South Korean corporate loans heavily concentrated in real estate and retail

The Korea Institute of Finance has reported a growing polarization in corporate performance, noting that while overall corporate earnings have improved, the gap between industries and company sizes is widening.

Real estate and wholesale/retail sectors currently account for 60.4% of all corporate loans in the financial sector. Specifically, real estate makes up 36.5% and wholesale/retail accounts for 23.9%. The institute warned that high inflation and interest rates could increase delinquency and default risks in these vulnerable sectors, potentially spreading credit risks to non-banking financial institutions.

To address these structural issues, the institute suggested that financial support alone may be insufficient. They recommended improving industrial structures where capital is excessively allocated relative to productivity and establishing a preemptive restructuring system involving the government, financial sectors, and private capital.