Decreasing Household Loans, Increasing Corporate Loans

[Asia Economy Reporter Song Hwajeong] As interest burdens increase due to continued interest rate hikes, household loans continue to decline, while corporate loans are on the rise as companies struggling to issue corporate bonds flock to banks.

According to the "October Financial Market Trends" announced by the Bank of Korea on the 9th, the balance of household loans at deposit banks stood at 1,058.8 trillion won at the end of October, down 600 billion won from the previous month. This is the first time household loans have decreased in October.

Household loans in the banking sector had been decreasing continuously since December last year but increased for three consecutive months from April to June. Afterwards, they fluctuated with decreases of 300 billion won in July, an increase of 300 billion won in August, and a decrease of 1.3 trillion won in September, followed by a decrease of 600 billion won in October, marking two consecutive months of decline.

Among household loans, mortgage loans including jeonse deposit loans (balance of 794.8 trillion won) increased by 1.3 trillion won in one month. Of this, 200 billion won was an increase in jeonse deposit loans. On the other hand, other loans including unsecured loans (balance of 262.8 trillion won) decreased by 1.9 trillion won. This is not only the first decrease as of October but also the 11th consecutive month of decline since December last year.

From January to October this year, total household loans decreased by 1.8 trillion won. If this trend continues, it is expected that household loans will show a decline on an annual basis for the first time by the end of this year.

While household loans continue to decline, corporate loans have been rising for 10 consecutive months. The balance of corporate won-denominated loans at banks stood at 1,169.2 trillion won at the end of last month, up 13.7 trillion won from the previous month. The increase was the largest since statistics began in June 2009 for October. Large corporate loans increased by 9.3 trillion won, marking the largest increase ever recorded for October. Loans to small and medium-sized enterprises also rose by 4.4 trillion won, including 100 billion won in loans to individual business owners. Due to the contraction of the bond market caused by the Legoland incident, companies finding it difficult to raise funds through corporate bonds are flocking to banks.

Kim Eun-gap, a researcher at IBK Investment & Securities, said, "The loan growth rate in the banking sector in October was 5.2% year-on-year, slightly down from 5.4% in the previous month, maintaining a downward trend since 2021," adding, "The growth rate of household loans is expected to decline further, but the rate of decline is expected to slow, and the total loan growth rate for this year is expected to fall to around 5%."

[Image source=Yonhap News]