SEOUL, April 26 (Korea Bizwire) — Controversy is flaring up over banks’ loan-deposit margins as households are suffering from higher interest rate burdens while banks are chalking up huge profits by raising loan interest rates higher than deposit rates.
The combined net profit of the nation’s five major financial holding firms — KB Financial Group Inc., Shinhan Financial Group Co., Hana Financial Group Inc., Woori Financial Group Inc. and NH Financial Group Inc. — totaled 5.24 trillion won (US$4.19 billion) in the first quarter of this year, the highest in history, according to the data from the Financial Supervisory Service (FSS).
Their strong performance is attributable to the sharp increase in interest revenue of the banks under their control.
Commercial banks chalked up huge profits by raising loan interest rates higher than deposit rates.
According to the Bank of Korea, the difference between the banks’ average loan interest rate and deposit rate widened to 18.86 percentage points in February from 1.55 percentage points in December last year, the biggest gap in nine months.
Thereafter, the banks announced that they raised deposit rates by up to 0.3 or 0.4 percentage points, but the actual rate of increase remained low at 0.25 percentage points.
President-elect Yoon Suk-yeol’s transition team and the FSS recently launched a project to introduce a disclosure system on loan-deposit margins, aimed at narrowing the gap between loan interest rates and deposit rates as well as checking whether domestic banks’ spread is appropriate and whether they financial institutions are colluding.
J. S. Shin (firstname.lastname@example.org)