Hana and Shinhan: Why Household Loan Growth Remains Low Despite the Real Estate Boom

Penalty Imposed for Exceeding Last Year's Household Loan Target
This Year's Quota Reduced by the Excess Amount
Shinhan Bank's Growth Rate Turns Negative Compared to Last Year

Hana Bank recorded the lowest growth rate in household loans among commercial banks this year. Shinhan Bank also saw a low growth rate, and compared to last year, its growth rate was actually negative. This is interpreted as a result of penalties imposed by financial authorities after these banks significantly exceeded their annual household loan targets last year.

According to financial authorities on the 23rd, Hana Bank and Shinhan Bank exceeded their annual household loan targets last year, resulting in penalties on their household loan quotas this year. A financial authority official stated, "Last year, Hana Bank exceeded its annual household loan target by the largest margin among banks," and added, "When a penalty is imposed, the total household loan quota for the current year is reduced by the amount that exceeded the target last year."

Previously, the Financial Services Commission announced that it would manage the annual growth rate of household loans within the range of the nominal economic growth rate (3.8%). This translates to a total household loan quota of approximately 70 trillion won for the entire financial sector this year. At the beginning of each year, the financial authorities receive household loan management plans from financial institutions. Through this process, the total amount of household loans is determined at an appropriate level.

Each financial institution determines its household loan quota based on the previous year's loan amount and business performance. If a financial institution exceeds its annual household loan management target, its quota for the following year is reduced. This means it faces a disadvantage in acquiring new business.

As a result, Hana Bank's household loan growth rate this year was exceptionally low. Comparing the increase in mortgage loans from January to May this year, Hana Bank's growth rate was only 0.8%. The rates for other banks were as follows: KB Kookmin Bank at 1.4%, Shinhan Bank at 1.6%, Woori Bank at 2.4%, and NH Nonghyup Bank at 5.6%.

Shinhan Bank, Junggu, Seoul. Photo by Jinhyung Kang aymsdream@

Among the banks that received penalties, Shinhan Bank managed its household loans the best. For the period from January to May this year, Shinhan Bank recorded a negative growth rate in household loans. A negative rate occurs when the amount of loan repayments exceeds the amount of new loans issued.

NH Nonghyup Bank complied with household loan management guidelines last year, but this year has seen explosive growth, leading the bank to actively manage its total loan volume recently. Starting from the 24th, NH Nonghyup Bank will temporarily block both in-person and online mortgage refinancing from other banks to Nonghyup Bank.

Last week, the bank also tightened its household loan conditions by applying the preferential interest rate (0.2 percentage points), which was previously offered to customers with a loan-to-value (LTV) ratio of 40% or less, only to those with an LTV ratio of 30% or less.