"Corporate Loans Soar by 10 Trillion Won... 'Corporate Lending May Also Be Blocked'"

SME Loans Increase by 8 Trillion Won and Large Enterprise Loans by 2.3 Trillion Won
"Authorities Expected to Strengthen Household Loan Management Until Year-End"

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] As financial authorities tightened household loans, corporate loans soared to a record high. Household loans continued to increase mainly in mortgage loans, but the growth rate slowed compared to the previous month. There are also forecasts that financial institutions will ease their lending stance on corporate loans in the future.

According to the "Financial Market Trends for October 2021" announced by the Bank of Korea on the 10th, as of the end of October, the outstanding household loans in the banking sector amounted to 1,059.3 trillion won, an increase of 10.3 trillion won from the previous month. This is the largest increase since the statistics began in June 2009. It broke the record for the largest increase for the third consecutive month following August (7.9 trillion won) and September (7.7 trillion won).

The increase was driven mainly by corporate loans to small and medium-sized enterprises (SMEs). SME loans increased by 8 trillion won to 881 trillion won. This was influenced by funding demand due to COVID-19, financial support from banks and policy financial institutions, value-added tax payments, and demand for facility funds. Loans to individual business owners, mainly borrowed by self-employed individuals, also increased by 2.6 trillion won. SME loans recorded the second-largest increase since the related statistics began to be compiled as preliminary data as of October.

Loans to large corporations increased by 2.3 trillion won to 178.3 trillion won. The increase was driven by temporary repayments and re-borrowings for managing financial ratios at the end of the quarter, as well as banks' efforts to expand corporate loans.

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

The outstanding household loans in the banking sector stood at 1,057.9 trillion won, up 5.2 trillion won from the previous month. Due to the impact of strong loan regulations, the increase was smaller than the previous month’s 6.4 trillion won. Compared to the same period last year (10.6 trillion won), it decreased by 5.4 trillion won.

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

The increase in jeonse loans was 2.2 trillion won, slightly down from August (2.8 trillion won) and September (2.5 trillion won).

Other loans also saw a reduced increase. Other loans such as general credit loans increased by 500 billion won in October, a slower growth compared to 800 billion won in the previous month.

A Bank of Korea official said regarding future household loan trends, "Loan volume management by banks is expected to continue until the end of the year," adding, "Future developments will depend on the additional management intensity by the financial sector and asset markets such as housing and stock markets, so we need to keep an eye on these."

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

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