"Sharp Drop in Savings Bank Deposits Amid 'Gongmoju Craze'... Raising Interest Rates to Retain Customers" (Comprehensive)

Despite Record Low Interest Rates
Marketing to Attract Short-Term Liquidity
to Prevent Loss of IPO Subscription Frenzy

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

Savings Banks Alarmed by Sharp Drop in Deposit Balances, Rush to Raise Interest Rates

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

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

Industry leader SBI Savings Bank also raised its time deposit interest rates twice this month alone. On the 1st, the 1-year maturity time deposit interest rate was raised by 0.1 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 joined in. Daishin Savings Bank raised its time deposit interest rate by 0.20 percentage points. Welcome Savings Bank and JT Savings Bank also raised their time 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.

A Facet of the Public Offering Frenzy

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 investments. A savings bank official said, "About 50 billion KRW was withdrawn before the Kakao Games public offering subscription held over 2-3 days," adding, "95% of the funds returned after the public offering ended."

There is also an interpretation that the interest rate hike was made to manage the loan-to-deposit ratio (the ratio of loan balances to deposit balances). 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 insider 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 deposit outflows and inflows at savings banks will repeat until the general public subscription for Big Hit Entertainment’s public offering scheduled for the 5th-6th of next month."

Meanwhile, due to the interest rate hikes by major savings banks, the industry average deposit and savings interest rates, which had been falling endlessly, have turned to an upward trend. According to the Korea Federation of Savings Banks, as of today, the 1-year maturity time deposit interest rate is 1.68%, slightly up from 1.65% at the end of last month.

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