Loan growth at South Korean banks ticked up to 3.5% year-on-year in May, according to data analyzed by Macquarie. The rebound reflected a 4.6% increase in corporate lending and a 2.3% rise in household loans.
Macquarie's review highlights corporate lending as the principal driver of the monthly improvement, supported by government-led productive finance programs. Household lending gains were concentrated in unsecured products tied to equity market activity, while mortgage lending rose for a second month as housing transaction volumes began to recover.
Mortgage expansion remained modest at 2.5% year-on-year in May, a pace described by Macquarie as the slowest since October 2023. On the funding side, deposit balances climbed 6.6% year-on-year, lifting the ratio of current account and savings accounts to 39.5%.
Macquarie emphasized that household demand has benefited from stronger unsecured lending and a pickup in housing transactions, but cautioned that regulatory constraints are likely to continue limiting overall household credit growth. The analysis notes that unsecured loans account for roughly 10% of the major banks' loan portfolios.
In response to concerns about household leverage, banks have been rolling out voluntary measures to rein in growth in that segment of their books. Those measures include tighter credit loan limits for higher-income borrowers, according to Macquarie's summary of industry behaviour.
Looking ahead, Macquarie sees limited upside for mortgage growth in light of upcoming regulatory changes. The firm specifically cites a June 2025 mortgage regulation that imposes a 600 million won cap on mortgages and an October 2025 widening of designated regulated areas as factors that will constrain future mortgage expansion.
Implications
- Bank balance sheets show a rebound in lending momentum, led by corporate credit demand.
- Household credit recovery is present but concentrated in unsecured lending and modest mortgage gains.
- Regulatory changes and voluntary bank measures are expected to keep household loan growth in check.