Shinhan Bank Offers Samsung, SK Hynix-Linked ELD With No Knockout Clause, Yielding Up to 3.15%

Shinhan Bank’s Safe ELD 26-9

Offers Up to 3.15% as Share Prices Rise

Shinhan Bank has launched an equity-linked deposit tied to the share performance of Samsung Electronics Co. and SK Hynix Inc., two stocks that have driven South Korea’s stock market. The product’s key feature is the absence of a knockout clause, which in many such products locks in only the minimum return once a preset threshold is breached.

According to the financial industry on June 4, Shinhan Bank will sell its principal-protected “Safe Equity-Linked Deposit 26-9” through June 9. The bank is offering separate one-year products linked to Samsung Electronics and SK Hynix. Both offer pretax annual returns of 2.85% to 3.15%, depending on gains in the underlying stock, with no knockout condition.

An ELD is a principal-protected product that can deliver a higher return than a time deposit if the underlying asset rises by a certain amount. Many ELDs include a knockout feature that fixes the return at the minimum level if the gain exceeds a preset threshold even once during the term. As stock-market volatility has increased, banks have been introducing products with lower maximum yields and no knockout clause.

The two products offer a base annual rate of 2.85%. If Samsung Electronics or SK Hynix rises between 0% and 10%, the final rate adds an amount equal to 3% of that gain, reflecting the participation rate. For example, if SK Hynix rises 5% from the reference level at maturity, the depositor would receive an annual return of 3.0%, made up of the 2.85% base rate plus 0.15 percentage point. If the stock rises more than 10% from the reference level by maturity, the final annual rate is 3.15%.

If the stock is unchanged or falls from the reference level, the return is fixed at 2.85% a year. In that case, the yield could be lower than on some time deposits while the funds remain locked up until maturity. As of June 4, Shinhan Bank’s one-year Shinhan My Plus Time Deposit offers as much as 3.0% a year with preferential rates applied. Early withdrawal incurs a fee.

KB Kookmin Bank, Shinhan Bank, Hana Bank and NongHyup Bank sold 12.3333 trillion won of ELDs last year, up sevenfold from 1.7751 trillion won in 2022, the largest volume in three years. They sold 3.5714 trillion won worth of the products this year through June 1.

Oh Yu-rim, Hankyung.com reporter our@hankyung.com