S. Korea’s debt grows at alarming level; S. Korea household debt estimated to have topped $935bn; Credit risks of S. Korea large firms hit 4-year high in Q4

S. Korea household debt estimated to have topped $935bn

2014.01.07 15:25:13

South Korea’s household debt is projected to have already exceeded 1,000 trillion won ($935.2 billion).

The estimate came after the outstanding balance of household debt, which includes household loans from all financial institutions and credit purchases provided by credit card issuers, came to 991.7 trillion won in late September of 2013, while depository institutions’ lending alone increased nine trillion won in October and November last year. The outstanding balance of household loans extended by banks and non-banking depository institutions such as savings banks, credit unions, the Korea Federation of Community Credit Cooperatives, and mutual finance companies expanded five trillion won month-on-month (mom) to 681.1 trillion won in late November last year, said the Bank of Korea Tuesday.
Depository institutions’ lending to households had declined from 659.9 trillion won in December 2012 to 654.4 trillion won in March 2013, but afterwards swung to expansion and has touched fresh record-high every month since May.
Outstanding household loans alone ballooned nine trillion won in two months since the end of September last year.
The outstanding balance of household debt reached 991.7 trillion won at the end of September last year.
Household debt, the most illuminating indicator for the size of domestic household debt, is calculated on a quarterly basis by incorporating the sum of loans extended to households by depository institutions and financial institutions including insurers, pension funds, predatory lenders, and public financial institutions, as well as credit purchases.
“Home mortgage for first-time housing loan debtors, profit-sharing mortgage, and other government-backed loans are rising as well,” said Lee Joon-hyup, researcher at Hyundai Research Institute. “Outstanding household debt is expected to have undoubtedly surpassed 1,000 trillion won at the end of December last year.”

S. Korea’s debt grows at alarming level

2014.01.05 13:56:54

South Korea’s level of national debt is lower than other nations, but its pace of annual growth over the last decade is higher than that of Southern European nations which are facing fiscal crisis, data showed.

An estimate based on the 2014 budget puts the government’s debt at 514.8 trillion won ($487.9), up 50.1 trillion won from the previous year, according to the Ministry of Strategy and Finance and National Assembly Budget Office Sunday.
The nation’s projected ratio of debt to gross domestic production (GDP) is 36.4 percent, far lower than the OECD average of 108.8 percent. The nation’s figure is still below Japan’s 219.1 percent, US 106.3 percent , the UK 103.9 percent and Germany 89.2 percent.
However, the pace of its rise is a source of concern as the nation’s debt climbed 12.3 percent from 2000 to 2012 on an annual basis, higher than that of Southern European nations struggling with fiscal crisis including Portugal with 10.5 percent, Spain 7.4 percent, Greece 6.7 percent and Italy 3.6 percent.
Among 34 OECD nations, Korea posted seventh highest growth after Luxemburg with 17.4 percent, Turkey 16.2 percent, Iceland 16.2 percent, Island 14.6 percent, Estonia 13.5 percent and Czech 12.5 percent.
The Korean government debts skyrocketed during the 1997 financial crisis as the government had to pay back public funds. The figure stayed at a stabilized level after 2006, but climbed again in the aftermath of the 2008 financial crisis.
The nation’s government liabilities rise at a relatively higher rate of 8.9 percent on an annual basis from 2008 to 2014.

Credit risks of S. Korea large firms hit 4-year high in Q4

2014.01.06 15:16:47

The credit risks of South Korean conglomerates for the fourth quarter (Q4) last year hit the highest level in four years since 2009.

The index of credit risks for the nation’s large companies reached 16 in Q4 last year, according to the Bank of Korea (BOK)’s survey on financial institutions’ lending practice released Monday.
The number touched a four-and-a-half year high since Q2 of 2009 when companies suffered financial woes in the aftermath of the global financial crisis.
With a baseline of zero, the index measuring credit risks ranges between -100 to 100. The higher the index is, the more banks keep their tight stance on lending toward large companies.
The reading surged to 28 in Q4 2008 during the global financial crisis, and gradually declined to swing to negative growth in 2011. However, the figure resumed an upward path to stay around six to nine since Q3 2012.
A BOK official noted, “amid lingering uncertainties at home and abroad including the yen’s slide and fears over some conglomerates’ fragile financial structure, the credit risks of large companies for Q1 this year will likely remain unchanged from the previous quarter.”
An index gauging banks’ lending attitudes toward large firms came to minus five, the lowest unseen since minus nine of Q2 2009.
This means banks will likely tighten grip on lending on concerns that some conglomerates could face default triggered by worsening financial soundness.