Bank Deposit Interest Rates Return to 3% Range... Balance Hits This Year's Highest Level

The upward trend in fixed deposit interest rates at major commercial banks appears to have slowed down. However, as major commercial banks continue to offer higher deposit rates compared to secondary financial institutions, demand to catch the last wave of high interest rates has pushed the fixed deposit balance to reach this year's highest level last month.

On the 4th, the representative deposit products (12-month maturity) of the five major banks?KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup?offered interest rates ranging from a maximum annual rate of 3.95% to 4.00%. At the beginning of last month, the deposit rates of the five major banks exceeded 4%, recording between 4.00% and 4.05%, but they have slightly decreased since then.

As of this morning, based on the Bankers Association standards, KB Kookmin Bank's 'KB Star Fixed Deposit,' Shinhan Bank's 'Solpyeonhan Fixed Deposit,' and Hana Bank's 'Hana Fixed Deposit' all offer a maximum annual rate of 3.95%, remaining in the 3% range. Only NH Nonghyup Bank's 'NH All One e-Deposit' and Woori Bank's 'WON Plus Deposit' provide the highest annual rate of 4.0%.

Until now, banks have competed for deposits by raising interest rates to reinvest maturing high-interest products attracted at the end of last year. However, the financial authorities have issued restraint orders, fearing that deposit competition could affect loan interest rates, which seems to have curbed the upward trend. Additionally, since the removal of the bank bond issuance limit restrictions in October, funding conditions have also improved.

Although banks have slightly lowered interest rates, the difference compared to secondary financial institutions such as savings banks is minimal. This is because savings banks are lowering fixed deposit rates due to deteriorating profitability. In some cases, an interest rate inversion phenomenon is occurring. Typically, savings banks offer deposit rates 0.8 to 1.0 percentage points higher than commercial banks. According to the Korea Federation of Savings Banks, as of today, the average fixed deposit interest rate (12-month maturity) for all savings banks is 4.07% annually, down 0.04 percentage points from a month ago (4.11%) and 0.13 percentage points lower compared to October (4.20%). Hana, Woori Financial, KB, and Must Samil Savings Bank, among others, apply rates of 3.9%, which are lower than those of the five major banks.

In response to this situation, large sums of money are flowing into deposits at the five major banks. Last month, the fixed deposit balance at the five major banks reached 868.7369 trillion KRW, marking the highest level this year. Compared to the previous month, it increased by 12.7627 trillion KRW in just one month, and compared to November of last year, it rose by 41.4383 trillion KRW.

Meanwhile, the balance of regular installment savings reached 45.1264 trillion KRW, increasing by 7.562 billion KRW compared to the previous month, and demand deposits including MMDA (Money Market Deposit Accounts) grew by 5.787 billion KRW to 598.7041 trillion KRW. The total deposit balance (including bank bonds) of the five major banks stood at 1,973.9895 trillion KRW at the end of last month, up 4.2708 trillion KRW from the previous month.

However, with forecasts suggesting that deposit interest rates have peaked, there are expectations that the growth rate of fixed deposits will slow down. A representative from a commercial bank explained, "Since a decline in interest rates is anticipated in the first half of next year, deposit interest rates are expected to maintain the 3% range."