SEOUL — South Korean banks reported a sharp rise in deposit-backed loans, with totals at KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup reaching 6.34 trillion won ($4.37 billion) at the end of July, according to bank data. That marks a gain of 70.8 billion won ($48.7 million) from the end of 2023 and a bigger jump of 508.3 billion won ($350 million) from early 2024 levels.

These loans let customers borrow up to 95% or 100% of their deposit balances. Banks charge interest at the deposit rate plus about one percentage point. Demand picked up as the KOSPI index rallied this month. Stricter household loan caps have made traditional borrowing tougher.

Bankers say the products appeal to customers shut out of mortgages and other credit. New deposit-backed loans dodge debt service ratio calculations under rules tightened last year. That exemption boosts their draw.

The trend flips a slump from early 2024. Balances at the five banks fell to 5.83 trillion won ($4.01 billion) by March’s end, down 604.2 billion won ($416 million) from 6.43 trillion won ($4.43 billion) at the end of 2023. Banks often ease quotas at year-start, cutting the need for such loans then.

Now, investors use deposits as collateral to fund stock bets without touching principal. Equity-linked deposits, or ELDs, show the shift too. Banks relaunched these products amid low rates and KOSPI 200 upside. Sales hit 5 trillion won in the first seven months of 2024, topping 70% of full-year 2023 totals.

Shinhan Bank kicked off its ‘Safe Equity-Linked Deposit KOSPI 200’ 25-18 series earlier this month. Subscriptions continue. The bank rolled out 18 ELD products this year. KB Kookmin started ‘KB Star Equity-Linked Deposit’ in January and refreshes it monthly. Hana Bank and NH Nonghyup have ramped up offerings as well.

ELDs park customer principal in bonds for safety. Interest flows to KOSPI 200-linked assets for potential extra yield. Principal stays protected. Investors pull cash from plain deposits into these hybrids.

The action spills to brokerages. Korea Investment & Securities, Mirae Asset Securities, Samsung Securities, Kiwoom Securities and NH Investment & Securities each posted net profits over 1 trillion won this year. Korea Investment led with more than 2 trillion won, topping NH Nonghyup Bank’s earnings. Higher KOSPI and KOSDAQ trading volumes fueled the gains, along with funds shifting from banks.

Analysts expect solid brokerage results short-term. They urge firms to spread revenue beyond trading commissions for lasting stability. Deposit loans, ELDs and brokerage booms tie together in South Korea’s financial web, shaped by market heat, rules and shifting appetites.