Reversing Savings Banks Raise Deposit Rates to Secure Loyal Customers

Despite Record Low Interest Rates
Marketing to Attract Short-Term Liquidity
to Prevent Withdrawal from Public Offering Subscription Frenzy

[Asia Economy Reporter Kim Min-young] Major savings banks are raising deposit and savings interest rates one after another despite the record low interest rate trend. This is interpreted as part of customer attraction marketing to prevent customer outflow caused by the recent public offering subscription frenzy and to attract short-term liquidity funds by raising deposit interest rates.

According to the industry on the 15th, OK Savings Bank, the second largest in asset size, raised the interest rates of major deposit and savings products by 0.10 percentage points starting yesterday.

The interest rate for the 1-year OK Fixed Deposit was raised from 1.5% to 1.6% per annum, and the 3-year OK Safe Fixed Deposit and 1-year OK Fixed Savings were also raised by 0.10 percentage points from 1.6% to 1.7%.

SBI Savings Bank, the industry leader, also raised fixed deposit interest rates twice this month. On the 1st, the 1-year fixed deposit interest rate was raised by 0.10 percentage points from 1.6% to 1.7%, and then on the 11th, the same product’s interest rate was raised again to 1.9%. This means an increase of 0.30 percentage points in just ten days.

Other medium and large savings banks also joined in. Daishin Savings Bank raised fixed deposit interest rates by 0.20 percentage points. Welcome Savings Bank and JT Savings Bank raised fixed deposit interest rates by 0.05 percentage points and 0.10 percentage points, respectively. Eugene Savings Bank, DB Savings Bank, BNK Savings Bank, and others also joined the rate hike trend.

The increase in deposit and savings interest rates by savings banks is widely analyzed as a response to the rapid outflow of deposit funds due to the recent "public offering frenzy." Investors who invested in newly listed stocks such as SK Biopharm and Kakao Games have hit jackpots one after another, leading savings bank customers to withdraw deposits and savings and move into stock investment. A savings bank official said, "About 50 billion won in deposits was withdrawn before the Kakao Games public offering subscription held on the 2nd and 3rd," adding, "95% of the funds returned after the public offering ended."

There is also an interpretation that the interest rate was raised to manage the loan-to-deposit ratio (the ratio of loan balance to deposit balance). If deposits decrease sharply, the loan-to-deposit ratio of savings banks suddenly rises. Savings banks must maintain the loan-to-deposit ratio within 110%, so they need to attract deposits equivalent to the loans already issued, and the only way to do this is by raising interest rates. An industry official said, "Although the 1.5~1.7% interest rates are better than banks, many customers seem to consider them very low compared to recent stock market returns," adding, "It is expected that the outflow and inflow of deposits at savings banks will repeat until the general public subscription for Big Hit Entertainment’s public offering scheduled for the 5th to 6th of next month."

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