KB Kookmin Bank's Loan Growth Rate Nears 5%... Financial Authorities Say "No Change to Total Volume Target"

If Loan Growth Does Not Slow, Some Branches May Halt Lending
Top 5 Banks' Loan Growth Rate at 4.69%... NongHyup Bank Reaches 7.4%
Financial Services Commission Chair Expected to Reiterate Management Commitment at Economic and Financial Experts Meeting

[Asia Economy Reporter Kwangho Lee] As KB Kookmin Bank's household loans have recently surged, the bank will significantly reduce the limits on jeonse deposit loans and group loans starting on the 29th. If the loan growth trend does not slow down, the bank may have no choice but to close some loan windows, similar to NH Nonghyup Bank.

According to KB Kookmin Bank on the 26th, as of the 23rd, the outstanding balance of household loans reached 168.8297 trillion won, up 4.31% from 161.8557 trillion won at the end of last year.

Although it has not yet exceeded the 5-6% growth target set by financial authorities, the problem is that the growth speed is too fast.

KB Kookmin Bank's household loan growth rate was only 2.58% at the end of July. However, it jumped more than 1 percentage point to 3.62% by the end of August, then rose another 0.53 percentage points within half a month to reach 4.15% on the 17th of this month. After the Chuseok holiday, it increased by another 0.16 percentage points, reaching 4.31% on the 23rd.

Excluding the holiday period, there was effectively only one business day on the 23rd after the 17th, so KB Kookmin Bank recognizes the recent growth speed as a serious issue. At this rate, the annual growth rate of household loans is likely to exceed 5% next month.

Looking at the growth rates by loan type, jeonse deposit loans (outstanding balance of 25.3949 trillion won) increased by 18.80%, nearly 20%. Total mortgage loans, including jeonse deposit loans (121.2992 trillion won), rose by 4.03%, and unsecured loans (37.7825 trillion won) increased by 6.03% just this year.

Accordingly, starting from the 29th, the limits on household loans will be significantly reduced.

First, the limit on jeonse deposit loans will be restricted to the amount of increase in the rental deposit (jeonse price). For example, if the rental deposit rises from 400 million won to 600 million won, an increase of 200 million won, tenants without existing jeonse deposit loans could previously borrow up to 80% of the rental deposit (600 million won), which is 480 million won. However, from the 29th, loans exceeding the increase of 200 million won in the rental deposit will not be allowed.

For group loans, the collateral criteria for move-in balance loans will change from "KB market price or appraisal value" to "the lowest amount among the sale price, KB market price, and appraisal value." For example, if an apartment's sale price is 500 million won but the current market price has jumped to 1 billion won, the loan limit for the balance will now be based on the original sale price of 500 million won, not the 1 billion won market price.

Mortgage credit insurance (MCI) and mortgage credit guarantee (MCG) subscriptions will be restricted for mortgage loans. MCI and MCG are insurances subscribed simultaneously with mortgage loans; borrowers with these insurances can borrow up to the loan-to-value ratio (LTV), but without insurance, loans are only possible for the amount excluding small rental deposits.

A KB Kookmin Bank official explained, "Because household loans are increasing too rapidly, this is an unavoidable measure from the perspective of managing the total loan volume."

Meanwhile, financial authorities maintain that although household loan performance is close to the annual total target, there will be no revision of the target.

As of the 16th, the household loan growth rate of the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?reached 4.69%, with Nonghyup Bank and Hana Bank rising to 7.4% and 5.04%, respectively.

Financial Services Commission Chairman Seung-beom Ko is also expected to reiterate the commitment to managing household loans at the economic and financial market experts meeting scheduled for the 27th.

Earlier, Chairman Ko announced that supplementary measures for household debt management would be disclosed after Chuseok.