Large Corporations and Households Alike... Reaching Out to Banks (Comprehensive)

Large Corporations Borrow 8 Trillion Won, Corporate Loans Increase 3.6 Times
Household Loans Also 6 Trillion Won, Highest in 4 Years and 4 Months

[Asia Economy Reporter Kim Min-young] Last month, won-denominated loans from the five major commercial banks surged by nearly 20 trillion won. This is attributed to large corporations securing cash to increase liquidity amid growing global uncertainties caused by the spread of COVID-19, and small and medium-sized enterprises (SMEs) facing difficulties in raising funds increasing their loans. Additionally, households experiencing financial hardship due to the highest number of temporary layoffs in a decade last month also borrowed more than 6 trillion won from banks.

According to the financial sector on the 2nd, the outstanding balance of won-denominated loans from Shinhan, KB Kookmin, Hana, Woori, and NH Nonghyup Banks totaled 1,170.7335 trillion won last month. This represents an increase of 19.8688 trillion won compared to the previous month, marking the largest increase since September 2015. This is highly unusual. Until now, the won-denominated loans from the five major banks increased by more than 10 trillion won only three times: October 2015 (14.284 trillion won), November 2015 (13.0199 trillion won), and October last year (10.4353 trillion won). Since the beginning of this year, bank won-denominated loans have been steadily rising, increasing by about 5 trillion won each month?5.2775 trillion won in January and 5.532 trillion won in February.

Corporate loans surged significantly. The increase in corporate loans in March was 13.4568 trillion won, 3.6 times the previous month’s 3.6702 trillion won.

In particular, loans to large corporations increased by 8.0949 trillion won. Typically, the increase in large corporate loans is around 2 trillion won, but last month saw a remarkable surge in bank loans. It is estimated that large corporations used pre-arranged bank credit lines to secure liquidity as the corporate bond market tightened due to COVID-19. Additionally, SMEs and small business owners facing financial difficulties likely increased their loans to cover factory and store operating expenses. In fact, SME loans also rose by 5.3619 trillion won compared to the previous month, with loans to individual business owners increasing by 2.7755 trillion won.

A representative from a commercial bank said, “Last year, the market was abundant in liquidity, but it has sharply frozen this year,” adding, “Large corporations securing cash have used credit lines similar to overdraft accounts, and banks have lowered loan thresholds to support SMEs and self-employed individuals affected by COVID-19.”

Household loans also showed a significant increase. Loans to households from the five major banks rose by 6.6801 trillion won last month, the largest increase in four years and four months since November 2015 (10.1822 trillion won), when household debt was rapidly increasing.

A substantial portion of household loans, mortgage loans, increased by 4.0688 trillion won. This is also the largest increase since December 2015 (5.6238 trillion won). Compared to increases of 1.2557 trillion won in January and 956.4 billion won in February this year, this is a significant rise. Personal credit loans also increased by 2.2408 trillion won last month, the largest increase since January 2016, when related statistics became available.

There is also an analysis that the significant increase in credit loans is influenced by individual investors entering the stock market. An industry insider said, “It is likely that individuals are using low-interest credit loans to invest in stocks.”

This content was produced with the assistance of AI translation services.