The banking sector saw its bad loan ratio rise to its highest level in three years in 2013 due mainly to insolvency in some manufacturing segments including shipbuilding and construction.

According to the Financial Supervisory Service, the bad loan ratio at 18 first-tier banks in Korea posted 1.77 percent last year, marking the highest since it reached 1.9 percent in 2010. The figures for 2011 and 2012 were 1.36 percent and 1.33 percent, respectively.

“While delinquent bank or credit card loans to the household sector reduced, insolvent lending to the shipbuilding and construction sectors markedly surged in 2013,” the FSS said in a statement.

The financial regulator cited businesses such as STX Group, Tong Yang Group and Ssangyong Engineering & Construction for major delinquent corporate borrowers.

The state-run Korea Development Bank reported the highest substandard loan ratio of 3.25 percent in 2013, compared with 1.59 percent a year earlier, followed by Woori Bank with 2.99 percent.

The companies’ overseas operations in 33 countries also saw their combined bad loan ratio climb from 0.9 percent at the end of 2012 to 1.2 percent at the end of June 2013.

By Kim Yon-se (kys@heraldcorp.com)