South Korea's sizable household debt and recent policies that eased rules on mortgage lending to prop up the ailing property market may potentially hurt credit risks of local lenders, an analyst said Friday.

"What is an issue is the disposable income comparison. You have more debt than disposable income," said Ritesh Maheshwari, a lead analytical manager at Standard & Poor's Ratings Services.

Standard & Poor's data showed that the country's household debt in comparison to disposable income continued to rise, reaching 138 percent in 2013 from 131 percent in 2010.

Debt held by households and individual business owners also accounted for 85 percent of the country's gross domestic product, rising from 80 percent in 2010.

Maheshwari said the recent action from the government to loosen the mortgage underwriting standards may also threaten local lenders as household loan growth is likely to gain traction.

His remarks come roughly a month after a set of measures that relaxes lending regulations such as the loan-to-value and debt-to-income ratios to spur property trade that went into effect on Aug. 1.

Under the eased rules, home buyers can now borrow up to 70 percent of their property value and use 60 percent of their income for mortgage payments.

Outstanding mortgage lending in the banking sector has increased by 3.9 trillion won ($3.8 billion) between Aug. 1 and Aug. 22, nearly double the 2 trillion won gain logged in the same period last year.

The Standard & Poor analyst also mentioned weak business in industries such as shipbuilding, shipping and construction as well as a strong won as some negative factors for credit risk.

Maheshwari, meanwhile, forecast profitability at local lenders to remain subdued for the time being.

"We think profitability will likely remain low partly because of competition at home and low interest rates that exist worldwide," he said.

Net interest margin, a key gauge of banks' profitability, is expected to remain under pressure due to a recent policy rate cut as well as the government's borrower-friendly drive to lower lending rates for small- and medium-size enterprises and households, according to Standard & Poor's.

Earlier this month, the Bank of Korea cut the base rate for the first time in 15 months to help amplify the effect of the government's growth initiative.

Local banks have also been reducing the number of their branches to cut costs amid growing competition and market saturation. (Yonhap)