Corporate Loans from 5 Major Banks Increase by 46 Trillion Won This Year

Increase in SME Loans Amounts to 34 Trillion Won, Accounting for 73%

[Asia Economy Reporter Buaeri] Corporate loans at the five major commercial banks have increased by nearly 46 trillion won over the past seven months this year. During the same period, household loans decreased by more than 11 trillion won due to interest rate hikes and regulatory measures by authorities, creating an atmosphere where banks are focusing on expanding corporate loans.

According to the banking sector on the 2nd, the outstanding corporate loans at the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) stood at 681.6743 trillion won at the end of July, an increase of 7.9191 trillion won compared to the previous month, and an increase of 45.7865 trillion won compared to the end of last year.

Looking at the loans by type, large corporate loans amounted to 94.6363 trillion won, up 2.7119 trillion won from the previous month and 12.2271 trillion won compared to the end of last year. Loans to small and medium-sized enterprises (including individual business owners) reached 587.0379 trillion won, expanding by 5.2073 trillion won compared to June and by 33.5594 trillion won compared to the end of last year. Among the increase in corporate loans (45.7865 trillion won), the increase in SME loans accounted for about 73%.

On the other hand, household loans have decreased for seven consecutive months. The outstanding household loans at the five major commercial banks stood at 697.4367 trillion won at the end of last month, down 2.2154 trillion won from the previous month and 11.6163 trillion won compared to the end of last year. A banking sector official stated, "With rising interest rates, there is a trend of customers repaying loans early."

This phenomenon is analyzed to be influenced by the five major commercial banks emphasizing corporate credit expansion since the beginning of this year. Unlike household loans, which are subject to total volume regulations, loan-to-value ratio (LTV), and debt service ratio (DSR) regulations, corporate credit is relatively free from government regulations. Furthermore, for individual business owners such as small merchants, there are almost no negative factors due to maturity extensions and interest payment deferrals until September, according to banking officials.

In fact, loans to individual business owners, which are included in SME loans, are also steadily increasing. Loans to individual business owners amounted to 312.3965 trillion won, increasing by about 1.615 trillion won compared to the previous month and by 12.675 trillion won compared to the end of last year. There are concerns that if interest rates rise further and financial support ends, defaults and deteriorations in soundness may occur among the rapidly increased corporate loans.

Earlier, the Korea Chamber of Commerce and Industry's Sustainable Growth Initiative (SGI) predicted that corporate loan interest burdens would increase by about 3.9 trillion won due to the Bank of Korea's big step (a 0.5 percentage point increase in the base interest rate). Lee Taegyu, senior research fellow at the Korea Economic Research Institute, also warned in a recent report, "Although household debt is mainly discussed when talking about the burden caused by rising interest rates due to its large scale, the possibility of debt deterioration due to interest rate hikes may be greater in the corporate sector," adding, "The deterioration of financial sector soundness due to rising interest rates may actually begin with corporate loan defaults."

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