Korean banks' deposit rate dips to 13-year low in Feb.

(ATTN: RECASTS headline, lead; REWRITES throughout)
SEOUL, March 30 (Yonhap) -- South Korean banks' deposit rate fell to the lowest
level in more than 13 years in February due to steep cuts in the key interest
rate, the central bank said Monday.

The average deposit rate for households and companies reached 3.23 percent last
month, down 0.93 percentage point from a month earlier, according to the Bank of
Korea (BOK). It marked the lowest level since January 1996 when the central bank
began to compile related data.
But the average lending rate declined by the smaller margin compared with the
deposit rate. The lending rate fell by 0.34 percentage point to 5.57 percent,
hitting the lowest mark since August 2005, the BOK added.
In March, the BOK froze the rate after six consecutive rate cuts to gauge the
effects of reductions on the economy and brace for a deeper economic downturn.
Between October and February, the central bank slashed the rate by a total of
3.25 percentage points.
"Since the BOK cut the rate, deposit and lending rates have fallen in tandem,"
Kim Byoung-soo, an official at the BOK said.
Meanwhile, South Korean banks' loan-deposit spread dropped to the lowest level in
more than four years last month.
The difference between local banks' lending and deposit rates reached 2.19
percentage points as of the end of February, compared with 2.4 percentage points
the previous month, the BOK added.
The February figure marked the narrowest gap since October 2004 when the central
bank began to compile related data.
"The narrow gap in the two rates reflects growing concern by lenders over
profitability," Kim added.
South Korean banks saw their fourth-quarter earnings tumble, with some even
posting net losses as they put aside more money to brace for the economic
downturn and subsequent corporate restructuring.
They are likely to suffer further setback this year as the economy is widely
expected to sip into the first recession in 11 years and funding costs shot up in
the process of raising their capital adequacy ratio, a key barometer of financial
health.
sooyeon@yna.co.kr
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