Saemaeul Geumgo Loan Balance Declines for 8 Consecutive Months... Savings Banks Also Down 7 Trillion Won in 7 Months

Saemaeul Geumgo July 195 Trillion → August 193 Trillion, Down 2 Trillion
Threshold Raised for High-Risk Credit Loans

The decline in loans at Saemaeul Geumgo, which raised lending thresholds for soundness management, continues. In the past month alone, loan balances have decreased by nearly 2 trillion won. Loans at savings banks have also been declining for seven consecutive months.

According to the Bank of Korea on the 21st, Saemaeul Geumgo's loan balance as of the end of August was 193.7734 trillion won, down 1.7858 trillion won from the previous month (195.5592 trillion won). Saemaeul Geumgo's loan balance has been decreasing for eight consecutive months since peaking at 201.6475 trillion won in December last year. In April, the 200 trillion won mark was also broken (199.4037 trillion won).

The rate of decrease is also growing. From January to April this year, the decrease was less than 1 trillion won, but in May and June, it shrank by 1.2704 trillion won and 1.5952 trillion won respectively compared to the previous month.

The reason for the decline in Saemaeul Geumgo loan balances is the strengthening of loan screening to manage risks such as delinquency rates. According to the Ministry of the Interior and Safety, the overall delinquency rate of Saemaeul Geumgo in the first half of this year was 5.41%, up 1.82 percentage points from 3.59% at the end of last year.

In particular, unsecured loans, which have a relatively high risk of delinquency, were reduced. According to the Saemaeul Geumgo Central Association's disclosure, as of the end of September, among the total 1,291 Geumgos, 375 Geumgos (29%) did not issue new unsecured loans during the previous three months (July to September). This is an increase of 23 Geumgos compared to the end of August (352 Geumgos, 27.3%).

MG Saemaeul Geumgo branch in a market in Seoul. Photo by Younghan Heo younghan@

The same trend of loan decline continues for savings banks, which are also part of the secondary financial sector. As of the end of August, the loan balance of the savings bank industry was 108.8647 trillion won, down 120.1 billion won from the previous month (108.9848 trillion won). Compared to the end of January (115.6003 trillion won), it decreased by 6.7356 trillion won.

The savings bank industry is also reducing loan issuance to manage soundness as delinquency rates have surged due to high interest rates and prolonged economic recession. According to the Financial Supervisory Service, the delinquency rate of savings banks in the first half of the year was 5.33%, up 1.92 percentage points from the end of last year. The rise in funding costs and the narrowing interest rate spread between deposits and loans, which worsened profitability, are also major causes.

On the other hand, the loan balances of mutual finance institutions such as Nonghyup and Suhyup increased by 1.7393 trillion won from 377.9785 trillion won in July to 379.7178 trillion won in August, and the credit unions also increased by 322.1 billion won from 108.4309 trillion won to 108.7530 trillion won during the same period.

[Image source=Yonhap News]

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