Corporate savings log first decrease in 19 years
Savings deposit accounts owned by companies logged an annual decrease for the first time in 19 years last year, due mainly to the soaring interest rates experienced by the companies.
According to data from the Bank of Korea’s (BOK) Economic Statistics System on Wednesday, the Korean won-denominated savings deposit balance of companies stood at 637.5 trillion won ($477 billion) as of the end of last year, which is a 0.9 percent year-on-year decline from the previous year.
This contrasts with an 8.5 percent increase in households’ savings deposit balances during the same period, which rose to 925.9 trillion won from the previous year, which stood at 853.8 trillion won.
The year-on-year decrease in corporate savings deposits is the first of its kind since 2004 when companies witnessed a 2.9 percent fall in their savings deposits from the previous year. Since 1975, when the BOK began compiling relevant statistics, only 2004 and last year have marked year-on-year decreases in the corporate deposit balance, showing the rarity of such an occurrence.
The fall is attributed to corporations’ withdrawal of money from both demand deposits and savings deposits throughout last year. At the end of last year, demand deposits held by corporations amounted to 115 trillion, a 1.1 percent decrease from the previous year. Savings deposits also logged a 0.9 percent fall, as the aggregated amount fell to 522.4 trillion won, down by 4.59 trillion won from the previous year.
It is estimated that corporations deleveraged themselves last year by reducing the amount of debt with their savings deposits under the high-interest-rate environment. Last year, the interest rate on corporate loans averaged 5.31 percent, marking the highest level since 2012.
Additionally, considering the rising trend in corporate loans as well as companies’ increasing delinquency rates last year, it can be interpreted that corporations had little room to increase their deposit balances due to tight finances due to the interest payments.