South Korea’s corporate loans rise in July; deposits decline

Tax payments and outflow of funds for various reasons led to the drop.

Loans extended to corporates by South Korean banks rose to KRW8.7t in July, rising faster than in June, data from the Bank of Korea (BOK) showed.

Bank lending to large corporations grew by KRW4.4t, which the central bank attributed to working capital and in particular the relending of loans temporarily redeemed at the previous half-year end.

Loans to SMEs continued to rise, with KRW3.4t extended in July. The BOK attributed this to “stronger efforts at some banks to extend lending to the corporate sector” as well as SMEs’ need to pay their taxes.

Deposits fall
Whilst loans to corporates rose, overall deposits held by banks in South Korea declined “substantially” in July, according to the central bank.

Deposit-taking by banks fell by KRW30.7t versus a KRW26.4t rise in June on the back of a sharp decrease in transferable deposits, the BOK said.

Transferable deposits, and in particular those from corporate funds, declined by KRW46.2t in July. This reversed the KRW36.8t growth recorded for June.

The BOK blamed the decline on tax payments, the outflows of funds that flowed in for the quarter-end financial reporting, and outflows of funds for settlement purposes.

In contrast, time deposits grew by KRW15.3t in end-July compared to a KRW2.5t decline in June. This was boosted by some banks’ efforts to attract funds and by “the perception of deposit rates reaching their peak,” the BOK said.