Shinhan Bank is raising base rates on its main deposit and installment savings products by as much as 0.3 percentage points a year, and other commercial banks are reviewing similar moves. Analysts say the shift of money back into bank deposits is likely to accelerate as pressure for higher rates builds.
Shinhan Bank will lift base rates on its major deposit and savings products by 0.2 to 0.3 percentage points starting on the 3rd, according to financial industry sources on the 2nd.
The base rate on the 12-month version of its flagship "Sol Convenient Time Deposit" rises 0.25 percentage points to 2.55% from 2.30%. The 12-month rate on its standard time deposit climbs 0.30 percentage points to 2.55%. Base rates on major installment savings products, including the "Shinhan S Dream Savings," increase by 0.2 to 0.3 percentage points depending on the product and maturity. "Top rates could be adjusted upward in line with changes in market rates and deposit conditions," a Shinhan Bank official said.
KB Kookmin Bank and Hana Bank said they are also considering raising deposit and savings rates. The highest rate on flagship time deposits at the five largest banks currently stands at about 3.20%.
Standard Chartered Bank Korea adjusted rates on short-term deposits and installment savings from the 1st. On its "Do Dream Account," a demand deposit, the rate applied to funds held within 30 days of deposit rose to 0.1% from 0.01%. Base rates on its "First Household Savings" product were raised by 0.25 percentage points across all subscription terms.
Industrial Bank of Korea is applying a special preferential rate to its small and medium-sized enterprise finance bonds. The top rate on its one-year compound-interest bond is 3.76%. The bonds are not covered by deposit insurance but are sold at bank branches much like deposits. The compound-interest bond adds interest to the principal over the contract period and pays out principal and interest together at maturity.
Top rates on time deposits at other commercial banks have also moved up to the high 3% range. The 12-month top rate on Standard Chartered Bank Korea's "e-Green Save Deposit" and Kyongnam Bank's "The Deundeun Deposit Season 2" is 3.85%. The Jeonbuk Bank's "JB 1·2·3 Time Deposit" offers up to 3.81%, while iM Bank's "The Coupon Deposit" and Jeju Bank's "J Time Deposit" carry top rates of 3.80%. Among savings banks, products offering more than 4% are common, with Dongyang Savings Bank's online time deposit paying as much as 4.10%.
Top rates on installment savings products at commercial banks have climbed into double digits. The Jeonbuk Bank's "JB Super Seed Savings" offers up to 13.50%, Woori Bank's "Dugeun Dugeun Lucky Savings" 13.00% and KB Kookmin Bank's "KB Card Sseudam Savings" 12.00%. iM Bank's "The Coupon Savings" and The Jeonbuk Bank's "Challenge Routine Savings" each offer up to 11.00%.
Money is flowing rapidly into time deposits alongside the rise in deposit rates. Time deposit balances at the five largest banks stood at 1,005.2319 trillion won at the end of last month, up 20.292 trillion won in a single month.
With global sovereign bond yields rising and upward pressure building on domestic market rates, analysts say bank deposit rate increases and the concentration of funds in time deposits are likely to continue for some time. "Expectations are firming that the base rate will rise to 3.5%," a financial industry official said. "If expectations of higher deposit rates combine with a preference for safe assets, the movement of money into time deposits will continue."
