The share of retail deposits at South Korea's savings banks keeps falling, led by the largest players. Deposits are declining as the lenders write off bad assets and shrink their balance sheets, but the erosion of retail deposits — the foundation of their business — is raising concern.
Retail deposits at SBI Savings Bank, the industry's largest by assets, accounted for 66.67% of its total, or 6.84 trillion won ($4.9 billion), at the end of June, down 1.06 percentage points from a year earlier, according to financial industry sources on the 16th.
The amount of SBI's retail deposits also fell by 1.12 trillion won. Part of the decline was offset by corporate and institutional money. The share of deposits from companies and institutions rose to 7.43% from 4.92% over the past year, a gain of 2.51 percentage points.
At OK Savings Bank, retail deposits made up 66.42% of the total, or 6.77 trillion won, at the end of June, down 3.59 percentage points in a year. In absolute terms, retail deposits fell by 918.2 billion won. The share declined 4.43 percentage points at Korea Investment Savings Bank and 1.84 percentage points at Acuon Savings Bank. At Welcome Savings Bank, the share rose to 80.14% at the end of June this year from 77.28% at the end of June 2025, though it remains below the 80.94% recorded in June 2024, when the figure was measured two years earlier.
Looking more broadly, the retail deposit share at Daol Savings Bank stood at 56.11% at the end of June, down 0.39 percentage point from a year earlier, while Shinhan fell 9.2 percentage points and DB dropped 5.7 percentage points. Hana Savings Bank also declined 4.5 percentage points. Chinae Savings Bank was the rare exception, rising 11.35 percentage points.
The market attributes the trend to the process of cleaning up bad real estate project financing loans, which reduces deposits, or liabilities, with retail money falling faster than other funding. As the lenders shrink their assets, individual customers are drifting away, and the banks are covering their funding needs with corporate and institutional deposits, which are relatively easier to secure.
Savings bank deposit rates are currently not particularly attractive. The average one-year deposit rate across the sector stood at 3.73% as of the 16th, lower than the 3.81% at the end of July. The gap with commercial banks has also narrowed considerably in recent months.
Industry officials say that with bad assets to work down and regional economies slowing, there are few places to lend. Loan demand has fallen further under lending curbs that have persisted this year. Given those conditions, they say, it makes sense to shrink deposits because there is little use for the money once it comes in.
The problem is retail customers. Savings banks are built to take deposits from individuals and lend to small and mid-sized businesses, self-employed business owners and vulnerable borrowers. A shrinking share of retail deposits means losing loyal customers, which could force the lenders to pay more to expand their business later. "Savings banks are shrinking their assets to strengthen their footing, but a smaller retail deposit base means losing a major business asset, since that is the bedrock of their operations," an official in the financial industry said. "Even if their finances improve and they start lending more, they could run into difficulties."
