[Asia Economy Reporter Song Hwajeong] The polarization of loans is intensifying. While household loans continue to decline, corporate loans are experiencing a sharp increase. Next year, the growth rate of corporate loans is expected to slow down, resulting in banks' loan growth rates dropping to around 3%.
According to the financial sector on the 5th, household loans at the five major banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?have decreased for 11 consecutive months. Household loans, which exceeded 709 trillion won at the end of last year, fell to 693.0346 trillion won last month.
Credit loans and jeonse (long-term deposit) loans are driving the decline in household loans. Credit loans at the five major banks decreased by 17.6 trillion won from the beginning of this year through November. Jeonse loans have continued to decline for two consecutive months recently. The cumulative increase in jeonse loans through November this year was only 3.4 trillion won, significantly lower compared to the 17.7 trillion won increase during the same period last year. Lee Byung-geon, a researcher at DB Financial Investment, analyzed, "The decline in jeonse prices due to rising interest rates and increased demand for monthly rent are influencing this trend," adding, "With the rise in interest rates on jeonse loans, monthly rent is becoming relatively more attractive compared to jeonse, so the downward trend in jeonse loans is likely to continue for the time being."
On the other hand, corporate loans are sharply increasing, centered on large corporations. Large corporate loans increased by nearly 29 trillion won compared to the end of last year. Loans to small and medium-sized enterprises (SMEs) rose by 45.6 trillion won, with 15 trillion won of that increase coming from loans to individual business owners. The increase in corporate loans was influenced by concerns over tightening liquidity in the bond market. As the corporate bond market froze, companies flocked to banks, and Korea Electric Power Corporation (KEPCO), which had been raising funds through bond issuance, was advised by financial authorities to switch to bank loans due to the establishment of the bond market. This led to a significant increase in large corporate loans. Last month, loans totaling 1.5 trillion won were made to KEPCO, including 600 billion won from Hana Bank and 900 billion won from Woori Bank. KEPCO issued over 23 trillion won in corporate bonds this year alone due to financial difficulties caused by deficits, and its high-quality bonds, known as KEPCO bonds, have been blamed for absorbing market liquidity and causing bond market liquidity tightening. The researcher predicted, "Additional loans to KEPCO exceeding 500 billion won are expected within the year, so a steady increase in large corporate loans will continue until the end of the year."
However, next year, the growth in corporate loans is expected to slow down, leading to a deceleration in bank loan growth. This is because loan demand is anticipated to decrease due to stabilization in the corporate bond market and an economic slowdown. Kim Jae-woo, a researcher at Samsung Securities, explained, "Some of the recent increase in corporate loans was due to proactive funding needs and temporary shocks in the funding market," adding, "In particular, the contraction in corporate bond market transactions and the sharp rise in corporate bond interest rates significantly contributed to large corporations increasing their bank loan funding, but such loans are unlikely to continue." He further noted, "If the economy slows down next year, the healthy loan demand from companies is likely to decrease even more than this year."
Accordingly, banks' loan growth rates are expected to fall to the 3% range next year. The researcher forecasted, "If the base interest rate hike stops next year and the funding market normalizes, the growth rate of corporate loans will decrease, causing banks' loan growth to fall to around 3%."
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