5 Major Bank Presidents Say "Loan Interest Rate Increase Will Not Be Significant This Year"

Economic Forecasts by Five Major Bank Presidents Predict Stable Loan Interest Rates
Base Rate May Reach 4%...Real Estate Expected to Remain 'Weak' This Year

From the left, Lee Jae-geun, President of KB Kookmin Bank; Han Yong-gu, President of Shinhan Bank; Lee Seung-yeol, President of Hana Bank; Lee Won-duk, President of Woori Bank; Lee Seok-yong, President of NH Nonghyup Bank. Photo by each company

[Asia Economy Reporter Bu Aeri] Heads of major commercial banks predicted that the increase in loan interest rates this year will not be significant. However, they stated that risk management due to the increased interest burden will be strengthened.

On the 17th, the heads of KB Kookmin, Shinhan, Woori, Hana, and NH Nonghyup Banks forecasted in interviews with Asia Economy that the complex crisis situation of high inflation, high exchange rates, and high interest rates will continue this year. However, they predicted that the rise in loan interest rates will be limited.

Lee Jae-geun, CEO of KB Kookmin Bank, said, "The additional increase in the base interest rate has already been reflected, and due to measures to stabilize the capital market such as the resumption of bank bond issuance, the funding cost index is either declining or the rate of increase is slowing down, so the rise in loan interest rates is expected to be small." Lee Won-duk, CEO of Woori Bank, also said, "As the tightening of the capital market for corporate bonds and commercial papers (CP) has eased and bank bond issuance has resumed, the burden of bank deposit interest rates has decreased," adding, "We predict that the upward trend in loan interest rates will stabilize this year."

Lee Seung-yeol, who took office this month as CEO of Hana Bank, expressed his intention to establish a flexible interest rate policy. He explained, "The increase in the US base interest rate is inducing a rise in market interest rates, so loan interest rates are expected to remain relatively high," but added, "However, since the increase in interest burden has a significant impact on the national economy, we plan to implement a flexible interest rate policy to minimize negative effects."

The Bank of Korea's base interest rate hike trend is expected to continue, with the final rate predicted to be around 3.5 to 4%. Han Yong-gu, CEO of Shinhan Bank, said, "We cautiously expect the base interest rate to rise to around 4% in the first half of this year and maintain the same level in the second half," adding, "Whether the US Federal Reserve raises rates and exchange rate volatility are variables."

Many expected the real estate market to continue its weakness. It was explained that recovery would be difficult due to demand contraction caused by interest rate burdens. CEO Lee Jae-geun said, "Interest rates are the biggest factor determining the real estate market trend," and predicted, "In the first half of the year, real estate prices will decline and transaction volumes will decrease simultaneously." Lee Seok-yong, CEO of NH Nonghyup Bank, also predicted, "Housing purchase sentiment will continue to shrink," and "There is little possibility of housing price increases during the interest rate hike period."

The heads of the five major banks also viewed the complex crisis situation as continuing this year and expressed concerns about deteriorating soundness and asset price decline risks. Each bank stated they would prepare for risks centered on vulnerable borrowers and marginal companies. CEO Han Yong-gu said, "As high inflation, high exchange rates, and high interest rates continue, managing soundness due to the increase in marginal companies and delinquent borrowers is a major challenge." CEO Lee Seung-yeol also said, "Attention should be paid to the increase in credit risk."

Platform competition was also cited as one of the management threat factors. CEO Lee Won-duk added, "Non-financial companies continue to enter the financial industry, and competition within business areas among financial companies is intensifying."

The five major banks also stated they would strengthen risk management related to the project financing (PF) loan default crisis this year. CEO Lee Seung-yeol predicted, "PF issues will repeatedly appear this year, and the timing is likely to be in the second half." CEO Lee Seok-yong said, "We will conduct proactive post-management to prevent defaults."

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