Industrial Loans Increase by 68 Trillion Won in Q2 Due to Raw Material Price Burden... Second Largest Growth Ever

<기사제목>Bank of Korea, Q2 Loans by Industry from Deposit-Taking Institutions

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] Due to the impact of rising raw material prices, companies increased their financing through financial institutions, resulting in industrial loans rising by approximately 68 trillion won in the second quarter (April to June).

According to the '2022 Q2 Depository Institutions Industrial Loans by Industry' statistics released by the Bank of Korea on the 2nd, as of the end of June, total industrial loans amounted to 1,713.1 trillion won, an increase of 68.4 trillion won compared to the previous quarter.

This increase is the second largest on record following the second quarter of 2020 (69.1 trillion won), with the growth rate expanding compared to the previous quarter (63.9 trillion won). The year-on-year growth rate was 15.9%, up from 14.5% in the previous quarter, marking record highs in both the amount and rate of increase.

By industry, the manufacturing sector's increase narrowed compared to the previous quarter, while the service sector, centered on finance and insurance, saw an expanded increase in loans.

In particular, the service sector balance rose from 1,073.6 trillion won to 1,121.6 trillion won, an increase of 48.1 trillion won, marking the largest increase on record. Within the service sector, loans in real estate (+13.4 trillion won), driven by continued commercial real estate investment, and finance and insurance (+7.4 trillion won) increased significantly.

Wholesale and retail trade (+11.7 trillion won) and accommodation and food services (+2.3 trillion won) saw their growth narrow by 100 billion won and 200 billion won respectively, as business conditions somewhat improved following the lifting of social distancing measures in April.

The manufacturing loan balance increased by 10.9 trillion won over three months, from 428.5 trillion won to 439.4 trillion won. The loan growth continued mainly in sectors importing raw materials such as food and beverages due to exchange rate and raw material price increases, but the increase narrowed as some loans were repaid to manage financial ratios at the half-year end.

By loan purpose, working capital increased by 44 trillion won in the second quarter, marking the second largest increase ever, while facility funds rose by 24.4 trillion won, the largest increase on record. The increase in working capital was driven by growing demand for raw material procurement funds, and facility funds increased due to sustained demand related to commercial real estate.

By financial institution type, deposit banks (+36.2 trillion won) expanded their relatively less regulated corporate loan handling, leading to a larger increase, whereas non-bank deposit-taking institutions (+32.2 trillion won) tightened lending attitudes for risk management, resulting in a contraction.

By company type, among deposit bank loans, corporate enterprises (+30.7 trillion won) saw a significant increase centered on finance, insurance, and real estate sectors, while non-corporate enterprises (+5.5 trillion won) contracted mainly in wholesale and retail trade and accommodation and food services due to loss compensation payments in May and June.

Park Chang-hyun, head of the Bank of Korea's Financial Statistics Team, stated, "Loan demand from companies increased due to rising exchange rates and raw material prices," adding, "The deteriorated financing conditions in the domestic corporate bond market also contributed to companies borrowing more from financial institutions."

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