Saemaul Geumgo offloads W3.5tr in bad loans, merges 51 branches this year

Saemaul Geumgo is accelerating its financial recovery by simultaneously offloading bad loans and merging branches. The mutual finance network disposed of nearly 3.5 trillion won ($2.5 billion) in non-performing loans and merged 21 branches in the first half of this year alone, as it pushes toward a return to profitability by 2028.

The Saemaul Geumgo Central Federation announced Friday that it is carrying out financial restructuring work — including NPL disposal and branch mergers — in cooperation with the Ministry of Interior and Safety.

Saemaul Geumgo branches nationwide sold off 3.48 trillion won in NPLs in the first half of this year. Of that, 3.19 trillion won was handled through MG Asset Management Co. (AMCO), a dedicated NPL management firm that launched in July last year. The remainder was resolved through NPL funds, the Korea Asset Management Corp. (Kamco) and asset securitization. The delinquency rate fell from 8.37 percent at the end of June last year to 5.08 percent by year-end.

Collaboration with outside financial institutions on bad-asset disposal has continued. Following the creation of a 217.2 billion won NPL fund with four regional banks last year, Saemaul Geumgo also established a 132.5 billion won mutual finance NPL fund with the National Credit Union Federation of Korea and others.

However, a prolonged slump in the real estate market continues to weigh on earnings. Saemaul Geumgo set aside more than 1 trillion won in loan-loss provisions in the first half of this year. A rise in the provisioning rate for real estate and construction loans — from 120 percent to 130 percent since April — has added further pressure. The network expects its net loss for the first half to narrow significantly from the same period last year, aided by the reduction in NPLs.

Branch restructuring is also expanding. Having merged 21 branches in the first half, Saemaul Geumgo plans to complete a total of 51 mergers this year — up sharply from seven in the first half of last year. Existing outlets of merged branches will be retained as sub-branches to preserve local residents' access to financial services.

The soundness management framework is being strengthened as well. The Ministry of Interior and Safety and financial regulators extended the operation of the Saemaul Geumgo Financial Soundness Special Management TF, which launched in December last year, through the end of this year. New restrictions on corporate loans deemed at high risk of delinquency will be introduced, along with a regulation capping project financing loans at 20 percent of total lending from 2027.

Saemaul Geumgo holds total reserves of 6.7 trillion won. An amendment to the Saemaul Geumgo Act that would allow statutory reserves to be used to cover losses has been submitted to the National Assembly.

"Saemaul Geumgo is currently devoting all its efforts to soundness management, both internally and externally, to restore trust," a federation official said. "We will do our utmost to ensure that Saemaul Geumgo faithfully fulfills its role as a community and grassroots financial institution and emerges as a trusted lender."

Meanwhile, Saemaul Geumgo completed joint inspections of 35 branches in the first half of this year, reinforcing on-site oversight alongside its NPL cleanup efforts.