- Savings bank term deposit annual interest rate, 2.67% → 2.72% in 15 days
Launch of products in the 3% range including OK, JT Dear, and HB
“It is difficult for deposit interest rates to rise further… Loan sales must revive.”
Savings banks are again introducing products with deposit interest rates in the 3% range. Recently, as the ‘reversal phenomenon’ occurred where the deposit interest rate was lower than that of commercial banks, it appears that they have started to prevent customer defection and manage the loan-to-deposit ratio.
According to the Korea Federation of Savings Banks on the 26th, the average interest rate on one-year maturity term deposits of 79 domestic savings banks as of the previous day was 2.72%. It fell from 2.72% on the 25th of last month to 2.67% on the 10th, but recently rebounded again.
View larger imageThe reason why term deposit interest rates are rising again is because some savings banks have recently relaunched products with interest rates in the 3% range. HB Savings Bank raised the annual interest rate on its ‘e-term deposit’ product from 2.86% to 3.01% from the previous day. JT Chinae Savings Bank also raised the annual interest rate on its ‘revolving term deposit (variable interest rate)’ product from 2.9% to 3.05% from the previous day. On the 20th, OK Savings Bank increased the annual interest rate for the ‘OK e-Safe App Plus Term Deposit 6’ product from 2.9% to 3.1%. As of the 19th, there were no term deposit products in the 3% range, but as of the previous day, the number had increased to 11.
It is analyzed that the revival of the 3% term deposit product, which had been missing since the 24th of last month, after about a month, reflects anxiety caused by the recent increase in deposit interest rates in the banking sector compared to savings banks in the secondary financial sector. In general, savings banks offer deposit interest rates about 1% higher than banks because their means of raising funds is limited to deposits. However, as of the 10th, when the average deposit interest rate of all savings banks was 2.67%, the interest rates of representative term deposit products of the four major commercial banks were higher at 2.7 to 2.8%. As the possibility of a further cut in the base interest rate within the year became low, commercial banks quickly raised deposit interest rates, but savings banks felt burdened by the decline in margins due to receiving high interest rates, resulting in an interest rate reversal between the two industries. An official from the savings bank industry said, “If the interest rate attractiveness of savings banks decreases, problems may arise in securing liquidity. The recent launch of 3% term deposits appears to be a preemptive response in this regard.”
There is also an interpretation that it will be difficult for savings banks to introduce 3% term deposit products on a large scale. This is because the shock to real estate project financing (PF) has not yet subsided and there is no need to unreasonably increase receiving business in a situation where credit business is not easy due to lending regulations. Another official in the savings bank industry said, “It is difficult to provide both household loans and corporate loans, so increasing the number of loans will result in losses,” and added, “There is a high possibility that we will respond by raising the deposit interest rate only to the level that meets the appropriate loan-to-deposit ratio (loan-to-deposit ratio).”
The savings bank industry is making every effort to manage its soundness this year. The cumulative net profit of 79 savings banks in the third quarter of this year was 422.1 billion won, showing a surplus for three consecutive quarters. The delinquency rate in the third quarter was 6.9%, falling to the 6% range in 1 year and 9 months. The liquidity ratio and loan loss reserve ratio were 122.31% and 110.83%, respectively, both exceeding the legal standard (100%).
Reporter Choi Dong-hyeon nell@asiae.co.kr
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