As Household Loans Tighten, Corporate Loans Soar... Corporate Loans Increase by 10.3 Trillion Won, a Record High

Bank of Korea Announces 'Financial Market Trends in October 2021'
Mortgage Loans Increase by 4.7 Trillion Won... Demand Remains Strong

[Asia Economy Reporter Jang Sehee] In October, bank corporate loans increased by 10.3 trillion KRW, marking a record high. It is interpreted that commercial banks expanded corporate loans instead of household loans as financial authorities began managing the total loan volume.

According to the Bank of Korea's 'Financial Market Trends in October 2021' released on the 10th, as of the end of last October, the outstanding corporate loans in the banking sector amounted to 1,059.3 trillion KRW, an increase of 10.3 trillion KRW compared to the previous month. This is the largest increase since the statistics began in June 2009. It surpassed the previous record highs of 7.9 trillion KRW in August and 7.7 trillion KRW in September.

Park Sungjin, Deputy Head of the Market General Team at the Bank of Korea's Financial Market Department, said, "In terms of the total increase in corporate loans, October marks the highest ever," and added, "Banks that have met the household loan growth management targets appear to be easing their lending stance on corporate loans."

Loans to large corporations increased by 2.3 trillion KRW, and loans to small and medium-sized enterprises (SMEs) increased by 8 trillion KRW. The Bank of Korea explained that the increase in SME loans continued due to ongoing COVID-19 related financial support, as well as demand for value-added tax payments and facility funds.

Household Loan Growth Slows, but Corporate Loans Hit Record High

The outstanding household loans in the banking sector reached 1,057.9 trillion KRW, increasing by 5.2 trillion KRW compared to the previous month. The increase narrowed compared to the previous month’s 6.4 trillion KRW due to strong loan regulations. Compared to the same period last year (10.6 trillion KRW), it decreased by 5.4 trillion KRW.

Looking at household loan changes by type, mortgage loans including jeonse deposit loans (outstanding balance of 774.5 trillion KRW) increased by 4.7 trillion KRW over the month. However, the increase was smaller than the previous month’s 5.6 trillion KRW due to a decline in group loans.

The increase in jeonse deposit loans was 2.2 trillion KRW, slightly down from 2.8 trillion KRW in August and 2.5 trillion KRW in September.

Other loans also saw a reduced increase. In October, other loans such as general unsecured loans increased by 500 billion KRW, a slowdown compared to 800 billion KRW in the previous month.

Regarding future household loan trends, Deputy Head Park said, "Loan volume management by banks is expected to continue until the end of the year," adding, "Going forward, the additional management intensity by the financial sector and asset markets such as housing and stock markets may have an impact, so we need to monitor closely."

Meanwhile, bank deposits in October increased by 19.5 trillion KRW, continuing the upward trend from the previous month. Demand deposits decreased by 7.9 trillion KRW due to corporate fund withdrawals. However, time deposits increased by 17.9 trillion KRW influenced by rising deposit interest rates.

Government bond yields rose sharply due to global inflation concerns and the possibility of major countries shifting monetary policy stances, and short-term market interest rates also rose significantly influenced by expectations of base rate hikes and increased bank bond issuance.

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