Growth in South Korean banks' household lending slowed to a five-month low last month, a shift the central bank attributed to a slowdown in jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) transactions and reduced stock investment by individuals amid a correction in the domestic equity market.
Outstanding household loans at banks stood at 1,198.9 trillion won ($841 billion) at the end of September, up 600 billion won from a month earlier, according to the Bank of Korea's monthly report on financial market trends released on the 15th. It marked the seventh straight monthly increase since March.
The gain was the smallest since April, when loans rose 2.1 trillion won. The increase narrowed sharply from 7.6 trillion won in June, 5.5 trillion won in July and 3.5 trillion won in August.
By category, mortgage loans rose 2.9 trillion won from the previous month to 995.5 trillion won, a smaller gain than August's 4.1 trillion won. Other loans, including unsecured personal credit loans, fell 2.3 trillion won to 242.6 trillion won.
"Mortgage loan growth narrowed as jeonse transactions slowed," a Bank of Korea official said. "Other loans declined for a second consecutive month on reduced stock investment by individuals, the sale and write-off of bad loans at the end of the quarter and the inflow of holiday bonuses, which pulled down overall loan growth." Jeonse deposit loans have fallen for 13 consecutive months since September last year.
Corporate lending, by contrast, expanded at a faster pace. Outstanding corporate loans at banks reached 1,441.5 trillion won at the end of last month, up 10.7 trillion won from a month earlier. It was the ninth consecutive monthly increase and a wider gain than August's 9.7 trillion won, matching the largest rise since April, when loans also grew 10.7 trillion won.
Lending to large companies grew 7.5 trillion won last month, up sharply from 4.9 trillion won in August. The central bank said the surge came as banks continued to step up lending operations and as companies sought funds to repay corporate bonds and finance capital investment.
Lending to small and medium-sized enterprises slowed to 3.2 trillion won from 4.8 trillion won in August. Demand for working capital, including funds for the Chuseok holiday, persisted, but the gain narrowed because of the sale and write-off of bad loans at the end of the quarter, the central bank said.
Companies stepped up net redemptions of corporate bonds. With rising market interest rates adding to issuance costs and a larger volume of debt coming due, net redemptions jumped to 3.4 trillion won last month from 900 billion won in August.