Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Banks tilted toward conglomerates in loan business over tightened household lending rule
A row of ATM machines belonging to major banks are lined up in Seoul, June. 22. Yonhap
By Yi Whan-woo
Major commercial banks are focusing more on conglomerates over households to secure revenues for their loan business, a result of pressure to reduce loans for private households.
The data compiled by five biggest lenders — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — showed their combined outstanding balance in loans for large corporations totaled at 165.65 trillion won ($121.31 billion) last month, up 4.6 percent from December 2024.
The net increase averaged 1.21 trillion won per month over the corresponding six months.
“Such an increase marks a turnaround in corporate loan business, considering the amount was on a downward trend previously,” an industry official said.
He noted the five lenders’ aggregate outstanding balance in loans for conglomerates amounted to 158.39 trillion won in December 2024.
The figure represented a 0.3 percent decline from June 2024, and a net decrease of 80 billion won per month on average over the six months.
Officials said the lenders are expanding loans for large businesses, as they are regarded as a reliable source of income at a time when financial regulators are tightening lending policies for households.
Regulators have been asking banks to keep the pace of growth in household debt below the nominal GDP growth rate, assisting the government as it seeks to boost the ailing economy.
According to the Institute of International Finance’s latest data, Korea’s household debt-to-GDP ratio stood at 91.7 percent at the end of the fourth quarter last year. The ratio was the second-highest among 38 major countries, trailing behind Canada’s 100.6 percent.
The combined outstanding balance in household loans among the five major banks totaled 754.83 trillion won last month, which was higher than the 165.65 trillion won for large corporations.
The pace of growth in household loans, however, significantly slowed and only grew by 2.8 percent from December 2024 to June this year.
Industry officials believe that slower growth in household loans will become more distinct in the second half of 2025.
The officials noted that banks are under pressure to halve the yearly increase in household loans to 2 trillion from the 4 trillion won planned in the beginning of 2025.
“In other words, the move to increase corporate lending is expected to accelerate,” an official said.
Asked why the banks target conglomerates in the corporate loan business over smaller firms, he explained the strategy is aimed at reducing repayment risks.
“Small and medium-sized enterprises (SMEs) and sole proprietors tend to have a higher possibility of failing to pay back principal and interest on time compared to large firms,” he said.
The five major banks reported a net increase of 310 billion won on monthly average in outstanding balance of loans for SMEs from December 2024 to June this year. The amount was nearly one-fourth of the 1.21 trillion won for large corporations.