July Household and Corporate Loan Growth Hits Record High... "Difficult to Slow Down Loan Increase Trend"

Bank of Korea 'Financial Market Trends in July 2021'

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eunbyeol] Last month, both household and corporate loans increased simultaneously, marking the largest July increase since the Bank of Korea began compiling related data in 2004.

According to the "Financial Market Trends in July 2021" released by the Bank of Korea on the 11th, bank household loans increased by 9.7 trillion KRW in July, expanding from 6.3 trillion KRW in June. Comparing the annual changes in July, this represents the largest increase since the Bank of Korea started compiling related data in 2004. The previous record for the largest July increase was 7.6 trillion KRW in July last year, which has now been surpassed.

Mortgage loans increased by 6.1 trillion KRW in July due to rising demand for funds related to home purchases and jeonse (long-term lease) deposits, along with continued group loan handling. This is about 1 trillion KRW more than the 5.1 trillion KRW increase in June. Bank jeonse deposit loans also rose from 2.3 trillion KRW in May and 2.2 trillion KRW in June to 2.8 trillion KRW in July.

Other loans increased by 3.6 trillion KRW in July, a larger increase compared to 1.3 trillion KRW in June. This was influenced by increased demand for funds related to public offering subscriptions for companies such as SD Biosensor, KakaoBank, and HK Innoen.

Park Sungjin, Deputy Head of the Market General Team at the Bank of Korea’s Financial Market Department, explained, "Household loans in the banking sector expanded in both mortgage and other loans compared to the previous month, and the scale is considerable. Mortgage loans increased significantly across individual loans related to sales, group loans, and jeonse deposit loans in similar proportions, while other loans mainly consisted of credit loans driven by demand for funds related to public offerings, as well as household living expenses."

Corporate loans at banks also increased significantly by 11.3 trillion KRW in July. The increase in corporate loans in June was 5.1 trillion KRW, so the increase expanded by 6 trillion KRW. The increase in corporate loans was the largest since June 2009, when the Bank of Korea began compiling preliminary statistics based on July’s increase.

Loans to large corporations decreased by 1.1 trillion KRW in June but increased by 2.3 trillion KRW in July, while loans to small and medium-sized enterprises (SMEs) expanded from 6.1 trillion KRW to 9.1 trillion KRW. For large corporations, the decrease in June was due to loan repayments at the end of the quarter followed by new borrowings, while for SMEs, the increase was driven by financial support from banks and policy financial institutions, as well as demand for funds related to value-added tax payments. The increase in loans to SMEs and individual business owners (4.2 trillion KRW) was also the largest on record for July.

Deputy Head Park added, "We need to observe the government's loan volume management intensity and regulatory effects further, but we believe it will be difficult for the household loan growth trend to slow significantly in the near future." Regarding corporate loans, he also noted, "Seasonal factors had the most significant impact in July, but with the implementation of social distancing level 4 from July 12, sales have slowed mainly in face-to-face service industries, which will act as a factor increasing loans going forward."

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