One-year corporate deposit rates at major South Korean banks have topped 4% as market interest rates climb both at home and abroad. With the Bank of Korea possibly raising its policy rate again this year and the U.S. 30-year Treasury yield surging into the 5.6% range, analysts expect deposit and lending rates to keep rising for some time.
Woori Bank recently raised the one-year rate on its WON Corporate Time Deposit to 4.09%, according to financial industry sources on the 30th. That is 0.44 percentage points higher than at the end of August. The product's rate has risen steadily since May, gaining 1.12 percentage points so far this year.
Other banks are in a similar position. NH NongHyup Bank is applying a rate of 3.81% on the one-year term of its Corporate e-Time Deposit, up 1.2 percentage points this year. Shinhan Bank's one-year corporate time deposit rate stands at 3.73%. Rates on personal time deposits are lower, at around 3.5%.
Banks raise about 80% of their total deposits from corporate clients. Market watchers say lending rates will soon follow, given the sharp increase in corporate deposit rates, a core pillar of bank funding. Financial debentures, another funding channel, also hit a new high for the year, with five-year unsecured AAA-rated paper rising to 4.65% as of Sept. 15.
External factors are also significant. The U.S. 30-year Treasury yield has reached its highest level in 24 years, since 2002, while the 10-year yield rose as high as 5.293% at one point. Rising sovereign bond yields in major economies feed through to domestic market rates.
Lending rates are already climbing fast. The weighted average mortgage rate at banks, based on newly extended loans, rose 0.18 percentage points from the previous month to 4.66% in August. That is the highest in three years and nine months, since November 2022. An official at a commercial bank said rising deposit rates lead to higher lending rates.
