South Korean Banks Exhaust 80% of Household Loan Quotas Amid Debt Surge

South Korea's major banks are facing a rapidly tightening lending environment as household debt has surged, with the five largest banks having already utilized approximately 80% of their annual loan quotas by early June. This rapid depletion of quotas is largely attributed to a rebound in housing transactions and a significant increase in demand for leveraged investments, commonly known as "bitu" (borrowing to invest), fueled by a booming stock market.

As of June 9, the combined household loan balance across KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup banks stood at 648.36 trillion won, an increase of 3.38 trillion won since the end of last year. The aggregate annual household loan growth target for these five banks was set at 4.33 trillion won, meaning they have already consumed about 78.2% of this limit. This trend is particularly concerning as it marks a reversal from the first quarter, when the household loan balance had decreased by nearly 6 trillion won.

The surge in lending accelerated in the second quarter, especially in May, when the balance increased by nearly 3.7 trillion won. This uptick is linked to the approaching deadline for a tax incentive on multi-home ownership, which spurred housing transactions. For instance, Gyeonggi Province saw its apartment transactions surpass April's figures by early June, with potential to exceed May's numbers. Similarly, Seoul experienced a significant increase in apartment sales in April and May.

Beyond housing, the robust stock market has driven up demand for unsecured loans, particularly revolving credit lines (minus-tongjang). The outstanding balance of credit loans across the five major banks increased by 767.7 billion won to 109.43 trillion won as of June 9. Revolving credit lines alone surpassed 44 trillion won, an increase of 724.7 billion won from the end of May and a substantial 4.41 trillion won from the end of April, indicating a heavy reliance on these flexible credit lines for investment purposes.

In response to this rapid loan growth and to preemptively manage their annual quotas, banks are implementing stricter self-regulatory measures. KB Kookmin Bank has halved its maximum mortgage loan limits, and some banks have temporarily suspended new non-face-to-face loan applications. Measures like limiting revolving credit line maximums to 50 million won or tying them to a percentage of annual income are also being adopted. These actions signal a significant tightening of credit conditions for consumers in the latter half of the year.