"The Lowest Loan Interest Rate"... NH Nonghyup, the 'Unfair No.1' in Loan-Deposit Interest Rate Spread

As of August, NH Nonghyup Leads in Loan-Deposit Interest Rate Spread Among Top 5 Banks
NH Nonghyup Has the Lowest Loan Rates but Even Lower Deposit Rates
Inflow of Low-Interest Short-Term Deposits Lowers Deposit Rates

Among Internet Banks, Toss Bank Has the Largest Loan-Deposit Interest Rate Spread at 4.79%
High Proportion of Medium-Low Credit Loans with Higher Interest Rates Is the Main Factor

Applications for the preferential Safe Conversion Loan, which converts variable-rate mortgage loans to long-term fixed rates starting at an annual rate of 3.7%, began on the 15th. A bank in downtown Seoul was quiet on that day. Photo by Moon Honam munonam@

[Asia Economy Reporters Sim Nayoung, Lee Eunju] "Among the five major banks, NH Nonghyup showed the largest loan-deposit interest rate spread despite having the lowest loan interest rate. This is because its deposit interest rate was also the lowest among the five major banks," said an NH Nonghyup official.

As of August, NH Nonghyup was found to have the highest loan-deposit interest rate spread among the five major banks (Kookmin, Shinhan, Hana, Woori, NH Nonghyup). According to the Bankers Association disclosure on the 20th, Shinhan Bank had the highest spread in July, but the ranking changed this time with NH Nonghyup taking first place. The loan-deposit interest rate spread refers to the difference between loan interest rates and deposit interest rates. The higher this level, the better the bank's profitability. However, for banks recently facing nationwide criticism for 'interest profiteering,' being ranked number one in loan-deposit interest rate spread is nothing but a stigma.

Why is NH Nonghyup, with the lowest loan interest rate, ranked first?

The issue lies in the somewhat unfair story behind NH Nonghyup taking first place in loan-deposit interest rate spread. The combined loan-deposit interest rate spread for NH Nonghyup’s corporate and household products was 1.78 percentage points (P), higher than other banks which showed 1.20 to 1.45%P. The household loan-deposit interest rate spread excluding corporate products was also higher at NH Nonghyup with 1.76%P compared to other banks (1.12 to 1.65%P). Based on household loan-deposit interest rate spread, Shinhan (1.65%P), Woori (1.57%P), KB Kookmin (1.43%P), and Hana (1.12%P) followed.

Why was NH Nonghyup’s loan-deposit interest rate spread the highest? Looking at the loan interest rates reflecting both corporate and household loans, NH Nonghyup’s rate was 4.23%, lower than other banks (4.41 to 4.51%). The household loan interest rate was also the lowest among the five major banks at 4.26%. This means NH Nonghyup’s loan interest rates were not high enough to cause a large spread. However, its deposit interest rate was also low at NH Nonghyup Bank (2.45%) compared to other banks (2.99 to 3.21%).

An announcement about loan interest rates posted on the exterior wall of a commercial bank in downtown Seoul on the 17th. Recently, as the base interest rate and market interest rates have risen, the upper limit of the jeonse loan interest rates at major commercial banks, which is most sensitive from the perspective of ordinary citizens, has exceeded 6% for the first time in about 12 years. According to the financial sector on the 17th, the jeonse loan interest rates (guaranteed by the Korea Housing Finance Corporation, 2-year maturity) of KB Kookmin, Shinhan, Hana, and Woori Banks were at the level of 4.010 to 6.208% per annum as of the 16th. Photo by Kim Hyun-min kimhyun81@

In conclusion, NH Nonghyup Bank’s loan interest rates are lower than the other four banks, but its deposit interest rates are even lower, resulting in the largest loan-deposit interest rate spread among the five major banks. An NH Nonghyup official explained, "The government’s collected taxes are usually operated as short-term deposits with one or three-month terms, and in August, a large amount of deposits matured in July were newly recorded. Because short-term deposits, which have lower interest rates than long-term deposits, accounted for 61% of total deposits, the deposit interest rate was lower than other banks."

In the loan-deposit interest rate spread announced last month for July, Shinhan Bank ranked first among the five major banks (based on household loan-deposit interest rate spread at 1.62%P), and there was a reason for that as well. At that time, Shinhan Bank argued, "The higher loan interest rate was a result of handling many low-income financial products (which have higher interest rates than general products) in response to government policy."

Toss Bank’s High Proportion of Medium-Low Credit Loans Widens Deposit Interest Rate Gap

Among 19 banks including internet banks, regional banks, and KDB Industrial Bank, Jeonbuk Bank had the highest household loan-deposit interest rate spread at 5.66%P. Toss Bank followed with 4.79%P, and Gwangju Bank recorded 4.39%P.

In the case of Toss Bank, it appears that the relatively large proportion of medium-low credit loans among the three internet banks had a significant impact. According to the Bankers Association disclosure as of the end of June, the proportion of credit loans to medium-low credit borrowers (mid-interest rate loans) was 36.3% for Toss Bank, 22.2% for Kakao Bank, and 24.0% for K Bank. A Toss Bank official explained, "It is because the proportion of medium-low credit loans is large."

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