Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
K bank cuts interest rates amid crypto-backed capital inflow
K bank headquarters in Seoul / Yonhap
By Lee Min-hyung
By Lee Min-hyung
K bank, one of the major digital-only lenders here, is moving to cut deposit interest rates amid a surging deposit balance, as cryptocurrency investors place a massive amount of capital in the lender's accounts.
Data showed K bank's total account balance surged by around 5 trillion won ($4.44 billion) to 8.72 trillion won as of the end of March, compared to the end of 2020.
This was driven by its partnership with Upbit, a Seoul-based digital currency exchange. There has been a sharp increase in the number of investors opening accounts at the lender to trade Dogecoin, a meme-based cryptocurrency traded only at Upbit here.
But the unexpected crypto boom here pushed the lender to cut interest rates for most of its saving account products. Early this month, the lender started reducing the interest rate for its regular savings accounts by 0.1 percentage point.
This is part of K bank's efforts to maximize profitability by increasing the loan-deposit margin at a time when its loan balance increases at a slower pace than the deposit balance.
K bank's loan balance increased by only about 800 billion won to 3.83 trillion won as of March 31 from the end of last year.
Increasing the balance of loans is generally considered one of the stablest ways for banks to maximize their loan-deposit margins. But with regulators stepping up pressure on banks to curb their loans, banks are increasing interest rates for their loan products.
Cutting deposit interest rates is another way to raise the margin, but this is less effective since people prefer not to put their money in savings bank accounts amid prolonged near-zero interest rates here and abroad.
But this was not the case for K bank, as the lender attracted massive capital particularly from retail investors in such a short period of time.
“It is crucial for not just K bank, but other lenders to keep placing top priority on ensuring their financial soundness, even if they grabbed the attention of investors due to the one-time cryptocurrency craze,” a bank industry source said.