Last Year, Internet Banks' Deposit and Loan Gap Reached 4 Trillion Won

Loan Reduction and Inflow of Idle Funds Amid Asset Market Contraction and Government Regulations

[Asia Economy Reporter Minwoo Lee] It has been revealed that the deposit (savings and time deposits) balances of major internet-only banks such as KakaoBank and K Bank exceed their loan balances by about 4 trillion KRW. Since they pay interest to receive money but have not issued loans, costs arise corresponding to the surplus funds.

According to the financial industry on the 10th, K Bank's deposit balance last year was 11.32 trillion KRW, an increase of about 7.57 trillion KRW from 3.75 trillion KRW the previous year. During the same period, the loan balance increased by 4.1 trillion KRW to 7.09 trillion KRW. As a result, the difference between deposit and loan balances surged to 4.23 trillion KRW, up about 3.5 trillion KRW from 756.6 billion KRW at the end of the previous year. The imbalance worsened as deposits grew significantly more than loans.

KakaoBank showed a similar trend. Last year, its deposit balance was 30.0261 trillion KRW, and its loan balance was 25.8614 trillion KRW, with a difference of 4.1647 trillion KRW. The gap widened by about 938.7 billion KRW compared to the previous year.

This is because the government strengthened total volume regulations last year, recommending a household loan growth rate of 5-6%, creating an atmosphere that restricted loans, while asset markets such as stocks and virtual assets weakened and deposit interest rates rose. The sharp increase in K Bank’s deposit-loan balance difference was largely influenced by its partnership with Upbit.

In the case of household loans, when the household loan growth rate reached the government’s recommended level in the fourth quarter of last year, commercial banks also stopped selling some loan products or even blocked refinancing loans. Internet banks, which mainly focused on household loans, could not avoid the impact of loan regulations.

There is also a view that the stock market’s slight stagnation compared to the first year of COVID-19 and concerns about base rate hikes led to a historic inflow of investment funds back into the banking sector. According to the Korea Exchange, customer deposits, which serve as standby funds for the stock market, reached a record high of 77.902 trillion KRW on May 3 last year but dropped to around 62 trillion KRW by the end of the year. As the KOSPI index faltered somewhat, investors who did not find ‘fun’ in the market turned their funds to banks.

In the case of K Bank, the impact of its partnership with Upbit, the overwhelming number one virtual asset exchange, was significant. Due to the boom in the virtual asset investment market, funds concentrated on K Bank, which is the only bank partnered with Upbit.

Costs arising from attracting deposits are also unavoidable. If K Bank applies a simple calculation using the deposit-loan difference of 4.23 trillion KRW, an 80% proportion of low-cost deposits, and a 1% interest rate on its main product, the 'Parking Account,' it incurs interest costs of 33.8 billion KRW. Considering that K Bank’s disclosed interest expenses last year were 7.6 billion KRW in Q1, 9.7 billion KRW in Q2, and 10.7 billion KRW in Q3, this roughly aligns. For KakaoBank, applying the same method with a deposit-loan difference of 938.7 billion KRW, a low-cost deposit ratio of 58.3%, and a maximum deposit interest rate of 1.1% results in interest costs of about 6 billion KRW. However, KakaoBank’s basic checking account deposit interest rate is 0.1%, and among these, the 'Safe Box,' which separately deposits up to 100 million KRW per person, offers an interest rate of 1.1%.

A financial industry insider said, "Especially compared to commercial banks where demand deposit interest rates are only about 0.1%, internet banks offering up to 2% interest rates seem to have attracted such ‘reverse inflow’ funds," adding, "From the perspective of internet banks that offer high interest rates on demand deposit accounts to attract customers, a large deposit-loan gap inevitably leads to opportunity costs." An internet bank official explained, "Short-term deposits are difficult to manage long-term but the idle amounts are not wasted," and added, "We generate profits through short-term operations such as repurchase agreements (RP) to offset interest expenses."

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