Whole lot of borrowing went on in April thanks to IPO

Borrowings spiked in April, buoyed by unsecured loans taken by punters to invest in an initial public offering (IPO) by SK IE Technology, which was listed on the Kospi on Tuesday.

Major banks ATM machine in Jongro in Seoul in May. Fresh loans borrowed in April saw a surge largely contributed by IPO hype. [YONHAP]

Borrowings spiked in April, buoyed by unsecured loans taken by punters to invest in an initial public offering (IPO) by SK IE Technology, which was listed on the Kospi on Tuesday.

Borrowings from members of the family that controls Samsung Group to pay inheritance tax also contributed.

According to the Financial Services Commission (FSC) and the Bank of Korea (BOK) on Wednesday, new borrowing in April amounted to 25.4 trillion won ($22.6 billion), a 167 percent increase over 9.5 trillion won in March.

Some 16 trillion won was borrowed from banks and 9.4 trillion won from non-banking financial companies including savings banks, which in Korea are like consumer finance companies, and insurance companies.

There was a significant surge in non-mortgage loans: 20.2 trillion won, or 573 percent more than the previous month. Of that amount, 11.3 trillion won was in unsecured loans.

Mortgage lending actually shrunk 20 percent compared to the previous month, from 6.5 trillion won in March to 5.2 trillion won in April.

According to the FSC, there was a particular spike in non-mortgage lending by banks between April 28 and 29, when SK IE Technology were accepting subscribers for its IPO.

On those two days, approvals of new non-mortgage loans including unsecured loans amounted to 9.6 trillion won.

Most were repaid on May 3 when refunds were made to retail investors who failed to get all the shares they applied for. On May 3, 7.8 trillion won of the loans were repaid.

A similar trend was detected in mortgages, which means some people were using that money for the IPO. On April 28 and 29, 10.1 trillion won in mortgage lending by banks was approved. Of those loans, 8.3 trillion won was repaid on May 3.

The FSC in a statement said loans temporarily surged last month due to a loan borrowed from a “certain” family, meaning the Lees, who have a big tax bill from their inheritances from the late chairman Lee Kun-hee.

In a public filing, the wife and two daughters of the late chairman said they borrowed roughly 700 billion won from Hana Bank and Woori Bank.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]