Deposit Rates Rose as Market Interest Rates Jumped

Son Min

Summary

It reported that major banks raised deposit rates by 0.1~0.15 percentage points due to the recent rise in market interest rates.
It said that external factors such as rising bank bond and government bond yields and a sharp rise in the won·dollar exchange rate could lead to simultaneous increases in deposit rates and loan rates.
It said that commercial banks assessed that the decline in market interest rates has stopped, allowing them to avoid a reduction in net interest margins.

Commercial banks raise around 0.1%P in a month

1-year bank bonds have also 'rebounded' since August

While the Bank of Korea has kept its base rate unchanged for three consecutive months, banks have been raising deposit rates one after another. This reflects the market interest rate returning to an upward trend amid the deadlock in tariff negotiations with the United States, property measures, and other fallout.

According to the financial sector on the 23rd, Woori Bank raised the top rate of its 'WON Plus Deposit' from an annual 2.55% to an annual 2.60% that day. Last month, it also increased the product's rate by 0.1%percentage point in two separate instances.

Other commercial banks such as Kookmin Bank (top annual 2.55%), Shinhan (annual 2.55%), and Hana (annual 2.6%) also raised deposit rates by 0.1~0.15%percentage points over the past month. NongHyup Bank (annual 2.59%), KakaoBank (annual 2.6%), and K-Bank (annual 2.55%) also raised deposit rates.

Banks have raised deposit rates reflecting the recent rise in market interest rates. On the 22nd, the yield on AAA-rated bank bonds (1-year maturity) was an annual 2.58%, up 0.09%percentage point from the 2.49% on August 14, which marked this year's low. Analysts say the deadlock in tariff talks with the United States, along with additional real estate regulations and a sharp rise in the won·dollar exchange rate that weakened expectations for a rate cut, had a large effect. Bank bond yields are used as a key benchmark when calculating deposit rates.

There is an assessment that loan rates are also more likely to rise. The COFIX (COFIX·Cost of Funds Index), which is the benchmark for banks' mortgage rates, was 2.52% last month, up 0.03%percentage point from the previous month. This is the first time the index has risen in a year. Kookmin Bank, which uses COFIX, raised its variable-rate mortgage rate (annual 3.88~5.28%) by 0.03%percentage point on the 16th from the previous level.

Banks are breathing a sigh of relief. The decline in market interest rates has stopped, allowing them to avoid a reduction in net interest margins for the time being. The net interest margin (NIM) of the five major banks — Kookmin, Shinhan, Hana, Woori, and NongHyup — was an average 1.55% in the second quarter, marking the lowest level in three years. An executive at a commercial bank predicted, "There is a high possibility that deposit and lending rates will be kept at current levels, so net interest margins this year will not decrease further."

Reporter Jinseong Kim jskim1028@hankyung.com