Banks strive to stem client fund outflow to brokerages amid KOSPI rally

Customers receive consultations at a branch of a commercial bank in Seoul, Oct. 15. Yonhap

Banks are racing to raise deposit rates and launch products that combine savings with securities, in an effort to prevent outflows amid the KOSPI rally, which has driven a “rapid movement of funds” into the stock market, industry officials said Thursday.

Demand deposit balances at the country’s five major banks — KB Kookmin, Shinhan, Hana, Woori and NH NongHyup — fell to 614.9 trillion won ($419 billion) as of Wednesday, down 33.4 trillion from the end of September and 12.6 trillion from the end of October. Daily withdrawals this month have averaged 1.14 trillion won.

The decline in demand deposits, largely idle funds, is attributed to the stock market rally, as the KOSPI surged more than 20 percent in just over a month, drawing large amounts of liquidity from the banking sector.

This prompted banks to raise deposit rates to retain customer funds, despite the Bank of Korea keeping its base rate at 2.5 percent since May.

KB Kookmin Bank raised the interest rate on its one-year time deposit from 2.65 percent to 2.7 percent on Wednesday, while Shinhan Bank increased the same term rate from 2.65 percent to 2.75 percent. Hana Bank also lifted its one-year deposit rate by 0.05 percentage points to 2.7 percent, and Woori Bank raised its rate from 2.65 percent to 2.75 percent. NH NongHyup Bank followed suit, adjusting the rate on its main deposit product from 2.65 percent to 2.7 percent.

Banks are also rolling out products and services that integrate banking and securities to retain customers.

Hana Bank recently introduced a unified account that merges its deposit account with a brokerage account, enabling customers to invest in both domestic and global stocks directly from their bank balance without separate transfers.

“The new product, jointly developed with Hana Securities, offers a comprehensive solution that combines payroll management and investment in one account,” a Hana Bank official said.

Internet-only banks have joined the trend, with KakaoBank introducing a 26-week savings product in collaboration with Kiwoom Securities, offering stock trading incentives to customers who make regular installment deposits.

Customers who open the account and complete automatic weekly transfers for 26 consecutive weeks can receive stock trading support funds and other rewards.

Previously, KakaoBank also made it easier for users to access Kiwoom Securities’ investment products by allowing account openings directly through its mobile app.

“Banks are cautiously raising deposit rates while monitoring each other’s moves, as the stock market rally raises the risk of fund outflows that could lead to customer attrition,” a banking industry official said. “Lenders are also likely to continue introducing hybrid products and services that combine deposits with securities to retain customer funds.”