Commercial Banks Struggle to Sell Funds, Compete Intensely to Attract Cheongyak Savings

Fund Scandals Erode Trust
Bank Sector Struggles to Boost Non-Interest Income
Attractive Fees from Recruiting Housing Subscription Savings Subscribers
Hot Apartment Subscription Demand Favors Subscriber Recruitment

[Asia Economy Reporter Park Sun-mi] "Due to the private equity fund scandal, trust in bank funds has plummeted, causing non-interest income to sharply decline. There is indeed pressure to immediately increase the number of subscribers to the Housing Subscription Savings." (A Bank deposit officer)

Banks are actively competing to attract new subscribers to the Housing Subscription Savings as an alternative, since it has become difficult to increase financial product sales commissions amid a series of private equity fund incidents. This is because they can earn commission income by acting as a sales channel for Housing Subscription Savings without bearing costs, and they believe it helps secure potential future customers.

According to the financial industry on the 14th, major commercial banks have launched a competition to attract subscribers to the Housing Subscription Savings to increase non-interest income. Typically, bank commission income consists of bancassurance, fund sales, trusts, foreign currency, and entrusted funds. However, due to the sharp decline in sales caused by the private equity fund redemption crisis and limitations such as the '25% rule' in the bancassurance sector, banks have shifted their focus to increasing subscription savings. A B Bank official explained, "Although the income from Housing Subscription Savings does not constitute a large portion of total commission income, there is intense competition to devise event strategies to prevent losing new subscribers to competitors. Housing Subscription Savings customers are likely to become long-term clients, so banks cannot afford to lose them."

In the case of C Bank, the increase in subscription demand aiming for 'lottery-style apartment sales' has led to a 10% rise in subscription-related commission income compared to the first half of last year. As a result, the proportion of entrusted fund commissions in total commission income increased from 3.25% to 3.68% by the end of the first half.

Banking Sector Faces Shrinking Interest Margins
Earning Commissions by Attracting Housing Subscription Savings Subscribers 'Profitable'

Currently, with market interest rates falling, the net interest margin (NIM), a core profitability indicator for banks, continues to decline. As of the end of Q2, the NIMs of the five major banks are at historic lows: NongHyup 1.67%, KB Kookmin 1.50%, Shinhan 1.39%, Hana 1.37%, and Woori 1.34%. While banks need to increase non-interest income to defend profitability, the channels have narrowed due to the private equity fund scandal.

In this situation, when customers subscribe to the Housing Subscription Savings, banks can receive subscription commissions from the Korea Housing & Urban Guarantee Corporation without additional cost burdens and also earn separate commissions for monthly payment maintenance. This is why competition to attract subscribers to the Housing Subscription Savings is heating up in the banking sector. Since subscription savings customers may use other bank services such as loans, securing future customers is an added bonus.

The ongoing strong demand for apartment subscriptions also creates a favorable environment for banks to attract new subscribers, further intensifying competition. According to the Korea Real Estate Agency's Subscription Home data, as of the end of July, the number of Housing Subscription Savings subscribers reached approximately 24.84 million, the highest ever. This is an increase of over 150,000 from 24.68 million at the end of June. The Housing Subscription Savings is a 'universal subscription account' that generates subscription rankings and allows applicants who meet the housing type qualifications to apply for both private and public housing. Subscribers can freely deposit between 20,000 KRW and 500,000 KRW monthly, making it a low-burden option.

[Image source=Yonhap News]

Active Events to Attract New Housing Subscription Savings Subscribers in the Banking Sector

Given this situation, three of the five major commercial banks have launched campaigns to attract new subscribers to the Housing Subscription Savings. KB Kookmin Bank, considering that many young people want to prepare their subscription savings in advance for home ownership, has been running a Housing Subscription Savings event since the 1st of this month targeting customers born between 1982 and 2001 (ages 20 to 39).

NH NongHyup Bank has also launched an event this month offering prizes such as laptops, gift certificates, and coffee gift cards to new subscribers and customers who register for automatic payments for the Housing Subscription Savings. They plan to sharply increase the number of subscribers through this event as they approach 500 subscribers. Woori Bank is offering clothing dryers, air purifiers, and health supplements to new subscribers of the Housing Subscription Savings and the Youth Preferential Housing Subscription Savings until the end of next month.

Even banks that do not hold prize events are trying to attract subscribers by offering various services. Shinhan Bank has added a housing subscription consultation service to its mobile application and, starting this month, allows non-face-to-face subscription to the Youth Preferential Housing Subscription Savings through the financial sector's first electronic document wallet service, eliminating the need to visit administrative offices.

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