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Korea Herald
12 hours ago
- Business
- Korea Herald
Household loans by major banks rise at fastest pace in 10 months in June
Household loans extended by five major banks in South Korea rose at the fastest pace in 10 months, industry data showed Sunday, amid signs of overheating in the housing market and a recent rally in the local stock market. Outstanding household loans extended by the five major commercials banks here, including KB Kookmin Bank and Shinhan Bank, stood at 752.1 trillion won ($547.6 billion) as of Thursday, up 3.99 trillion won from the end of May, according to the data. This translates to a daily increase of 210.2 billion won over the 19-day period in June, the fastest pace since last August, when loans grew by a daily 310.5 billion won. If this trend continues through the end of the month, household loans are expected to increase by 6.3 trillion won in June, marking the largest monthly gain since August last year, when they jumped 9.63 trillion won. By category, outstanding home-backed loans reached 596.6 trillion won as of Thursday, up 2.99 trillion won from the end of May. Unsecured loans also climbed to 104.4 trillion won, increasing by 1.09 trillion won over the same period. Market watchers attributed the recent rise in household loans to strong demand for investment in both the real estate and financial markets. Recent data showed that Seoul's apartment market has been on an upward trajectory for 20 consecutive weeks since turning positive in early February, with the pace of gains accelerating in recent weeks. Apartment prices in the capital city climbed by an average 0.36 percent as of Monday, the biggest weekly increase since the second week of September 2018, when prices rose 0.45 percent. Meanwhile, the local stock market has also been rallying since the new Lee Jae Myung government took office earlier this month. The benchmark Korea Composite Stock Price Index (KOSPI) finished at 3,021.84 points Friday, surpassing the 3,000-point threshold for the first time since Dec. 28, 2021. (Yonhap)
Korea Herald
08-06-2025
- Business
- Korea Herald
Why won likely to stall above 1,300
Widening rate gap with US, trade tensions, weak fundamentals limit further gains The Korean won has been staging a sharp rally, reaching its strongest levels in seven months in June. However, further appreciation beyond the 1,300-per-dollar threshold appears limited as economic headwinds persist. Earlier this year, the won weakening past 1,400 per dollar was considered the 'new normal.' But the local currency has since gained ground, with its average exchange rate in May standing at 1,390.7 won per dollar, dipping below 1,400 for the first time since November. On Thursday, the won closed daytime trading at 1,358.4 per dollar — its strongest level since Oct. 14. The momentum continued in after-hours trading, with the currency quoted at 1,356.5 by the close. The local foreign exchange market was closed Friday in observance of a public holiday. The recent appreciation of the Korean won has been partly fueled by renewed interest from foreign investors in the stock market, who purchased local equities worth 2.2 trillion won ($1.6 billion) following President Lee Jae-myung's election victory on Tuesday. While some market observers expect the won to strengthen further against the greenback, forecasts generally cap gains in the low 1,300 range. For instance, KB Kookmin Bank projects the won could appreciate as much as 1,330 per dollar in June. In contrast, in September, the outlook was more optimistic, with market expectations of the won strengthening toward the 1,200 level — a return to 2022 conditions, when the annual average exchange rate stood at 1,292.2 won per dollar. Expectations for the won to break below 1,300 have since moderated, as structural challenges continue to weigh on the currency, despite the easing of depreciation pressure triggered by political uncertainty. 'While the won may appreciate further in the short term, gains will likely be capped,' said Wi Jae-hyun, an analyst at NH Futures. 'Supplementary budget measures, the resolution of political uncertainty, and a rate cut-driven recovery in domestic demand are expected to provide a floor for the Korean economy. However, uncertainties in exports, stemming from US President Donald Trump's tariff policies, continue to pose a significant headwind to a growth rebound.' Another key factor limiting further appreciation is the widening interest rate gap between Korea and the United States. Following the Bank of Korea's 0.25 percentage point rate cut in May, the key interest rate differential between Korea and the US widened from 1.75 to 2 percentage points. This gap is expected to grow further, as the US Federal Reserve has signaled a continued hawkish stance to curb inflation — in part due to Trump's tariff measures — while the BOK has leaned toward a more dovish approach to support domestic growth. The divergence in monetary policy increases capital outflow pressures from Korea, as investors typically shift toward higher-yielding assets. This outflow puts downward pressure on the won. Experts caution against expecting a major rally in the local currency. 'The current level of the won reflects the country's economic fundamentals. It would not be reasonable to expect a sharp appreciation when the local economy is forecast to remain weak,' an official from the Bank of Korea said. The official added that a weaker won can play a constructive role in an economic slowdown. 'In times of economic downturn, a softer currency can help boost exports and attract foreign investment in undervalued won-denominated assets. While actively depreciating the won to spur growth should be avoided, a weak currency does serve a purpose under such conditions.'
