63% as of end-June, up 0.03 percentage point from 0.60% the prior quarter and 0.04 point from 0.59% a year earlier, the highest since December 2020. NPL balances climbed 1.2 trillion won to 18.9 trillion won with both corporate and household exposures deteriorating, a setup that pressures provisioning and net interest margins for KOSPI bank names and tightens credit supply at the margin. Watch whether the corporate share of new NPLs keeps expanding in the next quarterly release, since a broadening deterioration would shift the read from an isolated asset-quality drift to a domestic credit-cycle risk that weighs on Korean financial sector beta and won-denominated risk appetite.