White Flag Raised by Internet Banks... K-Bank and KakaoBank Also Lower Deposit Interest Rates (Comprehensive)

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] Despite the Bank of Korea's base rate cuts, internet-only banks that had been holding out have finally surrendered. K-Bank and KakaoBank, which attracted customers with higher interest rates than commercial banks, have also started lowering their deposit interest rates. There is even talk 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 fixed deposits and checking accounts starting from the previous day. The 1-year maturity rate of its flagship product, the ‘CodeK Fixed Deposit,’ was reduced by 0.15 percentage points from 1.45% to 1.30% per annum.

K Bank Logo

The interest rates for the ‘Main Transaction Preferred Fixed Deposit’ and ‘PlusK Fixed Deposit’ were also cut by 0.15 and 0.30 percentage points, from 1.25% to 1.10% and from 1.05% to 0.75%, respectively. The base interest rate for the ‘DualK Checking Account’ was lowered 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, it could no longer withstand the shrinking interest margin and joined the ranks of those lowering rates.

When the base rate is cut, loan interest rates also decrease, so if deposit rates remain unchanged, the bank's profitability worsens. 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.

KakaoBank, another internet-only bank, is also expected to lower its fixed deposit interest rates soon. A KakaoBank official stated, “Following the base rate cut, the responsible department is reviewing the reduction of deposit interest rates.” Earlier, KakaoBank had lowered deposit 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 rates on its flagship fixed deposit products, ‘Shinhan S Dream Fixed Deposit’ and ‘SOL Convenient Fixed Deposit,’ from 0.90% to 0.60% for a 1-year maturity. NH Nonghyup Bank also cut its basic fixed deposit interest rates by 0.15 to 0.25 percentage points starting from the 12th.

KB Kookmin Bank lowered 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 reduced interest rates on deposit products. The policy bank IBK Industrial Bank of Korea adjusted deposit and installment savings rates downward by 0.1 to 0.3 percentage points on the 9th.

A financial sector official 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 institutions, or transferring some to stock deposit accounts.” Total deposits at the five major banks (Shinhan, Kookmin, Hana, Woori, Nonghyup) amounted to 1,565.5386 trillion won last month, down 20.7446 trillion won from 1,544.794 trillion won in April.

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