IBK to lower lending rate for smaller firms

SEOUL, April 2 (Yonhap) -- South Korea's state-run Industrial Bank of Korea (IBK)
plans to lower its lending rate for smaller companies in an effort to help
cash-strapped firms weather the slowing economy, its head said Thursday.
Despite a series of rate cuts by the central bank, lending rates have stayed at a
relatively high level as risk-averse lenders are reluctant to lower the rates on
concerns over falling net interest margins and rising loan default rates.
"We plan to reduce borrowing costs for small and medium enterprises (SMEs) in a
bid to ease their financial burdens," Yun Yong-ro, chairman of IBK, told a press
conference. IBK caters mainly to SMEs.
According to data by the Bank of Korea, South Korean banks' lending rates
declined by a smaller margin than deposit rates in February. The average lending
rate for households and companies came in at 5.57 percent while deposit rates hit
a record-low of 3.23 percent.
According to Yun, IBK has extended 3.5 trillion won (US$2.6 billion) in loans for
SMEs so far this year, equivalent to 36 percent of total SME loans by local
commercial banks. It has targeted providing up to 12 trillion won in such loans
this year.
The move comes as local banks are still wary of increasing loans, in particular
to smaller firms as non-performing loans are piling up amid the slowing economy
and a corporate overhaul drive.
Yun said the bank may not post a loss in the first quarter although numbers would
depend on how sharply the Korean economy falls this year. Asia's fourth-largest
economy is expected to post negative growth in 2009 with the government
predicting a 2 percent contraction.
IBK, which is 57.7 percent owned by the Finance Ministry, posted a net profit of
15.4 billion won in the fourth quarter, down 89.2 percent from a year earlier.
sooyeon@yna.co.kr
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