March Loan-Deposit Interest Rate Spread 2.32%... Widened Again Due to Interest Rate Increase
H1: Continued Expansion of Loan-Deposit Interest Rate Spread Expected in the First Half of the Year
[Asia Economy Reporter Minwoo Lee] In March, the interest rate spread between deposits and loans in the banking sector increased once again. This is interpreted as a result of loan interest rates rising more than deposit interest rates due to the steady increase in market interest rates.
According to the Bank of Korea on the 1st, in March, the deposit interest rate (based on total deposits) of domestic banks was 0.96%, and the loan interest rate was 3.28%, rising by 0.03 percentage points (p) and 0.08 p respectively compared to the previous month. As a result, the interest rate spread between deposits and loans widened by 5 basis points (bp, 1bp=0.01%) to 2.32%. The interest rate spread has expanded by 11 bp during the first quarter of this year.
Researcher Kyunghoe Koo of SK Securities said, "With market interest rates steadily rising, loan interest rates have increased faster than deposit rates," adding, "Considering that bank interest rates lag behind market interest rates, the interest rate spread between deposits and loans at banks is expected to widen further at least during the first half of the year."
New loan interest rates, which had been rising sharply, showed a somewhat mixed trend. Based on savings deposits, the new deposit interest rate of banks in March was 1.74%, up 0.04 p from the previous month. On the other hand, the new loan interest rate was 3.50%, down 0.01 p from the previous month. This appears to be due to a decline in new interest rates for small and medium-sized enterprise loans (-0.02 p) and mortgage loans (-0.04 p). Meanwhile, interest rates for credit loans and group loans rose by 0.13 p and 0.05 p respectively.
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Researcher Koo forecasted, "If the interest rate spread continues to widen due to rising interest rates, it will have a positive impact on bank earnings in the second quarter."
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