Impact on Delinquency Rates: "Commercial Banks Influenced More by Housing Prices, Regional Banks More by Inflation"

Impact Variables Change According to Loan Composition Differences

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[Asia Economy Reporter Minwoo Lee] The loan delinquency rates of commercial banks and regional banks were found to be more sensitive to different variables. Commercial banks were more influenced by interest rates and housing prices, while regional banks' loan delinquency rates moved according to inflation, exports, and stock prices. This is analyzed as a difference due to the composition of customers and loans.

On the 19th, the Korea Institute of Finance revealed this through a report titled "Sensitivity Analysis of Macroeconomic Variables on Loan Delinquency Rates of Commercial and Regional Banks." The report calculated each bank's individual delinquency rate weighted by loan balance. The commercial banks surveyed were KB Kookmin, Shinhan, Hana, Woori, SC First, and Citi Bank, while the regional banks surveyed were BNK Busan, DGB Daegu, BNK Gyeongnam, Gwangju, Jeonbuk, and Jeju Banks.

The study analyzed the correlation between the calculated loan delinquency rates and macroeconomic variables such as interest rates (1-year Monetary Stabilization Bond rate), inflation (Consumer Price Index), stock prices (KOSPI), housing prices (National Housing Price Index), and export growth rate. The sample period was limited from the first quarter of 2008 to the fourth quarter of 2019. This was due to limitations during the COVID-19 period, where various government repayment deferral measures meant that despite delinquency status, amounts were not recorded as delinquent.

As a result, commercial banks' loan delinquency rates were relatively sensitive to changes in interest rates and housing prices. This is interpreted as being because the proportion of household loans (53.45%) in commercial banks' loan portfolios was higher than corporate loans (46.55%). Senior Research Fellow Ji-eon Lee of the Korea Institute of Finance explained, "Households generally have less bargaining power on interest rates than corporations, and since household loans include mortgage loans, the overall delinquency rate can be understood as more sensitive to housing prices."

On the other hand, regional banks' loan delinquency rates showed a stronger correlation with inflation, export growth rate, and stock prices. This is attributed to the higher proportion of corporate loans, which reached 69.97%, unlike commercial banks. Regarding inflation, corporate delinquency rates responded more sensitively than household delinquency rates. This is interpreted as rising inflation increasing production costs such as wages, thereby reducing corporate profitability and debt repayment ability.

The impact of stock prices and exports showed similar results from the perspective of profitability. The research fellow analyzed, "Especially when bank loans are for repayment purposes, stocks are a major means for companies to raise funds through listing and capital increases. When stock prices fall, listings and capital increases shrink, ultimately reducing debt repayment ability," adding, "If exports also decline, corporate profitability deteriorates primarily."

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