Bank Household Loans Decline for First Time in Six Months...Rise Excluding Policy Loans

[Financial News] Household loan balances at commercial banks declined this month. Banks have maintained their management stance on individual mortgage and credit loans, while the securitization of policy loans also had an impact.
According to the financial sector on the 6th, household loan balances at the five major banks—KB Kookmin Bank, Shinhan Bank, Bank of Hope, Woori Bank, and Nonghyup Bank—totaled 781.3916 trillion won as of the 3rd. This was a decrease of 727.6 billion won from 782.1192 trillion won at the end of the previous month.
Although the figures cover only three business days of the month and the trend requires further monitoring, household loan balances had not declined for six months, since falling by 136.4 billion won in March.
The decline in household loans was concentrated in mortgage loans. Mortgage loan balances fell by 757.9 billion won, from 621.2730 trillion won at the end of last month to 620.5151 trillion won as of the 3rd.
Banks tightened loan management after mortgage loans increased by 1 trillion to 3 trillion won every month from April through last month. The effects of these measures are believed to have been partly reflected in the decline in mortgage loans this month.
Some observers, however, view the decline in mortgage loans as temporary. When policy financial products such as Bogeumjari loans handled by banks accumulate beyond a certain level, they are transferred to the Korea Housing Finance Corporation (KHFC) for securitization and removed from banks’ loan balances. Excluding policy loans, the five banks’ own household loan balances stood at 651.8796 trillion won, actually increasing by 108.7 billion won from the end of the previous month. In other words, banks’ own lending continued to rise.
During the same period, group loan balances among mortgage loans fell by 32.1 billion won, from 149.2970 trillion won to 149.2648 trillion won. Credit loans, meanwhile, increased by 25.7 billion won, from 109.5718 trillion won to 109.5975 trillion won. After declining by 181.5 billion won last month—the first decrease in four months—they returned to an upward trend.
The banking sector expects the supply of group loans to expand, while the existing management stance on individual mortgage and credit loans will continue. Accordingly, even if household loans begin to rise again this year, the increase is expected to remain limited.
The five major banks are reportedly set to raise their annual household loan growth target for this year from approximately 4.34 trillion won to 7.11 trillion won after consultations with the financial authorities. The banks’ additional lending capacity for the rest of the year has increased somewhat after the government raised its target for the household loan growth rate from 1.5% to 3.0%. However, the banks’ own household loans, excluding policy loans, have already increased by 6.9096 trillion won from the end of last year. Even under the new target, the remaining capacity is only around 200 billion won.
A banking sector official said, "The fact that the aggregate target has been raised does not mean banks can uniformly expand ordinary household lending. If the execution of group loans gathers pace, total balances may rise again, but the increase will be limited as management of individual mortgage and credit loans remains in place."
[email protected] Ye Byung-jeong Reporter