Corona 19 prolonged business management impact analysis▶ Click here for a larger view
If sales do not recover due to the prolonged period of the novel coronavirus infection (Corona 19), it is analyzed that the probability of corporate bankruptcy next year will rise by 0.2 percentage points (p) from this year.
Although it looks small numerically, it is the largest increase since the 2008 financial crisis.
On the 24th, the Bank of Korea released the results of its analysis of’The Impact of Prolonged Corona 19 on Corporate Management’, which contained these details in the Financial Stability Report.
According to the report, the BOK is targeting 2,298 companies (40.4% of all subsidiaries, based on sales in 2019) that disclose quarterly financial statements, and the basic situation (sales growth rate of 5.8%) and performance improvement are delayed during next year. Each impact was analyzed assuming a pessimistic situation (increase rate -1.7%).
As a result of estimating the probability of corporate default, if sales recover, the probability of default is 1.38%, slightly lower than this year (1.41%). However, when sales decreased, it rose to 1.59%, up 0.18 percentage points.
Since 1996, only once in 2008 (+0.28% point) when the financial crisis occurred, the increase in the probability of a company’s default has exceeded 0.2 percentage points over the previous year. The rise in the probability of bankruptcy next year is the highest in 13 years.
An official from the BOK said, “The 0.18% point is on the big side historically,” he said. “However, we do not think that the possibility of such a pessimistic situation is very high.”
Depending on the probability of bankruptcy, the delinquency rate is also estimated to rise from 0.47% this year to 0.60 to 0.80% if financial support is maintained, and 1.05 to 1.25% at the end of the support. The correlation coefficient between the probability of default and the delinquency rate from 2007 to 2019 was 0.9, and if the probability of default increased by 0.1 percentage point, the delinquency rate increased by 0.3 percentage point.
The BOK also estimated that even if the government’s financial support continues, the amount of corporate liquidity, which will be insufficient in pessimistic circumstances, will increase from 1.4 trillion won this year to 4.2 trillion won next year. In the basic situation, insufficient liquidity has been reduced to 600 billion won.
If financial support ends, the amount of liquidity shortage will increase to 4 trillion won in the basic situation, and 7 trillion won in the pessimistic situation.
In the case of capital-encroaching companies, the proportion of SMEs is expected to increase from 2.0% this year to 2.5 (basic) to 2.7% (pessimism) next year.
A BOK official said, “Thanks to financial support, liquidity risk rarely occurred this year, but if financial support is not provided, there will be quite a few companies that will be at risk,” said a BOK official. “Companies with credit risk are much more likely to lead to insolvency. “You have to fund it as an enemy.”
Looking at corporate financial soundness for next year, the proportion of marginal companies (interest coverage ratio less than 1) that cannot pay interest with operating profit in a pessimistic situation will increase from 37.5% this year to 39.1%, and the proportion of companies with a debt ratio exceeding 200% this year from 12.4% to 12.6% It is estimated to be expanded to.
As of the first half of this year, companies’ interest compensation ratio (operating income/interest expense) and debt ratio were 3.5x and 81.1%, respectively, better than those of the foreign exchange crisis (1.0x, 339.2%) and the financial crisis (3.1x, 109.8%). .
[연합뉴스]
Copyrights ⓒ Yonhap News. Unauthorized reproduction and redistribution prohibited