Korea Herald
08-06-2025
- Business
- Korea Herald
Why Korean won's rally hits wall at 1,300
Widening rate gap with US, trade tensions, weak fundamentals limit further gains The Korean won has been staging a sharp rally, reaching its strongest levels in seven months in June. However, further appreciation beyond the 1,300-per-dollar threshold appears limited as economic headwinds persist. Earlier this year, the won weakening past 1,400 per dollar was considered the 'new normal.' But the local currency has since gained ground, with its average exchange rate in May standing at 1,390.7 won per dollar, dipping below 1,400 for the first time since November. On Thursday, the won closed daytime trading at 1,358.4 per dollar — its strongest level since Oct. 14. The momentum continued in after-hours trading, with the currency quoted at 1,356.5 by the close. The local foreign exchange market was closed Friday in observance of a public holiday. The recent appreciation of the Korean won has been partly fueled by renewed interest from foreign investors in the stock market, who purchased local equities worth 2.2 trillion won ($1.6 billion) following President Lee Jae-myung's election victory on Tuesday. While some market observers expect the won to strengthen further against the greenback, forecasts generally cap gains in the low 1,300 range. For instance, KB Kookmin Bank projects the won could appreciate as much as 1,330 per dollar in June. In contrast, in September, the outlook was more optimistic, with market expectations of the won strengthening toward the 1,200 level — a return to 2022 conditions, when the annual average exchange rate stood at 1,292.2 won per dollar. Expectations for the won to break below 1,300 have since moderated, as structural challenges continue to weigh on the currency, despite the easing of depreciation pressure triggered by political uncertainty. 'While the won may appreciate further in the short term, gains will likely be capped,' said Wi Jae-hyun, an analyst at NH Futures. 'Supplementary budget measures, the resolution of political uncertainty, and a rate cut-driven recovery in domestic demand are expected to provide a floor for the Korean economy. However, uncertainties in exports, stemming from US President Donald Trump's tariff policies, continue to pose a significant headwind to a growth rebound.' Another key factor limiting further appreciation is the widening interest rate gap between Korea and the United States. Following the Bank of Korea's 0.25 percentage point rate cut in May, the key interest rate differential between Korea and the US widened from 1.75 to 2 percentage points. This gap is expected to grow further, as the US Federal Reserve has signaled a continued hawkish stance to curb inflation — in part due to Trump's tariff measures — while the BOK has leaned toward a more dovish approach to support domestic growth. The divergence in monetary policy increases capital outflow pressures from Korea, as investors typically shift toward higher-yielding assets. This outflow puts downward pressure on the won. Experts caution against expecting a major rally in the local currency. 'The current level of the won reflects the country's economic fundamentals. It would not be reasonable to expect a sharp appreciation when the local economy is forecast to remain weak,' an official from the Bank of Korea said. The official added that a weaker won can play a constructive role in an economic slowdown. 'In times of economic downturn, a softer currency can help boost exports and attract foreign investment in undervalued won-denominated assets. While actively depreciating the won to spur growth should be avoided, a weak currency does serve a purpose under such conditions.' silverstar@
Korea Herald
30-05-2025
- Business
- Korea Herald
20 Korean financial institutions adopt ID verification for foreign customers
