Increase in Industrial Loans in Q2 Expands for the First Time in 4 Quarters...Manufacturing Declines, Services Rise

KRW 184.28 Trillion... Up KRW 2.43 Trillion

As of the second quarter of this year, the increase in loans by deposit-taking institutions by industry expanded for the first time in four quarters. This is interpreted as a result of financial institutions expanding corporate loans while companies preferred bank loans over corporate bond issuance.

On the 7th, the Bank of Korea announced through the 'Loans by Industry of Deposit-Taking Institutions' data that the outstanding loans by deposit-taking institutions by industry reached 1,842.8 trillion won at the end of the second quarter, an increase of 24.3 trillion won compared to the end of the previous quarter.

The increase in loans by industry had been shrinking for three consecutive quarters?from 68.4 trillion won in the second quarter of last year, which was the second highest ever, to 56.6 trillion won in the third quarter, 28 trillion won in the fourth quarter, and 20.8 trillion won in the first quarter of this year?but expanded in the second quarter for the first time in four quarters.

Regarding this, Seo Jeong-seok, head of the Financial Statistics Team at the Economic Statistics Bureau of the Bank of Korea, said, "While deposit banks maintained a relaxed lending stance, the merit of direct financing compared to bank loans diminished, leading companies to prefer bank loans over corporate bond issuance."

By industry, loans to the manufacturing sector increased from 11 trillion won to 5.6 trillion won, showing a reduced growth rate. The demand for working capital decreased due to improved financial conditions of export companies, leading to a smaller increase.

The service industry, centered on finance and insurance, and real estate, saw the increase expand from 8.4 trillion won to 13.4 trillion won. In finance and insurance (-4.8 trillion won → -0.8 trillion won), the decline in loans for trust account bill purchases slowed, and loans from savings banks to credit finance companies increased, reducing the decrease in loans.

Real estate (5.1 trillion won → 6 trillion won) saw a slight expansion in the increase due to the recovery of real estate transactions.

In construction (0.9 trillion won → 1.9 trillion won), the increase slightly expanded compared to the previous quarter due to a decrease in unsold units and government measures to stabilize real estate project financing (PF) sites.

However, Seo explained, "Loans to the construction industry have been declining since the first half of last year, and the increase of 2.8 trillion won in the first half of this year is the lowest since the second half of 2018 (1.7 trillion won). Loans to the real estate industry have also been declining since the first half of last year, and the increase of 11.2 trillion won in the first half of this year is the lowest since the first half of 2016 (10.6 trillion won)."

By purpose, working capital (11.4 trillion won → 9.4 trillion won) saw an expanded increase in the service and electricity and gas sectors, but the increase in manufacturing, centered on chemical products and primary metals, shrank from 9.4 trillion won to 3 trillion won, marking a fourth consecutive quarter of reduced growth.

Facility funds (9.4 trillion won → 15 trillion won) saw an expanded increase in the second quarter compared to the previous half-year, driven by manufacturing investments in semiconductors and automobiles, and by the service industry, mainly real estate.

By financial sector, deposit banks (17.4 trillion won → 22.5 trillion won) maintained a relaxed lending stance, expanding the increase for the first time in four quarters, while non-bank deposit-taking institutions (3.3 trillion won → 1.8 trillion won) further reduced their increase compared to the previous quarter due to a tightening lending stance. The increase by non-bank deposit-taking institutions recorded the lowest level since the fourth quarter of 2015 (1.3 trillion won).

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