Lenders turn to extending loans to large corporations with higher credit ratings


Household loans extended by Korean banks tumbled about 400 billion won ($359 million) over about two weeks this month, banking data showed on Monday.

The drop in local lenders’ loans to households came as the major banks toughened conditions for extending credit to households while focusing more on corporate clients.

Four major banks ― Kookmin, Woori, Shinhan, Hana ― saw their household loans stand at 276.6 trillion won as of Sept. 15, down 407.3 billion won from the end of last month.

The lenders’ household loans had been rising more than 1 trillion won per month this year, except for January when the figures slumped 474 billion won.

The sudden turnaround this month came after the financial regulators sent a strong warning to lenders against extending excessive household loans amid growing concerns about the country’s consumer debt problem.

Korean banks, as advised by the regulators, are now rushing to reduce loans to households. The amount of credit loans to individuals came in at 58.6 trillion won, down 461.7 billion won from the end of last month.

Shinhan Bank, one of the country’s largest lenders, saw its mortgage-backed loans plunge by 190 billion won this month, suggesting that even the relatively safe loans backed by collateral are declining, a trend that could hurt local home buyers.

Korean banks have long pursued real-estate mortgages as the sector is easier to manage than credit loans to individuals whose loan repayment records remain unstable.

Loans extended to groups of consumers who want to purchase apartments, a gauge that reflects loans trends in connection with the real estate market, also went down 4.4 billion won for Kookmin Bank and 8 billion won for Hana Bank.

The four banks’ overall mortgage-backed loans reached 193.9 trillion won, showing a slower growth of 39.5 billion won during the cited period, largely because Shinhan Bank and Hana Bank cut the mortgage-backed loans by 15.9 billion won and 18.2 billion won.

In contrast, loans extended to large companies with higher credit ratings jumped this month. The amount of loans for large firms stood at 58.9 trillion won in mid-September, up 1.4 trillion won, or 1.7 percent, from the end of last month.

The increase in loans to large companies by the lenders since the end of June was tallied at 4.2 trillion won, signaling that more bank loans have been directed to such big firms in the past couple of months.

But the lenders did not extend loans to small- and medium-sized enterprises as aggressively as they did for big companies, many of which have already hoarded enough operating capital. Loans to smaller firms rose just 587 billion won, or 0.3 percent, to 209.3 trillion won during the cited period.

By Yang Sung-jin  (insight@heraldcorp.com)