Bank Stocks Wear a Frown Amid Real Estate Regulations

[Asia Economy Reporter Song Hwajeong] The government’s high-intensity real estate measures are expected to negatively impact investment sentiment in bank stocks, as the loan growth rate of banks slows down.

Among the real estate measures announced by the government on the 17th, the main points related to banks include designating most areas in the metropolitan area, Daejeon, and Cheongju as adjusted target areas and speculative overheating districts to block speculative demand inflow in non-regulated areas; strengthening regulations on housing mortgage loans for actual demand and jeonse (long-term deposit lease) loans in regulated areas to block gap investments; and suppressing investment incentives using housing mortgage loans by housing sales and rental businesses. Choi Jeongwook, a researcher at Hana Financial Investment, said, "In the case of household housing mortgage loans, the growth rate has already significantly slowed due to continuous regulations, so the impact of this policy will be minimal," but added, "The ban on all regional housing mortgage loans for housing sales and rental businesses will inevitably have an impact." In particular, for jeonse loans, which have accounted for a large portion of the household loan growth rate, restrictions on the use of jeonse loan guarantees and immediate recall of jeonse loans when purchasing apartments over 300 million won could have a somewhat significant ripple effect. Since 2016, the growth rate of jeonse loans at the four major commercial banks has explosively increased by 30-40% annually, and the proportion of jeonse loans within housing-related loans currently approaches 20%.

Although a slowdown in the growth rate of jeonse loans is inevitable, opinions suggest that the impact on total loan growth will not be significant. Researcher Choi predicted, "In the first half of 2020 alone, the total loan growth rate of banks is expected to exceed 6%, and due to the increase in corporate loans following the outbreak of the novel coronavirus infection (COVID-19), the loan growth rate is already high, so the impact on total loan growth will not be large."

In addition to the deterioration of investment sentiment caused by real estate regulations, the sluggish performance of bank stocks in the global stock market is also a burden. Gu Kyunghoe, a researcher at SK Securities, explained, "Since the global spread of COVID-19, bank stocks in the global stock market have underperformed market returns due to the burden of low interest rates. In Korea as well, bank stocks have continued to weaken due to persistent selling by foreign investors," and added, "Until global investors’ sentiment toward financial stocks improves, it will be difficult for bank stocks to outperform the market."

This content was produced with the assistance of AI translation services.