Banks Secure Low-Cost Deposits
- Commercial banks are engaged in fierce competition to secure low-cost deposits, targeting both internet banking platforms and institutional business.
- The pursuit comes as banks face challenges in maintaining deposit levels amid fluctuating interest rates.
- According to figures from the financial sector, the combined low-cost deposits (including Money Market Deposit Accounts) of five major commercial banks totaled 624 trillion won at the end...
Commercial banks Compete for Low-Cost Deposits Amid Interest Rate Concerns
Commercial banks are engaged in fierce competition to secure low-cost deposits, targeting both internet banking platforms and institutional business.
The pursuit comes as banks face challenges in maintaining deposit levels amid fluctuating interest rates.
Data indicates a recent decline in low-cost deposits. According to figures from the financial sector, the combined low-cost deposits (including Money Market Deposit Accounts) of five major commercial banks totaled 624 trillion won at the end of February. This represents a decrease of 3.24 trillion won from 627.40 trillion won at the end of January. This decline marks the second consecutive month of decreases, with a drop of 3.82 trillion won from January.
Banks are concerned that this decline could become a trend, as customers increasingly seek products with higher interest rates.This shift puts pressure on banks to maintain their margins.
With anticipated restrictions on interest rate cuts,banks are looking to defend their margins by reducing interest costs and attracting funds through strategic products.
Several banks are launching new initiatives to attract deposits. Shinhan Bank, for example, has introduced a meeting account to compete with existing internet banks. Kookmin Bank is expected to benefit from its selection as a partner bank of the virtual asset exchange Bithumb, potentially securing large-scale, low-cost deposits. Bithumb deposits reached nearly 1 trillion won at the end of the third quarter of last year,totaling 932.7 billion won.
Other strategic products mentioned include Kookmin Bank’s Starbucks Exclusive Bank,
scheduled for release next month, and Hana Bank’s salary account, Daldal Hana Bank.
Commercial banks are also actively pursuing institutional business to attract low-cost deposits. While there are no major bids this year comparable to those from Seoul and Incheon, executives are focusing on opportunities with local governments in areas such as Guri, Bucheon, and Uljin.
Competition is also expected to be fierce for the Nara Love Card, a check card exclusively for soldiers.KB Kookmin Bank and IBK have managed the Nara Love Card program since June 2016.
Some banks are also focusing on managing accounts for major universities. One banking official noted that commercial banks are notably focused on the Nara Love Card this year.
Commercial Banks Compete for low-Cost Deposits: A Deep dive
Introduction: The Battle for Deposits
commercial banks are currently in a fierce competition to attract low-cost deposits. This push is happening in response to the challenges of maintaining deposit levels while navigating fluctuating interest rates. Banks are employing various strategies, from targeting internet banking platforms to pursuing institutional business, to secure these vital funds.
Key Questions and Answers:
Why are commercial banks focused on attracting low-cost deposits?
Banks are actively seeking low-cost deposits as these types of deposits are cheaper for them to maintain than other sources of funding and help banks defend their margins, especially with anticipated restrictions on interest rate cuts.
What is the current trend in low-cost deposits?
Recent data indicates a decline in low-cost deposits. Combined low-cost deposits (including Money Market Deposit Accounts) of five major commercial banks totaled 624 trillion won at the end of Febuary. This shows a decrease of 3.24 trillion won from 627.40 trillion won at the end of january. This decline marks the second consecutive month of decreases.
What initiatives are banks using to attract deposits?
Banks are launching strategic initiatives to attract deposits, including:
New Account Types: Shinhan Bank introduced a meeting account to compete with existing internet banks.
strategic Partnerships: Kookmin bank is expected to benefit from its selection as a partner bank of the virtual asset exchange Bithumb
New Products: Kookmin Bank plans to launch “Starbucks Exclusive Bank”. Hana Bank is offering a salary account called “Daldal Hana Bank.”
Institutional Business: Commercial banks are also pursuing institutional business opportunities with local governments
What role do institutional deposits play?
Commercial banks actively pursue institutional business to attract low-cost deposits.Executive are focusing on opportunities with local governments in areas like Guri, Bucheon, and Uljin. Also, competition is expected to be fierce for the Nara Love Card, a check card exclusively for soldiers, which is managed by banks like KB Kookmin Bank and IBK.
Why is the Nara Love Card significant?
Commercial banks are highly focused on the Nara Love Card this year signifying its importance in attracting deposits.Banks involved in managing the card program have been active since June 2016.
Comparing Bank Strategies:
Here’s a summary of key strategies used by diffrent banks:
| Bank | Strategy | Target |
| :————- | :—————————————- | :—————————————– |
| Shinhan Bank | New meeting account | Internet banking customers |
| Kookmin Bank | Partnership with Bithumb; New products | Crypto users; General public |
| Hana Bank | Salary account (“Daldal Hana Bank”) | Salary earners |
| Various Banks | Institutional business | Local governments, military personnel; Universities|