Corporate Bank Loans Rise for Third Straight Month Amid Bond Market Tightening

Companies continue to flock to bank loans rather than direct fundraising as the corporate bond market remains tight.

Bank loans to corporations totaled 1,387 trillion won in March, up 7.8 trillion won from the previous month, according to the “March Financial Market Trends” report released by the Bank of Korea (BOK) on Tuesday. While the increase was smaller than February’s 9.6 trillion won rise, corporate bank loans have now grown for three consecutive months.

Loans to small and medium-sized enterprises (SMEs) rose 4.5 trillion won to 1,080.1 trillion won, widening from the 4.3 trillion won increase in February. The gain marked the largest monthly rise in five months since October last year. “The increase widened as major banks’ efforts to expand corporate lending for ‘productive finance’ coincided with companies’ demand for working capital,” a BOK official said.

Bank loans to large corporations grew by 3.4 trillion won, narrowing from the 5.2 trillion won increase in February but maintaining an upward trend. The continued growth reflected banks’ intensified lending efforts and demand for foreign currency funding related to corporate bond repayments.

Meanwhile, the corporate bond market — previously a key funding channel for companies — continued to record net redemptions. This indicates that bond issuance volumes have slowed as bond yields surged in the wake of developments such as tensions involving Iran. Following net redemptions of 4.1 trillion won in February, the market posted another 300 billion won in net redemptions last month. “Net redemptions continued as the volume of maturing corporate bonds expanded, while seasonal factors such as shareholder meetings and heightened interest rate volatility reduced issuance,” the BOK explained.

Separately, outstanding household bank loans stood at 1,172.8 trillion won in March, up 500 billion won from the previous month, turning to growth for the first time in four months. Mortgage loans (unchanged from the prior month) saw a narrower increase compared to February’s 300 billion won rise due to tighter bank lending and weaker jeonse (lump-sum deposit lease) demand. However, other loans rose 500 billion won, driven mainly by credit loans linked to increased stock investment activity.