Even KeBae and KaBae Holding Firm... e-Banks Also Lower Deposit Interest Rates

Joining the Rate Cut Wave Unable to Withstand Base Rate Cut
K-Bank Lowers Deposit and Checking Account Interest Rates
KakaoBank Also Considering Deposit Rate Reduction

[Asia Economy Reporter Kim Min-young] Internet-only banks, which had held out despite the Bank of Korea's base rate cuts, have finally surrendered. K Bank and Kakao Bank, which attracted customers with higher interest rates than commercial banks, have also started lowering their deposit interest rates. There are talks that interest rate earners no longer have a place in the primary financial sector.

According to the financial sector on the 16th, K Bank lowered the interest rates on time deposits and checking accounts starting from the previous day. The 1-year maturity interest rate of its flagship product, the ‘CodeK Time Deposit,’ was reduced by 0.15 percentage points from 1.45% to 1.30% per annum.

The interest rates for the ‘Main Transaction Preferred Time Deposit’ and ‘PlusK Time Deposit’ were also lowered by 0.15 percentage points and 0.30 percentage points, from 1.25% to 1.10% and from 1.05% to 0.75%, respectively. The base interest rate of the ‘DualK Checking Account’ dropped from 0.20% to 0.10%.

K Bank had maintained its deposit interest rates despite consecutive base rate cuts by the Bank of Korea in March and on the 28th of last month, offering higher rates compared to other banks. However, unable to endure further compression of its interest margin, it has joined the ranks of interest rate reductions.

When the base rate is lowered, loan interest rates also decrease, so if deposit rates remain unchanged, the bank's profitability deteriorates. This is the first time in about eight months since last October, when the Bank of Korea lowered the base rate from 1.50% to 1.25%, that K Bank has reduced its deposit interest rates.

Kakao Bank, another internet-only bank, is also expected to lower its time deposit interest rates soon. A Kakao Bank official stated, “The responsible department is reviewing deposit interest rate cuts in response to the base rate reduction.” Previously, Kakao Bank lowered deposit interest rates by about 0.35 percentage points twice around March. On the 8th, it reduced the Safe Box interest rate from 0.70% to 0.50%, a 0.20 percentage point cut. The Safe Box is a demand deposit account that pays interest monthly.

Major commercial banks quickly lowered deposit interest rates following the Bank of Korea's base rate cut last month. Shinhan Bank reduced the interest rates of its flagship time deposit products, ‘Shinhan S Dream Time Deposit’ and ‘SOL Convenient Time Deposit,’ from 0.90% to 0.60% for a 1-year maturity. NH Nonghyup Bank also lowered its basic time deposit interest rates by 0.15 to 0.25 percentage points starting from the 12th.

KB Kookmin Bank cut interest rates on about 50 major deposit and installment savings products by up to 0.3 percentage points. Foreign banks such as SC First Bank and Citibank Korea also lowered interest rates on deposit products. The policy bank IBK Industrial Bank of Korea adjusted deposit and installment savings interest rates downward by 0.1 to 0.3 percentage points on the 9th.

An industry insider said, “Depositors who had kept money in banks despite low interest rates no longer find the primary financial sector attractive and seem to be moving their funds to savings banks or mutual finance sectors, or transferring some to stock deposit accounts.” Total deposits at the five major banks (Shinhan, Kookmin, Hana, Woori, Nonghyup) amounted to KRW 1,565.5386 trillion last month, a decrease of KRW 20.7446 trillion compared to April’s KRW 1,544.794 trillion.

This content was produced with the assistance of AI translation services.