[Photo by Han Joo-hyung]
Corporate loans extended by major banks in South Korea jumped by the biggest pace - $23 billion - in April as companies big and small turned to bank aid to survive the coronavirus storm.
According to data from the Bank of Korea on Tuesday, total corporate lending surged by 27.9 trillion won ($22.8 billion) in April, refreshing previous record of 18.7 trillion won in March.
BOK data showed that the outstanding balance in corporate loans at local lenders reached 929 trillion won as of April. Loans extended to large companies surged 11.2 trillion won and small- and mid-size companies 16.6 trillion won, each marking record monthly gains. The outstanding balance in large company loans came to 177 trillion won and small- and mid-size companies 752 trillion won.
Corporate loans tend to increase when the economy is thriving. But the latest surge stems from troubles from months-long toll from virus outbreak.
Experts noted that concerns are growing over financial stability as the surge in corporate loans comes amid growing fallout from the coronavirus outbreak that has left businesses to borrow money in the first and second quarters ending June.
Self-employed businesses, in particular, are struggling to stay afloat and are relying on bank loans to stay afloat.
In April, loans extended to individual businesses that include small merchants increased by the largest amount of 11 trillion won. The monthly spike was 2 trillion won in February and 4 trillion won in March.
An unnamed official from BOK said that corporate loans in April surged by a large amount amid rising demand for working funds and government and banks that increased financial support. Individual businesses relied on loans to cover plunging sales while small merchants in particular increased borrowing to benefit from government’s record-low yield on loans.
Loans extended to local households, meanwhile, increased 4.9 trillion won in April, data showed. Home-backed loans added 7.8 trillion won in February, 6.3 trillion won in March, and 4.9 trillion won in April.
Other loans including credit loans narrowed 100 billion won in April, data showed. BOK attributed the drop to coronavirus impact that decreased household spending and reduced demand for credit loans. Demand for loans for personal stock investment that had temporarily surged in March also dropped in April.
By Song Min-geun and Lee Eun-joo
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]