Large- and mid-sized corporate loans surge 51% in a year

Self-employed, household lending each fall by more than 1 trillion won

Real estate and construction loans shrink while manufacturing expands

[Yonhap]
[Yonhap]

Loans by savings banks to large and mid-sized companies surged more than 50 percent in a year, topping 5 trillion won ($3.73 billion) for the first time, while lending to self-employed borrowers and households each fell by more than 1 trillion won. The shift reflects the combined effect of efforts to resolve bad debt from real estate project financing and a regulatory push by financial authorities to channel more credit into productive sectors.

According to the Financial Supervisory Service's financial statistics system, the outstanding balance of large-corporate loans held by 79 savings banks nationwide stood at 5.31 trillion won at the end of the second quarter this year, up 50.8 percent from the same period last year. The balance also rose 443.3 billion won from the previous quarter. The share of large-corporate loans in total lending climbed 1.84 percentage points, from 3.71 percent to 5.55 percent over the same period. The FSS figures for large-corporate loans include mid-sized companies.

Loans to self-employed borrowers, by contrast, fell from 14.31 trillion won in the second quarter of last year to 12.6 trillion won in the second quarter of this year, a decline of more than 1.7 trillion won. Household loans also dropped, from 41.14 trillion won to 39.58 trillion won over the same period, a decrease of 1.56 trillion won. The share of household loans in total lending fell from 43.35 percent to 41.30 percent.

Small and medium-sized enterprise loans, which include self-employed borrowers, edged up slightly. The outstanding SME loan balance reached 43.29 trillion won at the end of the second quarter, up 78.6 billion won from a year earlier. However, the sharp decline in self-employed lending altered the internal composition of the SME loan portfolio.

By industry, real estate and construction loans contracted while manufacturing loans expanded. The outstanding balance of real estate sector loans stood at 15.89 trillion won in the second quarter, down 2.29 trillion won from a year earlier. Construction loans also fell, to 4.19 trillion won, a decrease of 34.5 billion won. Manufacturing loans, meanwhile, rose 567 billion won over the same period to 3.36 trillion won.

Financial authorities are also pursuing deregulation to encourage savings banks to expand corporate lending. In a plan for the sound development of savings banks announced in February, the Financial Services Commission proposed counting loans to mid-sized companies toward the calculation of the in-area lending ratio, aiming to give savings banks a greater incentive to supply funds to mid-sized firms and reduce the sector's heavy reliance on real estate lending.

The same plan also includes measures to raise the amount savings banks can lend to individual corporate borrowers, expanding their capacity to extend business credit. For savings banks with assets of 1 trillion won or more, the per-borrower credit limit for corporate clients would rise from 12 billion won to 14 billion won, with an additional 1 billion won permitted for borrowers outside the Greater Seoul area.

Tighter regulation of household lending is also cited as a driver of the shift. With savings banks facing restrictions on household loans and still dealing with the fallout from bad real estate project financing debt, analysts say the need to secure new corporate lending business has grown.

However, concerns have emerged that the decline in loans to self-employed borrowers and households — even as large- and mid-sized corporate lending expands — could weaken savings banks' role in providing financial services to ordinary people. Lee Sang-bok, a professor at Sogang University School of Law, said savings banks appear to be turning to mid-sized corporate loans as a new outlet for their funds, given the relatively lower risk involved.


snsd@heraldcorp.com