Full-service banks want a slice too

Korean banks plan to increase their household loans by nearly 25 trillion won ($22.1 billion) this year, a move some fear will exacerbate snowballing private sector debt, industry sources said yesterday.

Local commercial banks say they will expand their household loan portfolios by 24.5 trillion won in 2012, up 5.4 percent over the outstanding amount of453.6 trillion won, according to their latest management plans submitted to the Financial Supervisory Service, the country’s financial regulator.

The envisioned figure would be the largest since the 24.9 trillion won in such loans extended by the banks in 2008.

If the loan growth trend continues through this year, the overall outstanding household loans extended by banks is expected to surpass 500 trillion won next year, FSC sources said.

The banks said they plan to focus their business on nonsecured loans instead of loans backed by mortgages or other collateral, raising concerns over the possibility of a rise in loan delinquency because unsecured loans attract higher interest rates.

They will increase both secured and nonsecured loans by 5.5 percent each. The figure is the biggest jump for unsecured loans since 2007, while the growth in secured lending would be far lower than its 7.5 percent growth last year, the sources said.

Yonhap