Last month, household loans at banks turned to growth for the first time in four months. After stock prices dropped sharply following the Middle East crisis, investors expecting a rebound in the market took out unsecured loans to buy shares. In contrast, mortgage loan balances were flat as banks tightened management of household loans.
According to the "March financial market trends" released by the Bank of Korea (BOK) on the 8th, the outstanding loan balance of bank household loans at the end of last month was 1,172.8 trillion won. That was up 500 billion won from a month earlier. Household loans had declined from Dec. last year (-2 trillion won) through Feb. this year (-400 billion won) before rising again for the first time in four months.
An increase in other loans was the main driver. The outstanding loan balance of other loans last month was 237.1 trillion won, up 500 billion won from the previous month. Other loans also increased for the first time in four months since Nov. last year (1.2 trillion won). Typically in March, corporations reduce nonperforming loans to manage quarter-end financial ratios, leading to a decrease in unsecured loans, but this time they rose unusually.
Park Min-cheol, head of the market coordination team in the financial markets department at the Bank of Korea (BOK), said, "Amid the fallout from the Middle East war, stock prices swung sharply last month," and added, "Other loans increased mainly on days when prices fell steeply, suggesting higher demand for stock purchases using unsecured loans."
In contrast, mortgage loans, which account for more than 80% of bank household loans, were flat. The mortgage loan balance last month was 934.9 trillion won, unchanged from the previous month. Mortgage loans fell in Dec. last year (-500 billion won) and Jan. this year (-600 billion won), then turned to an increase in Feb. (300 billion won), but the gain narrowed again last month. The Bank of Korea (BOK) cited stronger management of household loans by banks and a slowdown in demand for jeonse funds as key reasons.
The Bank of Korea (BOK) sees household loans potentially increasing going forward. Park said, "If transactions of dwellings rise ahead of the end of the temporary easing of capital gains tax for multiple-home owners on May 9, household loans could increase accordingly," adding, "Typically, transactions of dwellings affect household loans with a lag of as little as two months to as much as about four months."
Corporate loans totaled 1,387 trillion won, up 7.8 trillion won from the previous month. Of that, loans to small and midsize corporations (1,080.1 trillion won) rose 4.5 trillion won, and loans to large corporations (306.9 trillion won) increased 3.4 trillion won, respectively. The government's push for a "productive finance" policy encouraging more lending to advanced industries is seen as boosting corporations' demand for working capital.
Meanwhile, bank deposits rose 20.5 trillion won from the previous month to 2,551.7 trillion won. Corporations significantly increased demand deposits to manage quarter-end financial ratios and pay dividends. Last month, demand deposits were 1,010.7 trillion won, up 25.8 trillion won from a month earlier. Time deposits, by contrast, fell 4.4 trillion won to 1,066.8 trillion won. The decline is attributed to more households canceling time deposits to expand stock investments.
Assets under management at asset managers' deposits fell 29.1 trillion won to 1,394.4 trillion won. Equity funds led the decline, falling 18.8 trillion won to 260.9 trillion won. Bond funds decreased 6.1 trillion won to 211.7 trillion won, and other funds fell 1.1 trillion won to 655.9 trillion won.