Loans Increase and Savings Decrease... January Banking Reflects Seasonality

Household Loans Flat in January, Corporate Loans Increase by 13 Trillion
Low-Cost Deposits Down 31 Trillion, Time Deposits Up 10 Trillion

[Asia Economy Reporter Minwoo Lee] Last month, the outstanding loans at deposit banks increased by about 13 trillion won compared to the previous month, while total deposits (savings and time deposits) decreased by about 17 trillion won during the same period. This is attributed to seasonal factors related to the beginning of the year.

According to Hanwha Investment & Securities and the Bank of Korea on the 12th, the outstanding loans at deposit banks last month amounted to 2,139 trillion won, an increase of 13 trillion won from the previous month. This represents an 8% increase compared to the same period last year. While household loans showed little change, corporate loans accounted for most of the overall loan increase.

Specifically, the growth rate of loans to individual business owners (SOHO) declined for six consecutive months, whereas the growth rate of loans to corporate small and medium enterprises (SMEs) rose for five consecutive months, showing opposite trends. Since the major large banks have focused their growth targets this year on corporate SMEs, this trend is expected to continue.

On the other hand, general household loans including credit loans decreased by about 2.6 trillion won last month, causing the year-on-year growth rate to fall to the 3% range. This is the lowest growth rate since the second half of 2015. Doha Kim, a researcher at Hanwha Investment & Securities, explained, "January is typically a month when credit loans decrease, but the fact that they declined for two consecutive months suggests that deleveraging due to a drop in expected asset market returns and rising interest costs has also partially occurred."

Housing loans (including policy mortgages) increased by only about 2.2 trillion won to 781 trillion won during the same period, resulting in a decline in the year-on-year growth rate for seven consecutive months. This is interpreted as an effect of the ongoing decrease in housing sales and jeonse (long-term lease) transaction volumes.

Meanwhile, total deposits at deposit banks in January amounted to 2,119 trillion won, an increase of about 10% compared to the same month last year, but a decrease of about 17 trillion won compared to the previous month. The deposit decline in January is considered a seasonal factor.

Low-cost deposit balances stood at 973 trillion won, also up 13% year-on-year, but decreased by 31 trillion won during last month. This is also seen as a seasonal factor. The rate of decrease was similar to that in 2019. Although the growth rate of low-cost deposits continues to exceed that of total deposits, the pace has significantly slowed. Relatively higher-cost time deposits amounted to about 753.8 trillion won, up 8% year-on-year, marking the highest growth rate in 26 months.

Researcher Kim said, "As expected returns in the asset market decline, investment demand appears to have decreased, but the resulting drop in risk premiums suggests that household loan demand still exceeds supply willingness. In particular, quantitative restrictions on credit loans are expected to continue for the time being." He added, "The banking sector is likely to pursue growth centered on corporate SME loans. This year, the growth rate of won-denominated loans in the banking sector is expected to reach around 5-6% compared to last year, with a net increase of about 120 trillion won."

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