Firms pile up cash, households accumulate debt

Local firms are shying away from making investments and hoarding cash despite improving performance figures.

According to the Bank of Korea, the total amount held in corporate bank accounts at the end of last year increased to 215 trillion won, an increase of more than 37.7 trillion won ($32.7 billion) from 2008.

The increase, 21.3 percent, is the second highest on record, after a 26.9 percent increase in 2000. By the amount by which corporate savings increased, last year`s 37.7 trillion won is the largest on record.

The massive increase is thought to have been fueled by local firms choosing the safe option and withholding investment despite raking in significant profits last year in fear of unclear economic forecasts.

For the final quarter of last year, top 50 companies in terms of market capitalization posted operating profits of nearly 10.4 trillion won, and are projected to post over 14.9 trillion won operating profits for the first quarter of this year.

Last year also saw the amount deposited by households also increase but at a much lower rate than that of corporate savings, 10.4 percent, pushing up the total amount to 360.5 trillion won.

However, unlike local businesses, whose financial status is improving, the average Korean household moved deeper into debt last year.



According to the data, debt in the average household rose 5.1 percent from the previous year to be recorded at 43.37 million won.

With the average household income increasing only by 1.5 percent to 41.31 million won, household debt outweighed income by 2.06 million won last year.

In addition to local businesses, investors are also closely guarding assets against potential problems with large amounts of floating funds being directed into banks.

According to industry data, the total amount held by Kookmin, Woori, Shinhan, Hana, Industrial Bank of Korea and Korea Exchange Bank stood at 765.4 trillion won on Thursday. The figure is an increase of 18.9 trillion won compared to the end of January, which is more than six times larger than the average monthly increase of 2.99 trillion won seen last year.

Including January, the amount deposited with the six banks has increased by nearly 27.5 trillion won from the end of 2009.

Of the six banks, the amounts held by Kookmin, Shinhan and Woori increased by more than 5 trillion won, while that of Industrial Bank of Korea and Korea Exchange Bank increased by about 1.4 trillion won.

In contrast, Hana Bank`s figure dropped by 529.3 billion won.

Much of the increase is thought to have been fueled by investors seeking relatively risk free assets such as time deposits as troubles in some European nations exert a negative influence on international markets.

(cheesuk@heraldm.com)



By Choi He-suk