March Bank Household Loans Down 700 Billion Won for Third Consecutive Month... Mortgage Loans Turn to Increase

Bank of Korea, Financial Market Trends in March

Last month, bank household loans decreased by 700 billion KRW, continuing a decline for the third consecutive month. Housing mortgage loans in the banking sector, which had decreased for the first time in over nine years in February, turned to an increase again after one month due to factors such as a rise in apartment sales transactions.

According to the "Financial Market Trends in March" released by the Bank of Korea on the 10th, bank household loans (including policy mortgage loans) decreased by 700 billion KRW last month, marking the second-largest decline since January 2004, when preliminary statistics for March changes began to be compiled.

Housing mortgage loans increased by 2.3 trillion KRW, reversing to growth. Yoon Ok-ja, head of the Financial Market Division at the Bank of Korea, explained, "Although demand for jeonse (key money deposit) loans continued to decrease, housing mortgage loans increased again in March due to factors such as increased apartment sales transactions and the execution of special Booming Housing Loans." Housing mortgage loans had decreased in February for the first time in 9 years and 1 month since January 2014, but rose again in March as apartment sales transactions revived.

Other loans decreased by 2.9 trillion KRW due to high loan interest rates and loan regulations, continuing a decline for the 16th consecutive month since December 2021 (-2.2 trillion KRW). This is the second-largest decrease since January 2004, when preliminary statistics for March changes began to be compiled.

Bank corporate loans increased by 5.9 trillion KRW, with the expansion centered on small and medium-sized enterprise (SME) loans. This was the third-largest increase since June 2009, when preliminary statistics for March changes began to be compiled.

Large corporate loans increased by 100 billion KRW, but the growth slowed due to temporary loan repayments for managing financial ratios at the end of the quarter.

SME loans surged by 5.8 trillion KRW, with the increase driven by banks' efforts to expand lending and demand for corporate tax payments.

Corporate bonds continued net issuance, but the scale shrank to 2.2 trillion KRW due to seasonal factors and increased interest rate uncertainty. Commercial papers (CP) and short-term bonds (-1.7 trillion KRW → -300 billion KRW) continued net repayments due to quarter-end seasonal factors and refinancing through corporate bond issuance by some companies.

Bank deposits decreased by 3 trillion KRW, turning to a decline. Demand deposits increased by 12.5 trillion KRW as local government funds were withdrawn due to fiscal execution, but corporate funds flowed in for managing financial ratios at the quarter-end and dividend payments.

Time deposits (24 trillion KRW → -8.8 trillion KRW) turned to a decrease as corporate funds were withdrawn despite household funds flowing in. Deputy Governor Yoon explained, "Corporate funds that entered time deposits last year due to high interest rates are maturing. Corporations judged that there is no significant advantage in current time deposit interest rates and did not reinvest their funds."

Asset management company deposits decreased by 11.6 trillion KRW, turning to a decline.

Money Market Funds (MMFs) decreased by 10.9 trillion KRW due to corporate quarter-end cash demand and withdrawals of treasury surplus funds for fiscal execution.

Bond funds and equity funds decreased by 2.6 trillion KRW and 200 billion KRW respectively, while other funds increased by 2.5 trillion KRW.

[Image source=Yonhap News]

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