Uncertain Market, Increased Appeal of Deposits... Bank Deposit Balances Soar

Bank Deposits Increase by 38.4 Trillion Won in June
Seasonal Factors and Investment Wait-and-See Demand
Idle Funds Concentrate on Time Deposit Rate Hikes

Last month, deposits at domestic banks in South Korea increased significantly. This is attributed to seasonal factors related to the end of the half-year period, along with growing market uncertainty and higher deposit interest rates, which led to a concentration of idle funds in the market.

According to the Bank of Korea on the 13th, the total deposits at domestic banks in June this year increased by approximately 38.4 trillion KRW. This marked a sharp rise compared to the previous month (about 8.2 trillion KRW). By category, demand deposits increased by 37.1 trillion KRW, and time deposits rose by about 4.4 trillion KRW.

The primary reason for the large increase in demand deposits at banks is considered to be seasonal factors. Typically, at the end of half-year or year-end periods, corporations tend to expand their demand deposits to manage financial ratios. At the end of last year, for similar reasons, demand deposits at banks increased by about 11 trillion KRW.

However, the impact of individuals amid uncertainty surrounding asset markets is also significant. The U.S. Federal Reserve (Fed) has signaled additional interest rate hikes, while domestic real estate markets are caught between 'bottoming out' and 'cautious' views. A financial industry official explained, "Last month, housing mortgage loans at banks increased by nearly 7 trillion KRW, reflecting growing expectations that the housing market has bottomed out, and with the possibility of interest rate cuts in the second half of the year emerging, funds are increasing in preparation for investment."

The rise in time deposits is also a result of increased interest rate attractiveness. As of the previous day, the representative time deposit products of the five major commercial banks (KB, Shinhan, Hana, Woori, NH Nonghyup) offered interest rates ranging from 3.72% to 3.90%, with the upper end approaching the 4% range again. This is about a 0.20% increase compared to the previous month's rates (3.52% to 3.70%). Additionally, banks such as SC First Bank and sh Suhyup Bank have introduced deposit products with rates around 4.0% to 4.2%.

The increase in deposit interest rates at banks is due to the restoration of the loan-to-deposit ratio (LDR) regulation to 100% from the temporarily raised 105% starting this month. Banks urgently need to secure funds to comply with the LDR regulation, prompting them to raise deposit interest rates.

The rise in bank bond yields has also had an impact. Recently, concerns about a crisis at Saemaeul Geumgo have pushed up bank bond yields. As of the 10th, the one-year bank bond yield was recorded at 3.970%. A commercial bank official stated, "For the time being, deposit interest rates are expected to show a gradual upward trend in line with rising market interest rates."

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