Demand for bank loans expected to shrink in Q2: poll

A reading above zero means demand is expected to grow from three months earlier while a reading below the benchmark means demand will likely shrink.

The quarterly reading is based on a survey of 15 local banks and 157 other non-bank financial institutions that offer loans, such as credit card firms, life insurers, mutual savings banks and financial cooperatives.

Separate indices measuring demand for loans from each type of financial institution also showed downward tendencies.

An anticipated drop in demand for bank loans in the second quarter was largely attributed to growing uncertainties.

"The demand for new loans from large companies is expected to continue growing in the second quarter, but at a much slower pace than in the previous quarter due to a recent increase in the companies' reserve funds and direct financing," the central bank said in a press release.

Demand for fresh loans from smaller firms is also expected to slow from the previous quarter as they expect worse business conditions down the road, it added.

The index measuring demand for loans from large firms came to 3 for the April-June period, down from 6 for the first quarter, while the index for small and medium-sized companies slipped to 16 from 19 over the cited period.

Demand for bank loans from households is expected to post negative growth, with the index measuring their demand for mortgage loans coming in at negative 6, unchanged from the previous quarter.

Korea's household borrowing reached a record high of 1,207 trillion won ($1.04 trillion) at the end of 2015. (Yonhap)