Bank Household Loans Rise for 3 Consecutive Months... Impact of Jeonse and Group Loans

On the 7th, a scene at a bank counter in Seoul city center shows major commercial banks lowering loan interest rates while raising interest rates on regular savings and installment savings products./Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Seo So-jeong] Last month, household loans in the banking sector increased for the third consecutive month. In particular, despite a slowdown in housing purchase-related funding demand, mortgage loans continued to rise due to ongoing jeonse and group loan transactions.

According to the 'Financial Market Trends' released by the Bank of Korea on the 12th, as of the end of June this year, the outstanding household loans at deposit banks amounted to 1,060.8 trillion won, an increase of 300 billion won compared to the end of May.

However, the increase was 100 billion won less than in May, marking the smallest change since the related statistics began to be compiled in January 2004 as of June.

Looking at the changes in household loans by type, mortgage loans (outstanding balance of 789.1 trillion won) increased by 1.4 trillion won.

Other loans, including credit loans (outstanding balance of 270.4 trillion won), decreased by 1.2 trillion won in one month. The decline widened mainly in credit loans due to rising loan interest rates.

Hwang Young-woong, Deputy Director of the Market Surveillance Team at the Bank of Korea’s Financial Market Department, explained, "Other bank loans decreased by 1.2 trillion won, marking the largest decline since the related statistics began to be compiled in January 2004 as of June. This appears to be influenced by the interest burden from rising loan rates and recent asset price adjustments."

For companies, the loan increase trend continued for six months. As of the end of June, the outstanding won-denominated loans to companies stood at 1,125.2 trillion won, rising by 6 trillion won in one month. This was the largest increase since the related statistics began to be compiled in June 2009 as of June.

Loans to small and medium-sized enterprises (SMEs) and large corporations increased by 5.4 trillion won and 600 billion won respectively, marking the second-largest increase on record as of June. SME loans rose due to continued COVID-19 financial support and demand for facility funds, while large corporation loans increased due to banks’ strengthened corporate loan operations and expanded corporate loan demand amid deteriorating corporate bond issuance conditions.

Deputy Director Hwang said, "Despite seasonal decreases at the end of the quarter in June, corporate loans by banks continued to increase due to banks’ efforts in corporate loan handling and demand for facility and settlement funds."

Bank deposits stood at 2,210.5 trillion won as of the end of June, increasing by 23.3 trillion won compared to the end of May.

In particular, demand deposits rose by 15.5 trillion won due to corporate fund inflows for quarter-end financial ratio management and securing settlement funds.

Time deposits also increased by 9.5 trillion won as household and corporate funds flowed in amid rising deposit interest rates.

On the other hand, asset management company deposits decreased by 7.1 trillion won in June.

Money Market Funds (MMFs) declined by 10.5 trillion won due to quarter-end treasury fund outflows and banks’ fund withdrawals for BIS ratio management.

Equity funds and bond funds saw outflows of 3.5 trillion won and 200 billion won respectively, while other funds increased by 7.3 trillion won.

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