Banks - Korea: Takeaways from the latest BoK commentary on financial stability

Research evidence excerpt

Banks - Korea: Takeaways from the latest BoK commentary on financial stability

BoK financial stability

Exhibit 1: Bank household loan delinquency rates in line with the long- Exhibit 2: While bank delinquency trends have increased gradually, the

term average deterioration is more pronounced among non-bank institutions

System and bank household delinquency rates trend System and bank corporate delinquency rates trend

System household delinquency System corporate delinquency

Average system household delinquency 3.00% Average system corporate delinquency

1.60% Bank household delinquency Bank corporate delinquency Average bank household delinquency

1.16% 1.20%

2.00%

1.62%

0.80%

0.41% 0.40% 1.00%

0.00%

1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 2Q25 3Q25 4Q25 1Q26 0.00% 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 1Q24 2Q24 3Q24 4Q24 1Q25 2Q25 3Q25 4Q25 1Q26

Source: BofA Global Research, Bank of Korea

BofA GLOBAL RESEARCH Source: BofA Global Research, Bank of Korea

BofA GLOBAL RESEARCH

Exhibit 3: Retail and real estate account for 36.5% of total loan book Exhibit 4: These sectors exhibit delinquencies above the system

System corporate loan breakdown by sector (as of 1Q26) average of 2.09%

Sector-wise delinquency trends

Construction

4% Metal products 8.00% Construction Metal products

4% Petrochemicals

3% Petrochemicals Holesale and retail 6.00%

Holesale and retail

13% 4.00%

Others

52%

Real-estate 0.00%

24%

1Q21 3Q21 1Q22 3Q22 1Q23 3Q23 1Q24 3Q24 1Q25 3Q25 1Q26

Source: BofA Global Research, Bank of Korea Source: BofA Global Research, Bank of Korea

BofA GLOBAL RESEARCH BofA GLOBAL RESEARCH

Exhibit 5: Banks showed limited sensitivity to credit cost amid rising Exhibit 6: Even for savings banks where credit losses are relatively