'Lowest Loan Interest Rate' NH Nonghyup... The Story Behind Becoming 'Accidental No.1' in Household Loan-Deposit Interest Rate Spread

Among the 5 Major Banks, NongHyup Has the Lowest Loan Interest Rate
Savings Deposit Interest Rates Also the Lowest
Due to Local Government Grants Flooding into Short-Term Deposits

Financial Services Commission's Household Loan-Deposit Interest Rate Gap Calculation Method Also Problematic
"Household Loan Interest Rates Should Be Compared with Household Deposit Interest Rates," Criticized

[Asia Economy Reporter Sim Nayoung] Among the five major banks (KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup), NH Nonghyup showed the highest household loan-deposit interest rate spread for September, following August. According to the Bankers Association disclosure on the 20th, NH Nonghyup's loan-deposit interest rate spread in September was 1.90 percentage points (p). It was followed by Shinhan Bank (1.54%p), Woori Bank (1.22%p), KB Kookmin Bank (1.20%p), and Hana Bank (1.18%p). In August, NH Nonghyup's loan-deposit interest rate spread was also 1.90%p, leading other banks.

The loan-deposit interest rate spread is the difference between loan interest rates and deposit interest rates, directly linked to bank profitability. However, banks nationwide facing criticism for 'interest profiteering' want to avoid being ranked first in this spread. Nevertheless, there are reasons why NH Nonghyup had to be first for two consecutive months. The first reason is that while household loan interest rates are the lowest compared to other banks, deposit interest rates are also at the lowest level.

NH Nonghyup's household loan interest rate is 4.64%. This is lower than Woori Bank's 5.19%, Shinhan Bank's 5.06%, Hana Bank's 4.76%, and KB Kookmin Bank's 4.72%. In other words, the spread did not widen because of higher loan interest rates.

The cause of the widened loan-deposit interest rate spread lies in the deposit interest rates on savings products. NH Nonghyup's savings deposit interest rate was 2.74%. Compared to Hana Bank's 3.58%, and KB Kookmin Bank, Shinhan Bank, and Woori Bank each at 3.52%, this is significantly lower. Even though NH Nonghyup's individual fixed deposit interest rate for household loan products is 4.65% (NH All One e-Deposit), the highest among the five major banks, this result occurred for a reason.

An NH Nonghyup official explained, "Grants allocated to local governments and local education offices in Korea are usually managed as short-term deposits with one- or three-month terms, and handling a significant portion of these caused the overall deposit interest rate to drop significantly." He added, "Because short-term deposits, which have lower interest rates than long-term deposits, account for more than 60% of total deposits, the deposit interest rate was lower than other banks."

The method used by the Financial Services Commission and banks to calculate the household loan-deposit interest rate spread (household loan interest rate minus savings deposit interest rate) also has issues. The disclosed household loan interest rate excludes corporate and institutional volumes, but the savings deposit interest rate includes corporate and institutional volumes. NH Nonghyup explained that if corporate and institutional volumes were excluded from the savings deposit interest rate, the deposit interest rate would rise, and the loan-deposit interest rate spread would have been narrower than it is now.

A financial sector official said, "The household loan-deposit interest rate spread should compare 'household loan interest rates and household deposit interest rates,' but currently it compares 'household loan interest rates and total deposit interest rates (including corporate, individual, and institutional),' which creates a gap from the interest rate levels experienced by individual customers." He added, "The current disclosure of the loan-deposit interest rate spread does not adequately reflect the actual situation."

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