South Korea's five largest commercial banks - KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup - reported combined non-performing loans (NPLs, loans no longer generating normal interest income) of 6.41 trillion won, or about $4.4 billion, at the end of the second quarter, the first time the total has exceeded 6 trillion won. That was up 28.0% from 5.01 trillion won at the end of last year, while the NPL ratio across total loans rose to 0.34% from 0.27%, the highest level since February 2020. The deterioration was led by corporate credit: corporate NPLs jumped 36.4% to 4.65 trillion won and the corporate NPL ratio rose to 0.42% from 0.32%, far outpacing households, where NPLs increased 10.2% to 1.76 trillion won and the household NPL ratio stayed at 0.09% for five straight quarters. Bank officials said prolonged high interest rates and a delayed economic recovery have weakened repayment capacity, especially among small and medium-sized enterprises. The outlook has become more sensitive after Ryoo Sang-dai, deputy governor of the Bank of Korea, said on the 11th that there was a strong chance of an additional base-rate increase, raising the risk that higher lending rates could add to borrower stress and further test banks' financial soundness.