KIF: Heavy Reliance on Household Loans Limits Productive Financing for Top 4 Banks

An analysis suggests that the relatively high proportion of household loans held by domestic banks is hindering them from becoming more active in productive financing.
Kim Seok-ki, a senior research fellow at the Korea Institute of Finance (KIF), presented this analysis in a report released today (June 20), comparing the four major domestic banks (KB Kookmin, Shinhan, Hana, and Woori) with JPMorgan Chase of the U.S. and Mitsubishi UFJ of Japan.
While domestic banks have maintained a portfolio centered on consumer loans (household loans), banks in the U.S. and Japan have focused primarily on corporate lending.
The ratio of household loans to total assets for the four major domestic banks averaged 27.8%, whereas it was only 14.5% for JPMorgan and 3.1% for Mitsubishi UFJ.
The situation was the opposite regarding the proportion of "ultra-low-risk assets," such as deposits and government bonds, which carry almost no risk of principal loss and low volatility.
The ratio of ultra-low-risk assets to total assets was 29.2% for JPMorgan and 41.8% for Mitsubishi UFJ, significantly higher than the 11.8% average of the four major domestic banks.
Having a high volume of such ultra-low-risk assets reduces the burden of risk-weighted assets (RWA), allowing banks to be more active in high-risk, high-return lending and investment.
Senior Research Fellow Kim pointed out that the structure of domestic banks, which is heavily skewed toward household loans, could act as a structural constraint on productive financing, and suggested that plans to diversify asset structures should be considered.
He stated, "We should consider a mid- to long-term transition toward a 'Korean-style barbell portfolio' that balances risk-free safe assets with high-yield assets."
(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.