"Deposits look better than stocks."
Money is flowing into banks as a sharp stock market decline dampens investor sentiment. Time deposit balances at major banks have grown by more than 67 trillion won in little more than three months, touching off a competition among financial firms to attract funds with higher-yielding products.
Investor deposits held at brokerages, which serve as cash waiting to enter the stock market, fell to 97.428 trillion won as of the 14th from 121.634 trillion won at the end of June, a decline of 24.206 trillion won, according to the Korea Financial Investment Association on the 16th. Over the same period, the KOSPI dropped about 29.1% on a closing basis, to 6,008.81 from 8,476.48.
Banks, by contrast, are drawing large inflows. Time deposit balances at the five largest banks — KB Kookmin Bank, Shinhan Bank, Hana Bank, Woori Bank and NH NongHyup Bank — stood at 1,016.5229 trillion won as of the 14th, up 67.1231 trillion won from 949.3998 trillion won at the end of June. Time deposit balances have risen for six straight months through mid-October after turning higher in May.
Total deposits at the five banks also climbed to 2,291.9009 trillion won, up 37.154 trillion won, or 1.6%, from the end of the previous month. That is the largest figure since the tally of total deposits began at the end of January 2022.
Banks are raising deposit rates one after another to speed up their efforts to gather funds. Analysts say rate competition has intensified as consecutive policy rate increases in July and August coincided with money shifting out of equities amid the market correction.
Shinhan Bank raised the rate on its 12-month "Sol Convenient Time Deposit" three times from July, for a combined increase of 0.60 percentage points. The rate, which stood at an annual 2.90% on May 27, reached an annual 3.50% on Sept. 30. Hana Bank raised the rate on its "Hana Time Deposit" four times between July and early this month, while Woori Bank lifted the rate on its "WON Plus Deposit" three times, for a combined increase of 0.70 percentage points. With KB Kookmin Bank and NH NongHyup Bank joining the round of increases, deposit rates at major banks have risen to the mid-3% range from the 2% range in the first half of the year.
High-yield special offerings are also emerging one after another. Shinhan Bank on the 6th introduced its "Super SOL Welcome Time Deposit," a one-year product with a base rate of an annual 3.6%. Customers who meet preferential conditions can receive up to an annual 4%. NH NongHyup Bank launched the "NH All One Bank 10th Anniversary Deposit," offering a rate of up to an annual 3.9%.
Brokerages, which need to stem the outflow of client funds, have also played the high-rate card. Special-offer promissory notes carrying rates in the 4% to 5% range are a prime example. Promissory notes are short-term financial products with maturities of up to one year, issued on the firm's own credit by brokerages designated as mega investment banks with equity capital of 4 trillion won or more.
Kiwoom Securities (039490.KS) this month launched a special-offer promissory note paying an annual 5.80% on a three-month maturity. Samsung Securities (016360.KS) has been selling a one-year promissory note with an annual 4.3% rate since the 12th.