Corporate Loans Surge by 28 Trillion Won in First Half of This Year, Surpassing Household Loan Growth for Two Consecutive Periods

Tighter Household Loan Caps and Shift Toward Productive Finance
76% of Corporate Loan Growth in the First Half Driven by Large Corporations
Expansion of Credit Focused More on Large Corporations Than SMEs

Following the trend from the second half of last year, the increase in corporate loans also outpaced the increase in household loans in the first half of this year. This is attributed to the financial authorities having tightened the total volume regulation on household loans since the beginning of the year, as well as banks responding to the government’s policy stance of expanding productive finance. However, there are criticisms that a significant portion of the increased corporate loans were directed toward large corporations, which somewhat diverges from the original intent of productive finance policies.

According to an analysis on July 8 by The Asia Business Daily of the outstanding loans at the five major commercial banks — KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup — corporate loans increased by 61.7623 trillion won (7.6%), from 815.7857 trillion won at the end of June 2024 to 877.548 trillion won at the end of June this year. In the same period, household loans grew by 66.3629 trillion won (9.4%), rising from 708.5723 trillion won to 774.9352 trillion won, meaning that over the two years, the increase in household loans surpassed that of corporate loans.

Looking at the trend by half-year, household loan growth slowed while corporate loan growth accelerated. In the second half of 2024, corporate loans increased by 9.9703 trillion won, and in the second half of last year, the growth widened to 14.9859 trillion won. In the first half of this year, the increase sharply accelerated to 28.1973 trillion won. On the other hand, household loans, which grew by 25.5627 trillion won in the second half of 2024, saw the growth slow to 12.8433 trillion won in the second half of last year, and further down to 7.2571 trillion won so far this year.

This is interpreted as a result of the financial authorities strengthening the cap on household loan growth to 1.5% and banks expanding corporate finance in line with the broader productive finance policy. Since its inauguration, the Lee Jaemyung administration has consistently emphasized productive finance to redirect funds concentrated in real estate toward businesses.

In response to this government policy, the five major financial holding companies have announced plans to invest a total of 508 trillion won in productive finance over five years by 2030. Productive finance encompasses not only corporate loans but also financial intermediation and supply of financial products. Until recently, banks had actively managed household loans, which are secured by collateral.

An official from a commercial bank stated, "Following the government’s productive finance initiative and drive to expand corporate loans, the focus of loan portfolios is shifting more toward the corporate sector."

The increase in corporate loans was led by loans to large corporations. The balance of large corporate loans grew by 30.7668 trillion won, from 159.5973 trillion won at the end of June 2024 to 190.3641 trillion won at the end of June this year. During the same period, small and medium-sized enterprise (SME) loans rose by 27.8793 trillion won, from 541.755 trillion won to 569.6343 trillion won. Considering that about 78% of all corporate loans go to SMEs, the rapid growth in large corporate loans stands out even more. In fact, over the past two years, the growth rate of large corporate loans was 19.3%, far exceeding the 5.1% increase for SME loans.

This concentration on large corporations intensified this year. In the first half alone, the five major banks’ large corporate loans increased by 20.0649 trillion won, while SME loans grew by only 6.2939 trillion won. As a result, about three-quarters (76.1%) of the increase in corporate loans in the first half of this year came from large corporations, with SMEs accounting for 23.9%.

This trend is interpreted as a result of banks expanding lending to large corporations with higher credit ratings to manage asset quality, even as they increase corporate loans in line with the productive finance policy. SMEs have weaker financial capacity and higher delinquency risks compared to large corporations, which makes banks more cautious about increasing lending to them. According to the Financial Supervisory Service, as of the end of April this year, the delinquency rate on large corporate loans was 0.22% — up 0.09 percentage points from a year earlier — while the delinquency rate on SME loans was even higher at 0.90%.

However, some point out that this capital concentration does not fully align with the government’s intended policy of productive finance. As the statistics show, bank lending has been expanding primarily to large corporations, which are considered to have lower risk compared to innovative or growth-oriented companies.

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