Lending by five commercial majors in South Korea grew nearly 20 trillion won ($16 billion), the largest in five years, in March, as both companies and individuals sought to take out loans against the rainy day from virus fallout.

According to bank sources on Thursday, the outstanding balance of lending in the Korean won at KB Kookmin, Shinhan, Woori, Hana, and NH Nonghyup totaled 1,170.7 trillion won in March, adding 19.9 trillion won from a month earlier. The monthly gain is the largest since data compiling from September 2015.

Bank loans exceeded 10 trillion won only three times over the last five years - October and November in 2015 and October in 2019.

During the first two months of this year before the coronavirus became a global pandemic, loan increased 5.3 trillion won in January and 5.5 trillion won in February.

The unusual surge owes to demand from large companies who usually turn to the debt market. But the global capital run has turned debt financing unfavorable for even the investment-grade Korean companies.

In March, corporate loans from five banks increased by 13.5 trillion won. That is a near four-fold hike from a month earlier. Lending to large companies increased by 8.1 trillion won, compared the past monthly average of around 2 trillion won.

“Companies have become nervous about financing and used up their credit account as they would have to pay their suppliers by the end of the quarter,” said a bank official.

Bank loans to small and medium-sized businesses increased 5.4 trillion won, with loans to self-employed growing 2.8 trillion won in March as lenders under state request eased loan requirements to help them out.

Personal loans also jumped.

The five banks’ loans to households gained 6.7 trillion won in March, the largest since November 2015.

Mortgage-backed loans, which make up a bulk of household borrowings, grew 4.6 trillion won, also the largest since December 2015.

The growth in mortgage-backed loans had slowed entering this year, increasing 1.3 trillion won in January and 956.4 billion won in February, amid toughened government regulations to stem real estate bubbles.

The loans this time likely went to sustain livelihood or self-employed business instead of home purchases, one industry observer said.

Personal credit loans soared likewise in March. Credit loans extended by the five banks increased 2.2 trillion won in March, the largest since January 2016. The last time the personal credit loan rose by more than 2 trillion won in a month was in October 2018.

By Pulse

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