Corporate Loans at 5 Major Commercial Banks Soar... 60 Trillion Won Increase in One Year

Last Month 746 Trillion, 8 Trillion Increase from Previous Month
Largest Increase in Corporate Loans Since July
Preference for Bank Loans as Corporate Bond Issuance Rates Rise

The outstanding corporate loans of the five major domestic commercial banks increased by 8 trillion won in just one month, expanding the growth margin. This is because demand for bank loans has grown mainly among large corporations, while regulations on household loans have intensified competition among banks in corporate lending.

According to the financial sector on the 3rd, the outstanding corporate loans of the five major commercial banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?stood at 764.3159 trillion won as of the end of last month. This is an increase of 7.9849 trillion won compared to the previous month (756.331 trillion won) and a rise of 59.6452 trillion won compared to a year ago (704.6707 trillion won). The outstanding corporate loans have increased every month without exception since the beginning of this year.

The increase in corporate loans was driven by loans to large corporations. At the end of October, the outstanding large corporate loans of these banks amounted to 137.3492 trillion won, up 4.3585 trillion won from the previous month (132.9907 trillion won). The increase in large corporate loans in October surpassed 4 trillion won, marking the highest level in four months. The monthly increases have been growing: 2.9979 trillion won in July → 3.1949 trillion won in August → 3.5863 trillion won in September.

This is because large corporations prefer raising funds through bank loans rather than issuing corporate bonds. The gap between corporate bond issuance rates and bank corporate loan interest rates is rapidly narrowing. The issuance rate for corporate bonds (unsecured 3-year AA- standard), which maintained the low 4% range in the first half of this year, rose to 4.801% annually as of the previous day. The bank large corporate loan interest rate (based on new loans) was 5.18% annually as of September.

A representative from a commercial bank explained, “Large corporations are raising funds through relatively short-term bank loans while expecting corporate bond issuance rates to stabilize.” Given the increasing possibility of interest rate declines, they judge that bank corporate loans with variable interest rates are preferable to corporate bonds, which have a higher proportion of fixed interest rates.

Lee Bok-hyun, Governor of the Financial Supervisory Service, also said the day before, “Recently, some companies have changed their funding sources from corporate bonds to bank loans or commercial paper (CP) due to market uncertainties and interest rate burdens, showing changes in funding conditions.” He added, “We will closely monitor the refinancing trends in corporate bonds and short-term money markets and whether credit spreads widen.”

Furthermore, intensified competition in corporate lending has contributed to the overall increase in corporate loan volumes. As financial authorities clamp down on household loans such as mortgage loans, banks are entering the corporate loan market. Another banking sector official explained, “From the banks’ perspective, they need to secure a large amount of high-quality assets in the mid to long term, but since it is difficult to increase household loans now, they are strengthening corporate loan operations.”

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