South Korean credit loans surge by 2.7 trillion won amid 'debt-to-invest' boom

Major South Korean commercial banks experienced a significant surge in credit loan balances in May, reaching 2.7 trillion won. This marks the largest monthly increase in over five years, driven by a strong stock market performance and a rise in "debt-to-invest" (bitu) activities. Individuals are increasingly leveraging credit lines, such as overdrafts, to fund their investments.

The combined credit loan balance across five major banks, Kookmin, Shinhan, Hana, Woori, and Nonghyup, stood at 106.99 trillion won as of May 28. This represents an increase of 2.65 trillion won from the end of April. This growth is the most substantial since April 2021, when credit loans rose by 6.84 trillion won amid a booming stock market that saw the KOSPI index surpass 3,200 points.

The increase in credit loans was primarily fueled by overdraft accounts. The balances in these accounts across the five banks grew by 2.14 trillion won in May, reaching 41.93 trillion won. This is the first time overdraft balances have increased by over 2 trillion won in a single month since April 2021, and the total balance is the highest in three and a half years.

Conversely, the growth in housing loans has slowed considerably. As of May 28, the total balance for housing loans across the five banks was 612.27 trillion won, an increase of only 25 billion won from the end of April. This stark contrast highlights the shift in borrowing patterns, with credit loans increasing more than 100 times the amount of housing loans in May. A banking official noted that regulatory restrictions have significantly curbed housing loan operations, leading to the surge in credit loans for investment purposes.

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The authorities' regulations have significantly curbed housing loan operations, leading to a surge in credit loans, such as overdrafts, due to 'debt-to-invest' demand.