IBK Industrial Bank of Korea Surpasses SMEs in Household Loan Growth Rate... First Quarter Earnings Soar

SME Loan Growth Rate Stands at 2.8%, Lower Than Overall Increase
Meanwhile, Household Loan Growth Rate is 3.6%
"Difficult to Get Loans Without Collateral"...Collateral and Guarantee Loans Exceed 80%

[Asia Economy Reporter Park Sun-mi] IBK Industrial Bank of Korea (IBK) delivered outstanding performance in the first quarter of this year, far surpassing commercial banks. However, contrary to the bank’s founding purpose of ‘providing financial support to small and medium-sized enterprises (SMEs),’ the growth rate of household loans exceeded that of SME loans. There are criticisms that the bank neglected its fundamental role as a policy bank by failing to properly support SMEs struggling amid the spread of COVID-19.

According to IBK on the 27th, the consolidated net profit including subsidiaries for the first quarter of this year recorded 592 billion KRW, an 18.3% increase compared to the same period last year. The net profit on a separate basis excluding subsidiaries increased by 8.3% to 539.8 billion KRW. Even when looking at the bank alone, this surpasses the first-quarter net profit growth rates of other commercial banks such as Shinhan Bank (4.8%) and Hana Bank (3.8%).

IBK cited loan asset growth through support for SMEs and small business owners, as well as stable soundness management due to the recovery of client companies’ business conditions, as the main factors behind the profit increase.

However, the growth rate of SME loans was actually lower than that of household loans. During this period, IBK’s total loan balance stood at 192.1 trillion KRW, up 2.9% from the end of the previous year. The SME loan growth rate was 2.8%, lower than the overall growth rate. In contrast, the household loan growth rate reached 3.6%. During the same period, the proportion of SMEs in IBK’s total loans remained at 79.9%, the same level as at the end of last year.

An IBK official explained, "SME loans increased significantly last year, which lowered the growth rate in the first quarter. The higher growth rate of household loans is due to increased real demand such as apartment mortgage loans."

Higher Barriers for SME Loans... Increase in Collateral and Guaranteed Loans

Another issue is that the proportion of unsecured loans in SME lending has decreased, while the share of less risky collateral and guaranteed loans has increased.

In the first quarter, the proportion of unsecured loans to SMEs at IBK was 17.8%. The shares of collateral loans and guaranteed loans were 63% and 19.2%, respectively. Before the full-scale expansion of SME loans due to COVID-19, in the first quarter of last year, the proportion of unsecured loans was 19.9%, and collateral and guaranteed loans accounted for 80.1%. This continuation of a stable collateral and guarantee-based lending practice means that the loan threshold for SMEs struggling to secure funds during the COVID-19 situation has been raised even higher.

As the COVID-19 situation continues, the conditions for domestic SMEs are becoming increasingly difficult. According to statistics recently released by the Small and Medium Business Research Institute, the SME Fund Condition Index (BSI) last year was 66.3, down 6 points from 72.3 the previous year. A BSI below 100 indicates a deterioration in funding conditions. As SMEs falter, the number of jobs has turned to a decline for the first time in 11 years since 2009. Last year, the number of employees in SMEs with fewer than 300 workers was approximately 24.23 million, a decrease of 297,000 (1.2%) from about 24.53 million the previous year.

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