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Banks' loan-deposit spread widens, interest income soars in 2018

All Headlines 10:19 February 11, 2019

SEOUL, Feb. 11 (Yonhap) -- The average loan-deposit spread of South Korean banks rose to a five-year high in 2018, which is forecast to lead to record-high interest earnings, data showed Monday.

According to the data from the Bank of Korea (BOK), the spread stood at 2.31 percentage points as of the end of last year, which is the highest since 2013 when the figure came to 2.53 percentage points.

The gap between interest paid by banks to savings account holders and the interest rate for outstanding loans has been on a constant rise since 2015 after hitting a low point of 2.15 percentage points.

The growing difference came as lenders have jacked up lending rates to the point where they are steeper than those for savings. Compared with 2016, the lenders' average interest rates for deposits rose 0.24 percentage point last year, while the loan rates advanced 0.36 percentage point, the data showed.

The widening spread is expected to help boost the lenders' interest income.

According to data compiled by the Financial Supervisory Service, local banks raked in 29.9 trillion won (US$26.62 billion) of interest income during the first nine months of last year, which is the highest since 2008 when the watchdog began compiling such data.

If such a pace is maintained, the total for the whole year is expected to reach nearly 40 trillion won, analysts said.

Of major lenders, KEB Hana Bank saw a 10 percent increase in its interest income to 5.29 trillion won last year.

KB Kookmin Bank logged 6.1 trillion won of earnings from interest in 2018, up 9.6 percent from a year earlier.

"Banks are forecast to report decent earnings from interest income this year on the back of the central bank's rate hike late last year," said Kim Soo-hyun, an expert at Shinhan Investment Corp.

Banks' loan-deposit spread widens, interest income soars in 2018 - 1


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