In the fourth quarter of last year, the amount of money borrowed by domestic companies and self-employed individuals from banks and other financial institutions was 28 trillion won, which decreased to about half compared to the previous quarter. This was due to increased uncertainty caused by high interest rates and high inflation. However, on an annual basis for last year, it increased by 217 trillion won, marking a record high.
According to the "2022 Q4 Depository Institutions' Loans by Industry" released by the Bank of Korea on the 8th, the outstanding loan balance by industry was 1,797.7 trillion won, an increase of 28 trillion won compared to the end of the previous quarter. Compared to the third quarter of last year (56.6 trillion won), the increase narrowed. This increase is the smallest since Q4 2020 and marks a decline for two consecutive quarters.
Although the demand for loans continued due to the contraction of direct financing, the increase was limited by strengthened loan soundness management by financial institutions, loan interest rate hikes, and seasonal factors at the end of the year.
However, on an annual basis for 2022, loans increased by 217 trillion won, which is the highest level ever since 187.1 trillion won in 2021. Park Chang-hyun, head of the Bank of Korea's Financial Statistics Team, explained, "The contraction of corporate bonds led companies to use loans from financial institutions as their main funding channel," adding, "Also, from the perspective of depository institutions, corporate loans have relatively fewer regulations, so the scale was expanded."
Looking at the loan status in the fourth quarter of last year, the contraction was significant mainly in manufacturing and service industries. In manufacturing, the increase in facility funds due to increased capital investment was large, but the increase in working capital loans shrank from 10.6 trillion won in the previous quarter to 4.6 trillion won due to temporary repayments at the end of the year.
In the service industry, the overall increase sharply decreased due to continued sluggishness in the real estate market, which holds the largest share, and a shift to a decrease in loans in the finance and insurance sectors.
In the finance and insurance sector, loans increased by 7.5 trillion won in the previous quarter but decreased by 2 trillion won in the fourth quarter, marking the first decline since Q2 2019. This was influenced by growing instability in the capital market. Due to sluggish conditions in the real estate industry, the increase in loans, mainly for facility funds, shrank, and loans in wholesale and retail trade as well as accommodation and food services also decreased to less than half compared to the previous quarter.
By purpose, the increase in working capital loans (36.6 trillion won → 16.6 trillion won) shrank mainly in manufacturing and finance and insurance sectors, and the increase in facility funds (20 trillion won → 11.4 trillion won) shrank mainly in the real estate industry.
Working capital demand continued due to inflation and rising loan interest rates, but companies temporarily repaid working capital loans to manage financial ratios at the end of the year, reducing the increase. Facility funds slowed as loans in the service industry decreased due to sluggish conditions in the real estate market.
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