Securities Firms That Had Tightened Margin Loan Limits Are Loosening Them Again

Some securities firms are once again raising limits on stock margin loans. The move runs counter to the first half of the year, when firms suspended or tightened margin lending amid a surge in so-called "debt investing," or borrowing to invest. KB Securities recently lifted its customer-specific limit, and NH Investment & Securities also removed the 500 million won cap on purchases.
According to the financial investment industry on the 11th, NH Investment & Securities lifted the 500 million won limit on each customer's margin loan purchase amount starting that day. Until now, even if a customer's credit line exceeded 500 million won, actual purchases were capped at that level. Going forward, the firm will remove the uniform cap and allow borrowing up to the lower of the customer's approved limit or the stock-specific rating limit.
Stock-specific limits will also rise sharply. The S, A, B and C ratings are categories NH Investment & Securities uses to classify stocks eligible for margin lending under its own standards, and higher ratings come with larger loan limits. The limit for S-rated stocks will rise from 500 million won to 1 billion won, A-rated stocks from 200 million won to 700 million won, B-rated stocks from 100 million won to 500 million won, and C-rated stocks from 50 million won to 100 million won.
KB Securities had already expanded its margin loan purchase limit on the 29th of last month, raising it from a previous customer-specific cap of 2 billion won to each customer's approved credit line.
This stands in contrast to the first half of the year. As stock prices rose at the start of the year and margin trading surged, securities firms moved to manage their credit exposure. Korea Investment & Securities and NH Investment & Securities temporarily suspended new margin loan transactions, and Korea Investment & Securities also blocked new transactions in June after exhausting its credit exposure limit before resuming them on June 22.
The recent decision by some securities firms to expand limits again appears to reflect available credit capacity and customer trading demand. Margin lending is also a major retail revenue source for securities firms because it generates interest income. In the first quarter of this year, interest income from margin loans at the country's top 10 securities firms came to about 600 billion won, up 55.9% from a year earlier.
[email protected] Kim Hyun-jung Reporter