In the second quarter of this year, industrial loans increased, primarily driven by the service sector. Service sector loans reached their highest level since the fourth quarter of 2022. However, the growth rate compared to the previous quarter has slowed.
According to the Bank of Korea on September 7, the outstanding balance of sectoral loans from deposit-taking institutions at the end of the second quarter was 2,065.3 trillion won, an increase of 30.6 trillion won from the end of the previous quarter. This marks a decrease in growth compared to the first quarter's increase of 30.8 trillion won.
By sector, the growth in manufacturing loans has slowed, while service sector loans have expanded. Manufacturing loans increased by 8.4 trillion won in the second quarter, down from an increase of 11 trillion won in the previous quarter. This slowdown is attributed to efforts to manage financial ratios at the end of the half-year and early repayments by some companies, particularly affecting facility funds.
In contrast, service sector loans rose by 19.9 trillion won, a larger increase than the previous quarter's 19.1 trillion won. This growth was primarily driven by the real estate, finance, and insurance sectors. The construction sector saw an increase in working capital, but a decrease in facility funds kept it at the same level as the previous quarter.
Kim Sung-jun, head of the Bank of Korea's Financial Statistics Team, stated, "The increase in service sector loans is the largest in 14 quarters since the fourth quarter of 2022." He explained that the real estate sector benefited from improved lending conditions due to increased guarantees for real estate project financing (PF), while the finance and insurance sectors saw expanded loans due to increased funding demands from securities firms following margin rate hikes in the derivatives market.
In terms of loan purposes, working capital loans increased by 23.8 trillion won, up from 21.4 trillion won in the previous quarter. The increase in manufacturing loans (7 trillion won) was driven by funding needs for corporate bond repayments, while service sector loans (14 trillion won) remained at a high level.
Facility loans increased by 6.9 trillion won, a decrease from the previous quarter's increase of 9.4 trillion won. While service sector loans, particularly in real estate, saw an increase, manufacturing loans in sectors such as chemicals, medical products, and electronic components experienced a decline.
By institution, the increase in loans from deposit banks rose from 25 trillion won in the previous quarter to 29.3 trillion won. In contrast, loans from non-bank deposit-taking institutions decreased from 5.8 trillion won to 1.3 trillion won during the same period.
Among deposit bank loans, the increase in loans to large enterprises rose from 12.7 trillion won to 16.5 trillion won, while loans to small and medium-sized enterprises increased slightly from 10.1 trillion won to 10.3 trillion won. Loans to individual business owners decreased from 1.5 trillion won to 1.1 trillion won.
Kim noted, "While there are differences by sector, overall, the trend of expanding corporate loans by banks continued in the second quarter, similar to the first quarter."
Looking ahead, he stated, "The existing strategy of expanding productive finance is expected to continue for the time being, which will contribute to the increase in corporate loans. However, factors such as banks' risk management and sluggish local real estate markets may also limit actual loan growth, so we will need to monitor the situation closely."
* This article has been translated by AI.
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