September Bank Loans: Household Loans Down 1.2 Trillion KRW, Corporate Loans Up 9.4 Trillion KRW... 32 Trillion KRW Pooled in Savings Deposits

Record High Increase in Corporate Loans as of September
Largest Growth in Time Deposits Amid Rising Interest Rates

[Image source=Yonhap News]

[Asia Economy Reporter Seo So-jeong] Amid the Bank of Korea's base rate hikes, household loans from banks turned to a decline again last month, while corporate loans from banks increased by more than 9 trillion won, marking the largest increase since statistics began in 2009. Due to consecutive interest rate hikes, savings deposits attracted 32.5 trillion won in funds, reaching a record high increase.

According to the 'Financial Market Trends in September' released by the Bank of Korea on the 13th, bank household loans (including policy mortgage loans) decreased by 1.2 trillion won compared to the previous month as the increase in mortgage loans shrank and other loans declined further. This is the first time since statistics began in 2004 that household loans showed a decline in September.

Mortgage loans saw their increase shrink to 900 billion won as housing transactions remained sluggish and loans for group and jeonse (key money deposit) financing slightly decreased. This is the second smallest increase since related statistics began in 2004 for the month of September.

Other loans decreased by 2.1 trillion won due to rising loan interest rates and government loan regulations, marking the largest decline since statistics began in 2004 for September. Other loans have decreased for two consecutive months following August.

Bank corporate loans increased by 9.4 trillion won, maintaining a strong growth trend centered on large corporations despite seasonal factors such as quarter-end lump-sum repayments. Loans to small and medium-sized enterprises (SMEs) increased by 4.7 trillion won due to ongoing COVID-19 related financial support and working capital demand, while loans to large corporations rose by 4.7 trillion won as companies continued to rely on loans amid a contraction in the corporate bond market.

Hwang Young-woong, Deputy Head of the Market General Team at the Bank of Korea's Financial Market Department, explained, "Bank corporate loans showed the largest increase since related statistics began in 2009 for the month of September," adding, "The increase in large corporate loans is also the largest since statistics began for September."

Corporate bonds continued to see sluggish issuance due to weakened investor sentiment, turning to net repayments (from 300 billion won to -600 billion won), and commercial paper (CP) and short-term bonds (from 3.5 trillion won to -400 billion won) also shifted to net repayments due to quarter-end effects.

Bank deposits increased by 36.4 trillion won, mainly in time deposits, influenced by rising interest rates.

Demand deposits (-15.3 trillion won to -3.3 trillion won) decreased mainly in household funds due to fund shifts to savings deposits following the base rate hikes.

On the other hand, time deposits (21.2 trillion won to 32.5 trillion won) continued a strong increase due to banks' efforts to attract funds to improve regulatory ratios (LCR) and inflows of funds from households and corporations following rising deposit interest rates.

Asset management company deposits turned from an increase of 1 trillion won in August to a decrease of 12.4 trillion won last month. Money Market Funds (MMFs) decreased by 10.9 trillion won due to outflows of government surplus funds and banks' fund withdrawals to manage BIS ratios (Basel Committee on Banking Supervision recommended capital adequacy ratios). Other funds saw an inflow of 4.9 trillion won, but bond funds and equity funds experienced outflows of 2.3 trillion won and 3.1 trillion won, respectively.

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