Five Major Banks’ Corporate Loans Rise by 6.2 Trillion Won... Focus on Lending to Large Corporations

Corporate Loans at Five Major Banks Reach Nearly 884 Trillion Won at End of August
Large Corporations Account for 3.7 Trillion Won Increase, 59.5% of Net Growth
Lending Growth to SMEs and Sole Proprietors Remains Limited

In August, corporate loans from the five major commercial banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup) increased by more than 6 trillion won compared to the previous month. This was due to banks actively attracting corporate lending, as there are limitations on increasing household loans. Notably, loans to large enterprises accounted for more than half of the total increase in corporate loans last month, leading the overall upward trend.

According to the financial sector on September 2, the balance of corporate loans at the five major banks at the end of last month stood at 883.9647 trillion won, an increase of 6.2562 trillion won from the previous month's 877.7085 trillion won. It is the first time in four months that the monthly increase in corporate loans at the five major banks has exceeded 6 trillion won, since April, when the balance rose by 6.2909 trillion won.

Although the burden of issuing corporate bonds has grown due to the Bank of Korea's policy rate hikes and rising market rates, the banking sector, which faces difficulties in increasing the total amount of household loans, has turned to rate competition to attract more corporate lending as a result.

According to the Bank of Korea's weighted average interest rates for financial institutions in July, the weighted average interest rate on household loans at deposit banks was 4.64% in July, up by 0.14 percentage points from 4.50% in June. In contrast, the weighted average interest rate for corporate loans during the same period fell by 0.07 percentage points to 4.20%. As a result, the difference between household and corporate loan rates widened from 0.23 percentage points in June to 0.44 percentage points in July.

Within the category of corporate loans, the weighted average loan rate for large enterprises rose by 0.01 percentage points to 4.18% in July compared to the previous month, while the rate for small and medium-sized enterprises decreased by 0.16 percentage points to 4.22%.

By company size, outstanding loans to large enterprises by the five major banks at the end of last month totaled 195.9746 trillion won, a month-on-month increase of 3.7196 trillion won (1.93%). This accounted for 59.45% of the total net increase in corporate loans. Loans to small and medium-sized enterprises, including individual business owners, increased by 2.5367 trillion won (0.37%) from the previous month to 687.9901 trillion won.

This upward trend in loans to large enterprises has continued throughout this year. Loans to large enterprises increased by 15.08% (25.6754 trillion won) from the end of last year (170.2992 trillion won), while loans to small and medium-sized enterprises (including individual business owners) rose by just 2.01% (13.5639 trillion won). Among SME loans, loans to individual business owners increased by only 0.52% (1.6982 trillion won) from the end of last year (324.4325 trillion won).

This increase in loans to large enterprises is attributed to greater funding demand from large corporations and banks' efforts to restructure their corporate loan portfolios to maintain soundness. In contrast, the increase in loans to small and medium-sized enterprises and individual business owners—who are relatively more exposed to liquidity constraints—remains limited. According to the Financial Supervisory Service, of the 7.2 trillion won in newly generated non-performing loans in the second quarter of this year, newly generated non-performing loans from small and medium-sized enterprises accounted for 4.5 trillion won, or 62.5%.

A banking sector official stated, "Driven by the expansion of facility investments by semiconductor and IT companies as they transition to artificial intelligence (AX), loans to large enterprises are increasing." The official further explained, "On the other hand, small and medium-sized enterprises and individual business owners, facing economic slowdown and weak domestic demand, are reluctant to take on additional loans."

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