Expectations for Loan Regulation Easing... Will the Mood of Bank Stocks Change?

"Little Change Expected in Short Term... Positive Shift in Regulatory Tightening Stance"

[Asia Economy Reporter Minwoo Lee] With the regime change decided, the possibility of easing loan-related regulations has also increased. Even if the loan growth rate does not change significantly in the short term, as the situation of continuous tightening of regulations changes, there is an analysis that investment sentiment in bank stocks could turn positive.

On the 13th, IBK Investment & Securities made this forecast regarding future changes in loan-related regulations. Regarding the housing loan-to-value ratio (LTV) pledge, first-time homebuyers will have an LTV of 80%, single-home real demand buyers will have an LTV of 70% regardless of region, and multi-homeowners will have a differentiated LTV of 30-40%. It is expected that the increase in loans itself will not expand significantly due to the total debt service ratio (DSR) cap, even with the easing of LTV regulations.

Although DSR regulations could also be eased, concerns about household debt increase and the current rising interest rate environment make the possibility low. Kim Eungap, a researcher at IBK Investment & Securities, explained, "Regardless of regulation, the fundamental constraint is the rapid rise in housing prices over the past few years," adding, "Since the increase in housing prices far exceeded income growth, even if LTV and DSR regulations are eased, many cases require bearing a significantly higher principal and interest repayment burden compared to the past to purchase a home." Ultimately, while easing loan regulations may lead to an increase in new loans, it is analyzed that it will not drastically change the loan growth rate.

Nevertheless, from the perspective of regulatory easing, it is diagnosed that investment sentiment in bank stocks will be positive. This is because the loan growth rate in the banking sector could rise even slightly. Although the household loan growth rate may have little impact, it is expected to increase. Demand for corporate loans, such as financial support for small and medium-sized enterprises and self-employed individuals, is also expected to continue. Additionally, loan increases due to supply expansion such as reconstruction are also expected to be reflected over time. Researcher Kim said, "Even if regulatory changes do not cause a significant change in the loan growth rate in the short term, the fact that the situation of continuous tightening of regulations has changed alone will have a positive effect on investment sentiment."

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