“Expectation of market interest rate decline and austerity easing”
Inbang barely maintains 4% per year
‘Big 5’ time deposits decreased by 6 trillion in one month
Although the Bank of Korea raised its benchmark interest rate last month, a sharp drop in deposit rates is observed in the financial sector. Deposit interest rates of commercial banks as well as some savings banks have been lowered to the 3% level per annum, while internet-only banks are barely keeping at the 4% level.
According to the financial sector on the 6th, Kakao Bank, an internet-only bank, lowered the fixed deposit interest rate by up to 0.6 percentage points as of the 4th. Previously, interest rates of 4.5-4.6% per annum were differentially applied to time deposits with a maturity of 1 to 3 years depending on the maturity, but with the adjustment of the deposit interest rate, all time deposits with a maturity of 1 year or more were lowered to 4% per annum. K-Bank also recently lowered the interest rate of ‘Code K fixed deposit’ by up to 0.3 percentage points, applying an annual interest rate of 4.1% for products with a maturity of one year.
KB Kookmin Bank, Shinhan Bank, Woori Bank, Hana Bank, and NH Nonghyup Bank’s time deposit interest rates, which used to exceed 5% per year, are only in the low to mid 3% range. As of this day, Woori Bank’s ‘Woori Super Term Deposit’ with a one-year maximum preferential interest rate was only 3.0% per year, Nonghyup Bank’s ‘NH Allone e Deposit’ at 3.47%, and Shinhan Bank’s ‘Sol Convenient Term Deposit’ at 3.63 per year. % was
The decline in deposit interest rates is due to stabilization in bank bond yields. Banks raise funds by issuing bank bonds or increasing the volume of deposits. An official from the banking sector said, “There is no need to attract deposits while paying interest rates that are higher than bank debentures. There is also an expectation that the austerity stance will ease,” he said. In fact, according to the Korea Financial Investment Association Bond Information Center, the one-year bank bond (AAA) interest rate rose to 5.107% on November 7 last year, but fell to 3.536% on the 3rd.
Even savings banks are adjusting their deposit interest rates to the 3% level per annum. IBK Savings Bank recently lowered the one-year maturity interest rate of the ‘Unusual Time Deposit’ by 1.0 percentage point to 3.7% per year. In addition, Shinhan Savings Bank and Hana Savings Bank’s one-year term deposit products and OK Savings Bank’s ‘OK Term Deposit’ interest rates are around 3.9% per year.
The withdrawal of funds that were concentrated in time deposits is also observed. In October of last year, the balance of time deposits at the five major banks increased by 46.8657 trillion won in one month, while at the end of last month it decreased by 6.1866 trillion won from the previous month to 812.25 trillion won.
Reporter Hwang In-joo
