SEOUL, October 15 (AJP) — South Korean bank household lending barely grew in September under tightening cycle while lending to large firms surged as they rushed to secure funds for bond repayments and capital expenditure before borrowing rates went higher.
Household loans increased by 0.6 trillion won ($444 million) from a month earlier, sharply down from a revised 3.5 trillion won gain in August and the smallest positive monthly increase since March, according to data released Thursday by the Bank of Korea (BOK).
Outstanding household loans stood at 1,198.9 trillion won at the end of September.
Mortgage lending rose by 2.9 trillion won, slowing from 4.1 trillion won a month earlier as Jeonse transactions remained subdued and housing move-ins declined.
Other household loans fell by 2.3 trillion won, extending a 0.6 trillion won decline in August. The BOK attributed the larger drop to reduced individual stock investment as well as seasonal factors including quarter-end bad-loan disposals and holiday bonuses.
Corporate borrowing moved in the opposite direction.
Bank loans to companies increased by 10.7 trillion won in September, up from 9.7 trillion won the previous month. Loans to large firms jumped by 7.5 trillion won, the biggest monthly increase this year.
The BOK attributed the increase to continued efforts by banks to expand lending and stronger demand from companies seeking funds to repay bonds and finance capital expenditure.
The figures also point to a greater reliance on bank borrowing for corporate financing this year. Corporate bank loans increased by 77.6 trillion won in the first nine months, compared with 45.0 trillion won during the same period last year.
Corporate bonds, meanwhile, recorded 20.6 trillion won in net redemptions over the January-September period, reversing 5.7 trillion won in net issuance a year earlier.
The trend was also evident in September, when net corporate bond redemptions widened to 3.4 trillion won from 0.9 trillion won in August. The BOK said higher market rates continued to weigh on issuance while a larger volume of bonds reached maturity.
Loans to small and medium-sized companies rose by 3.2 trillion won, slowing from a 4.8 trillion won increase a month earlier.
Working-capital demand, including funding ahead of the Chuseok holiday, remained in place, but quarter-end bad-loan disposals and write-offs limited the increase.
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