Corporate loans rise by record amount in Q2 amid pandemic

Loans extended to companies in South Korea jumped by the largest amount on record in the second quarter, as financial firms sharply increased lending to the service sector hit hard by the new coronavirus outbreak, central bank data showed Wednesday.

The outstanding amount of corporate loans came to 1,328.2 trillion won ($1.12 trillion) at the end of June, up 69.1 trillion won from three months earlier, according to the data from the Bank of Korea (BOK).

It compared with a 51.4 trillion won rise tallied in the first quarter.

The second-quarter reading marks the largest on-quarter increase since the first quarter of 2008, when the BOK began to compile related data.

"Financial institutions increased financial support for the service sector amid the COVID-19 pandemic, and companies in the segment also ramped up efforts to secure funds due to the business slump," the BOK said.

In the April-June period, loans extended to the service industry jumped 47.2 trillion won, accelerating from a 34 trillion won increase in the previous quarter.

Lending to the service sector grew by the largest quarterly amount on record in the second quarter, the BOK added.

Loans to manufacturing firms added 17.2 trillion won in the cited period, up from a 14.8 trillion won gain in the preceding quarter as loan demand increased amid the virus outbreak.

In March, banks reached an agreement with the government to extend loan maturity for cash-strapped small merchants and small and medium-sized enterprises (SMEs) by six months until the end of September.

The government announced last week that the loan maturity will be extended by another six months. (Yonhap)