Did lending curbs work? September household loan growth plunges from the 3-trillion-won range to 600 billion won

[Financial News]  Household loan growth plunged to around 600 billion won in September amid slower housing transactions in the Seoul metropolitan area and tighter loan management by banks. Compared with the previous month, when growth reached the 3-trillion-won range, the increase had clearly lost momentum. By contrast, corporate loans continued to grow by more than 10 trillion won, as demand for facility investment and corporate bond repayments concentrated among large companies.
According to the September Financial Market Trends released by the Bank of Korea on the 15th, banks' household loan balance stood at 1,198.9 trillion won at the end of September, up 600 billion won from the previous month. The increase was much smaller than the 3.5 trillion won rise in the previous month.
The slowdown in household lending reflected weakness in both mortgage loans and other loans.
Mortgage loans stood at 955.5 trillion won at the end of September, up 2.9 trillion won from the previous month. This was a much smaller increase than the 4.1 trillion won rise in the previous month.
This was due to the continued slowdown in jeonse transactions and a decline in the number of homes becoming available for occupancy. Nationwide jeonse loans fell by 800 billion won in July, and the decline continued in August (down 700 billion won) and September (down 900 billion won).
Other loans, including credit loans, overdraft accounts and stock-backed loans, fell by 2.3 trillion won in September, a much larger decline than the 600 billion won drop in the previous month. This is attributed to a combination of seasonal factors, including reduced individual investment in stocks, the sale and write-off of nonperforming loans at quarter-end, and the inflow of holiday bonuses.
By contrast, bank lending to businesses continued to grow, led by loans to large companies.
Bank lending to businesses rose by 10.7 trillion won in September, up from 9.7 trillion won the previous month. Loans to large companies accounted for 7.5 trillion won of the increase, a substantial rise from 4.9 trillion won the previous month. This was the largest increase since October 2022, when it reached 9.3 trillion won.
Despite demand for working capital, including funds for Chuseok, the increase in loans to small and medium-sized enterprises narrowed to 3.2 trillion won from 4.8 trillion won the previous month, partly due to the sale and write-off of nonperforming loans at quarter-end.
Lee Seung-yup, head of the BOK's Market Operations Team, explained, "With banks continuing to step up their lending efforts, companies' demand for funds to repay corporate bonds, cover working capital and invest in facilities has increased amid high interest rates."
Corporate fundraising through direct financing markets remained subdued.
Net repayment of corporate bonds increased from 900 billion won the previous month to 3.4 trillion won in September, amid higher issuance costs due to rising market interest rates and a larger volume of bonds reaching maturity.
Issuance of commercial paper (CP) and short-term bonds, which had increased by 4.1 trillion won the previous month amid debt repayments to manage financial ratios, turned to a decline of 100 billion won in September.
Equity issuance rose by 300 billion won in September, down slightly from 500 billion won the previous month, as the amount raised through rights offerings decreased.
Marked fund movements driven by seasonal factors were seen in the financial institutions' deposit market.
Bank deposits increased by 29.1 trillion won, led by demand deposits. This was a sharp rise from the 100 billion won increase the previous month.
In particular, demand deposits reversed from a 14 trillion won decline the previous month to a 24.7 trillion won increase, as a large volume of corporate funds flowed in to manage financial ratios at quarter-end.
Time deposits continued to post modest growth, rising by 2.1 trillion won after increasing by 20.3 trillion won the previous month. This was despite more deposits from some large companies reaching maturity, as banks continued efforts to attract funds and households continued to deposit their money.
By contrast, deposits at asset management companies reversed from a 23.5 trillion won increase the previous month to an 11.1 trillion won decline in September. To manage financial ratios at quarter-end, corporations withdrew funds from money market funds (MMFs, down 25.6 trillion won) and other instruments and shifted them to bank demand deposits and similar accounts.
Bond funds rose by 1 trillion won, a slight rebound from a 300 billion won decline the previous month. Equity funds increased by 5.1 trillion won, a smaller gain than the 15.5 trillion won rise the previous month.
[email protected] Jeong Sang-gyun Reporter