Korean lenders focus on corporate banking for growth

[Graphics by Song Ji-yoon]

South Korea’s commercial lenders saw their combined corporate loan balance surge by more than 32 trillion won in May from December 2023, suggesting their focus on business financing amid intensifying competition in the household loan sector.

According to multiple sources from the financial industry on Sunday, the balance of corporate loans extended by the country’s four major commercial banks stood at 664.2 trillion won at the end of May, up 32.9 trillion won from the end of December 2023.

Among corporate loans, the balance of loans extended to large corporations surged by about 16 trillion won to 133 trillion won at the end of May from 116 trillion won in December 2023. The growth rate was 13.7 percent.

The four banks are Woori Bank, KB Kookmin Bank, Hana Bank, and Shinhan Bank.

Loans to large corporations are considered relatively low risk loans among other risk-weighted assets (RWA), an asset calculation used by a financial institution to determine loan qualities.

Although loans to small and mid-sized enterprises and self-employed borrowers also increased by 16.9 trillion won, the growth rate was only 3.3 percent at the end of May compared to the end of December last year.

The commercial banks’ focus on corporate loans comes amid intensifying competition in the mortgage loan industry with online banks penetrating the market.

The combined mortgage balance for three online banks – KakaoBank Corp., Kbank, and Toss Bank – was 31.3 trillion won at the end of March, up by 4.7 trillion won in just three months compared to the end of last year when the balance was 26.6 trillion won.

The mortgage balances of the four commercial banks, whose housing-related loan balances are nearly 15 times larger than those of the three online banks, on the other hand, increased by 6.9 trillion won at the end of March from the end of December 2023.