Seoul, May 3 (IANS) Some 3 trillion won (around $2 billion) worth of loans extended by South Korea’s four major financial groups have been classified as “estimated loss” in the first quarter, financial sector data showed on Sunday.

A total of 2.9 trillion won of loans held by these groups were deemed largely unrecoverable as of the end of March, up 5.8 percent from the same period a year earlier, according to a fact book released by the four major lenders.

The four financiers are KB Financial Group, Shinhan Financial Group, Hana Financial Group and Woori Financial Group, reports Yonhap news agency.

Under financial regulatory guidelines, South Korean banks classify their loans into five categories based on asset soundness: normal, precautionary, substandard, doubtful, and estimated loss.

Estimated loss is the worst category, where banks believe they have almost no hope of getting their money back.

“The burden of high interest rates has weakened the repayment capacity of the self-employed and small and medium-sized business owners, who took out loans when interest rates were low,” an official from one of the commercial banks said.

The war in the Middle East also had an effect, market watchers added, as a rise in oil prices and inflation caused by the conflict added burden to the local real estate market and caused more real estate project financing loans to go delinquent.

By company, KB Financial Group’s exposure to such non-performing loans rose 27.2 percent from the same period a year earlier.

The figure from Hana Financial Group jumped 30.3 percent on-year, while the amount at Woori Financial Group advanced 12.4 percent. The “estimated losses” at Shinhan Financial Group fell 20.1 percent on-year.

—IANS

na/