SEOUL, Oct. 2 (Korea Bizwire) — Household loans extended by five major lenders here have been growing at a steady pace, nearing a record high of 600 trillion won (US$499 billion) for the first time in history, industry data showed Wednesday.
As of end-September, outstanding household loans extended by the five local banks came to 599.38 trillion won, up about 43.6 trillion won from the end of 2018.
From a month earlier, the reading marks an increase of 2.59 trillion won.
But the September growth marks a sharp slowdown from 4.56 trillion won and 4.98 trillion won on-month increases in July and August, respectively, according to the data.
“The rate of rise slowed, but the demand appears to be on a steady rise despite government steps to curb household debt,” a bank official said.
The five local lenders are Shinhan, KB, Woori, KEB Hana and NH.
Household debt is fast becoming a downside risk for Asia’s fourth-largest economy, possibly forcing the Bank of Korea to think twice before reducing its policy rate to avert a further economic slowdown.
The South Korean economy unexpectedly contracted 0.4 percent from three months earlier in the first quarter, before rebounding 1 percent in the second quarter.
On an annualized basis, the local economy expanded 1.9 percent from the same period last year, far lower than the annual target of 2.2 percent.
Overall household debt, including credit spending and loans extended by all local lenders, came to a new high of 1,556.1 trillion won as of end-June.
The government plans to further restrict household debt by forcing local lenders to keep their overall lending at below their total deposit holdings from the start of next year.
Bank officials note this will inevitably undermine their interest earnings.
Local banks have posted a combined quarterly interest income of more than 10 trillion won since the second quarter of 2018, posting a combined 10.5 trillion won in interest income in the second quarter of this year.