Q2 Industrial Loans Increase by 25 Trillion Won... Impact of Banks Expanding Corporate Loans

BOK Announces 2024 Q2 Industry-Specific Loans by Deposit-Taking Institutions

As banks expanded their corporate loan operations, industrial loans in the second quarter continued the growth trend seen in the previous quarter. However, the increase narrowed as non-bank deposit-taking institutions reduced loans to strengthen risk management.

To slow down the pace of household loan growth, commercial banks are consecutively raising mortgage loan interest rates. On the 3rd, a loan information board was posted at a commercial bank branch in Euljiro, Jung-gu, Seoul. Photo by Jo Yongjun jun21@

According to the "2024 Q2 Industrial Loans by Deposit-Taking Institutions" released by the Bank of Korea on the 6th, the total balance of industrial loans at the end of the second quarter was 1,941.6 trillion KRW, an increase of 25 trillion KRW compared to the previous quarter. The increase was smaller than the 27 trillion KRW growth recorded in the previous quarter.

The year-on-year increase was 98.2 trillion KRW, similar to the 98 trillion KRW recorded in the previous quarter.

Kim Minsu, head of the Financial Statistics Team at the Bank of Korea, explained, "As deposit banks expanded their corporate loan operations, industrial loans in the second quarter maintained the growth trend of the previous quarter. However, the increase narrowed as non-bank deposit-taking institutions slightly reduced loans to strengthen risk management."

By sector, deposit banks (25.7 trillion KRW → 25.4 trillion KRW) continued the growth trend of the previous quarter, but non-bank deposit-taking institutions (1.3 trillion KRW → -0.4 trillion KRW) turned to a decrease after one quarter.

By industry, compared to the previous quarter, the increase in manufacturing and construction sectors narrowed, while the increase in the service sector expanded.

In manufacturing, the increase narrowed from 12.2 trillion KRW to 6.8 trillion KRW as working capital demand slowed due to improved business performance of large corporations.

In construction, the increase shrank from 2.1 trillion KRW to 0.2 trillion KRW due to a decrease in construction progress payments.

In the service sector, although the increase in wholesale and retail trade narrowed, the increase expanded from 11 trillion KRW to 13.5 trillion KRW, mainly driven by the real estate industry.

In wholesale and retail trade, loan growth centered on large corporations and working capital shrank from 4 trillion KRW to 1.5 trillion KRW due to cost-cutting efforts in the distribution sector.

On the other hand, in real estate, the increase grew from 3.3 trillion KRW to 4.4 trillion KRW as commercial real estate transactions increased.

By loan purpose, the increase in working capital loans (14.7 trillion KRW → 7.9 trillion KRW) narrowed, mainly in manufacturing and construction.

Conversely, facility loans (12.3 trillion KRW → 17 trillion KRW) expanded as manufacturing maintained the previous quarter’s growth and the service sector increased, led by real estate.

By company size, the increase for large corporations (12.9 trillion KRW → 9.5 trillion KRW) narrowed, while the increase for small and medium-sized enterprises (10.8 trillion KRW → 13.3 trillion KRW) and individual business owners (1.7 trillion KRW → 2 trillion KRW) expanded.

Kim said, "The narrowing of loan growth for large corporations was due to reduced working capital demand as their business performance was favorable in the second quarter. In particular, the chemical industry saw a significant increase after the first quarter’s statistical reclassification, which created a base effect."

He added, "The increase for small and medium-sized enterprises expanded due to growth in the real estate sector in the second quarter."