Companies Surviving on Debt... Corporate Loans Increase by 16 Trillion Won in May

Bank of Korea 'Financial Market Trends in May 2020'

[Asia Economy Reporter Kim Eun-byeol] Last month, the increase in corporate loans by banks continued at a high level. Thanks to the government's market stabilization measures, the issuance conditions for corporate bonds improved, resulting in a reduced growth rate. Previously, in April, the increase in corporate loans by banks recorded the highest level since statistics began.

According to the "Financial Market Trends for May 2020" announced by the Bank of Korea on the 10th, as of the end of last month, the outstanding corporate loans by banks amounted to 945.1 trillion won, an increase of 16 trillion won compared to the previous month.

The increase is the third highest since the Bank of Korea started compiling related statistics in June 2009, following April (27.9 trillion won) and March (18.7 trillion won) of this year. However, compared to April, the growth rate decreased as the issuance conditions for corporate bonds improved. The net issuance of corporate bonds was only 100 billion won in April but expanded to 3.3 trillion won in May.

By company size, bank loans to large corporations increased from 11.2 trillion won to 2.7 trillion won, showing a reduced growth rate. Loans to small and medium-sized enterprises amounted to 13.3 trillion won, which is a decrease in growth compared to the previous month (16.6 trillion won) but still remained at a high level.

Last month, the increase in household loans by banks maintained a similar level to the previous month. As of the end of last month, the outstanding household loans by banks, including the transferred policy mortgage loans from the Korea Housing Finance Corporation, amounted to 920.7 trillion won, an increase of 5 trillion won compared to the end of the previous month. Previously, in April, household loans by banks increased by 4.9 trillion won, and in March, they increased by 9.6 trillion won, marking the highest level since statistics began.

The balance of mortgage loans, which account for the majority of household loans (including transferred policy mortgage loans), was 680.8 trillion won, an increase of 3.9 trillion won compared to the end of the previous month. This is due to a slowdown in demand for funds related to housing sales and jeonse (long-term lease) transactions. According to the Seoul Real Estate Information Plaza, the number of apartment sales transactions in Seoul decreased from 4,000 units in March to 3,000 units in April, and jeonse transactions also decreased from 9,000 units to 7,000 units during the same period.

The balance of other loans, such as overdraft loans, stood at 238.9 trillion won as of the end of last month, an increase of 1.2 trillion won compared to the end of the previous month, reversing from a 100 billion won decrease in the previous month. The Bank of Korea explained, "Typically, in May, credit loans tend to increase due to consumption expenditures related to Family Month."

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