A total of 20 Korean financial institutions, including banks, savings banks, securities brokerage firms and a credit card company, have adopted the government's identity verification service for foreign residents, according to the Justice Ministry on Friday. The system enables foreign nationals in South Korea to have their identification verified using their residence cards to access personal financial services -- such as opening a bank account, taking personal loans and wiring money overseas -- both via mobile and bank branches at 10 institutions. These are three commercial banks, namely KB Kookmin Bank, Shinhan Bank and Woori Bank; state-owned Industrial Bank of Korea; credit card firm KB Kookmin Card; and five provincial banks, which are Kwangju Bank, Kyongnam Bank, iM Bank, Busan Bank and Jeonbuk Bank. At Hana Bank, a commercial institution, and mobile-only Toss Bank, as well as savings banks JB Woori Capital and Welcome Savings Bank, foreign customers can use the system to verify their identity for mobile banking services only. At these 14 institutions, foreign nationals can access a range of personal banking services and other financial services remotely, while the institutions can avoid the risk of identity fraud, according to the government. The Justice Ministry introduced the "residence card verification service" in 2023 following a revision of the Immigration Act in December 2022. It has enabled financial institutions to immediately verify a foreign customer's identity based on immigration agency data, allowing access to financial services without the need for in-person visits. At six other institutions -- Nonghyup Bank, Suhyup Bank, National Federation of Fisheries Cooperatives, Korea Federation of Community Credit Cooperatives, Mirae Asset Securities and Hana Securities -- the identity verification service is available for foreign customers at branches only. The government said it was moving to add more financial institutions starting in June.
Korea Herald
12-05-2025
- Business
- Korea Herald
KB Bank signals strategic shift in Indonesia with profit rebound
With profits up, bank weighs naming first local chief KB Kookmin Bank is expected to push for a breakthrough at its long-struggling Indonesian subsidiary, KB Bank, with a change in leadership this year. Accelerating the shift, the unit returned to profitability in the first quarter. KB Bank President Director Lee Woo-yeol is set to step down at the holding company's shareholder meeting scheduled for May 28 at its Seoul headquarters. The bank is reportedly considering appointing an Indonesian national as Lee's successor. If confirmed, it would mark the first time a local figure has led the unit since KB Kookmin Bank fully acquired the Indonesian lender in 2020. Lee, who previously served as Chief Information Officer at KB Kookmin Bank, was appointed to the role to oversee the digital transformation of the unit through the Next Generation Banking System project. On April 21, KB Bank announced the successful launch of NGBS and completion of its system migration. 'The successful migration to NGBS reflects our commitment to delivering banking services that are relevant to today's and future banking needs. Customers can now enjoy a faster and more secure transaction experience, seamlessly across all KB Bank service channels, both online and at branch offices,' Lee said in a press statement. Adding momentum to the restructuring efforts, KB Bank reported a consolidated net profit of 352 billion rupiahs ($21 million) in the first quarter, a sharp turnaround from a net loss of 827 billion rupiahs during the same period last year. With an 11.19 percent increase in net interest income, the unit returned to profit after recording a net loss in the previous quarter. 'These figures are preliminary, based on local standards. They will be finalized once included in the group's consolidated financial statement. But overall, KB Bank has returned to profitability in the first quarter,' a KB Financial Group official said. 'The goal is to post a full-year profit,' the official added. The unit also reported 'notable improvement' in asset quality, with its loan-at-risk ratio falling to 23.41 percent from 34.33 percent. The nonperforming loan ratio improved to 9.1 percent from 9.92 percent. Liquidity also strengthened, with third-party funds growing 10.86 percent on-year, driven by an increase in low-cost deposits. 'This performance underscores the tangible progress of our strategic transformation under the stewardship of KB Financial Group, South Korea's largest financial institution,' the unit said in a social media post. The Indonesian unit had long been a drag on KB Kookmin Bank's global expansion strategy. With the recent turnaround, the lender is expected to report a profit in its overseas operations. While KB Kookmin Bank posted a 96.2 billion won net profit from global operations in the first quarter of 2023, it fell into a net loss of 2.56 billion won during the same period last year, primarily due to losses from the Indonesian unit.
