Banks' other loans overshoot targets by W2.4tr as 'debt investing' surges

Non-mortgage loans at South Korea's five major commercial banks have exceeded their combined targets by nearly 2.4 trillion won ($1.62 billion), as a surge in credit lending fueled by "debt investing" — borrowing to fund stock or asset purchases — pushed other-loan balances well past set limits. Banks tightened controls on mortgage lending in July, but the spike in other loans has put overall household credit management on high alert.

Other loans refer to all lending outside of home-secured mortgages, including credit loans, overdraft accounts and savings-backed loans.

According to data that Rep. Lee Yang-su of the People Power Party, a member of the National Assembly's Political Affairs Committee, obtained from the Financial Supervisory Service on Wednesday, the combined other-loan balance at the five major banks — KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank and NH NongHyup Bank — rose 3.47 trillion won from the end of last year through the end of June. That figure exceeded the banks' combined other-loan target of 1.09 trillion won by roughly 2.4 trillion won, about 3.2 times the target.

Breaking down the figures by bank, Woori Bank's other loans grew 1.07 trillion won, 8.2 times its target of 131 billion won, while Hana Bank posted a 759.9 billion won increase — 8.9 times its 85.6 billion won target. Shinhan Bank's other loans rose 708.8 billion won, 6.7 times its 105.8 billion won target. KB Kookmin Bank supplied 1.18 trillion won in other loans, roughly double its 595 billion won target. NH NongHyup Bank was the only exception among the five, recording a net decrease of 252.5 billion won against a target that called for a 175 billion won increase.

With total household lending overshooting targets — driven in large part by a surge in overdraft account usage — banks have been raising the bar on mortgage loans, which are relatively easier to control. KB Kookmin Bank preemptively cut its mortgage lending cap from 600 million won to 300 million won earlier this month, while major banks have temporarily suspended applications through loan solicitor channels and restricted access to mortgage credit insurance products.

Mortgage balances at the four banks excluding NH NongHyup continued to fall. KB Kookmin Bank trimmed its mortgage book by 1.31 trillion won through the end of June, approaching its reduction target of 1.41 trillion won. Woori Bank cut mortgages by 502.9 billion won, far exceeding its 91.9 billion won reduction target. Shinhan Bank and Hana Bank reduced their mortgage balances by 696.5 billion won and 226.9 billion won, respectively, though both fell short of their targets.

NH NongHyup Bank, by contrast, saw its mortgage balance surge 1.7 trillion won — far above its 260 billion won target. It is the only one of the five banks whose total household loan balance has already surpassed its full-year target of 870 billion won. The other banks had also exceeded their first-half household lending targets well ahead of schedule.

"Banks are tightening mortgages in response to regulatory pressure, which is in effect cutting off access to financing for ordinary borrowers with genuine housing needs," Rep. Lee said. "Financial authorities need to move beyond a regulation-only approach and put in place measures that minimize harm to real end-users."