Savings Bank, 1.7 trillion won in mid-interest loans in the first quarter
As corporate loans such as PF deteriorate, household loans
Policy financial products such as Saitdol 2 also increased by about 1.7 times.
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The volume of mid-interest loans handled by savings banks was found to have increased by 100 billion won as of the end of the first quarter of this year compared to the same period last year. This is in contrast to a decrease of approximately 1 trillion won at the end of the first quarter of last year compared to the end of the first quarter of 2022 the previous year. As the corporate lending environment becomes difficult due to concerns about real estate project financing (PF) insolvency, it is analyzed that savings banks have turned to household loans to find a way out.
According to the Korea Federation of Savings Banks on the 25th, the volume of mid-interest loans handled by savings banks as of the end of the first quarter of this year was KRW 1.777 trillion, an increase of 6.5% (KRW 108.5 billion) compared to the same period last year. This number only counts private mid-interest loans executed by savings banks themselves, excluding ‘Syitdol 2’, which is a policy mid-interest loan.
A mid-interest loan is a loan issued to borrowers in the bottom 50% of credit ratings. From the perspective of savings banks, there is an advantage in that loans that meet the interest rate ceiling requirements are provided with incentives for credit extension limits. The Financial Services Commission sets the upper interest rate for mid-interest loans by industry every half year. In the case of savings banks, incentives will be applied if they comply with the 17.5% cap as of the first half of this year.
While the savings banking industry recorded a loss of 555.9 billion won last year, it is unusual for the private mid-interest loans issued by savings banks to increase. So far, private mid-interest loans handled by savings banks have continued to decline. In the first quarter of last year, the volume of private mid-interest loans plummeted by 43% from KRW 2.7562 trillion to KRW 1.6685 trillion in the same period last year, as credit operations became difficult due to the continued high interest rates due to the tight bond market.
An official from the Korea Federation of Savings Banks said, “The real estate recession has made it difficult to obtain corporate loans, including real estate PF, which has had an impact on the increase in household loans. From a risk management perspective, relatively small mid-interest loans are more advantageous than large corporate loans.” “I do,” he said.
Savings banks have increased not only private mid-interest loans, but also the size of ‘Saitdol 2’ loans, a policy mid-interest loan product, over the past year. In the first quarter of this year, Saitdol 2’s loan size was KRW 32.8 billion, an increase of KRW 13 billion from the same period last year (KRW 19.8 billion).
Saitdol 2 is a policy financial product guaranteed by SGI Seoul Guarantee to provide mid-interest loans to people with low and medium credit. Although profitability is low, it has the advantage of low risk for savings banks because it is guaranteed by a public institution.
An official from a savings bank said, “Mid-interest loans are relatively easy to manage risk as they can provide loans with an average interest rate of about 16% based on the new amount handled,” and added, “Also, Saitdol 2, a policy finance product, is safe, so it has a multiple-segment type.” “It seems like they are choosing a strategy of selling a lot.”
