Top 5 South Korean Banks’ Corporate Loans Jump Over 5 Trillion Won for Second Month

Corporate loan balances at major commercial banks rose by more than 6 trillion won in April, marking a second straight month of increases exceeding 5 trillion won. The rise suggests companies are leaning more on bank borrowing as higher government bond yields spill over into the corporate bond market.

As of the end of last month, corporate loans at the country’s five largest banks — KB, Shinhan, Hana, Woori and NH NongHyup — totaled 866.0646 trillion won, up 6.2909 trillion won from a month earlier, according to the banking industry on Monday. The increase followed a 5.4449 trillion won gain in March.

Market watchers attributed the jump to a sharp cooling in corporate bond issuance after the war in the Middle East. With rates rising and funding costs climbing, companies have increasingly turned to bank loans, they said.

Data from the Korea Financial Investment Association showed domestic companies repaid 13.1125 trillion won in corporate bonds in April while issuing 10.6248 trillion won, resulting in net repayments of 2.4877 trillion won. With market volatility rising and interest rates climbing steeply, more firms are seeking funding through loans, analysts said.

Loan demand is expected to keep growing. In the Bank of Korea’s survey on financial institutions’ lending practices released on April 21, both large companies (11→14) and small and midsize firms (22→28) were projected to increase loan demand to secure liquidity amid greater domestic and external uncertainty.

Concerns are rising that the high-rate environment could persist. Bank of Korea Deputy Gov. Yoo Sang-dae said at a recent briefing that “prices are rising more than expected, so we could move into a tightening cycle,” signaling the possibility of rate hikes.

Small and midsize firms and so-called marginal companies are particularly vulnerable because they rely more on bank loans and have weaker credit. If funding costs such as interest rates surge, the risk of corporate distress is likely to grow. Higher oil prices and increased costs for imported raw materials tied to the Middle East situation are already adding to the burden, the report said.

The strain is also showing up in indicators. The average corporate delinquency rate at the five banks in the first quarter rose to 0.46% from 0.37% the previous quarter, up 0.09 percentage points. Delinquencies among large companies increased to 0.13% from 0.03%, while the rate for small and midsize firms rose to 0.57% from 0.49%.

A financial industry official said that if rates keep rising as lending expands, companies’ funding burdens could grow and credit problems could spread. The official warned that corporate distress could weigh on the broader economy and called for preemptive steps to respond.