Korean banks` loan-deposit spread falls to 4-year low

SEOUL, March 30 (Yonhap) -- South Korean banks' loan-deposit spread dropped to
the lowest level in more than four years in February amid steep cuts in the key
interest rate, the central bank said Monday.
According to the Bank of Korea (BOK), 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 February figure marked the narrowest gap since October 2004 when the central
bank began to compile related data.
The lending rate fell by 0.55 percentage point to 6.4 percent as of the end of
February while the deposit rate declined 0.34 percentage point to 4.21 percent.
"Since the BOK cut the rate, deposit and lending rates have fallen in tandem. The
narrow gap in the two rates reflects growing concern by lenders over
profitability," Kim Byoung-soo, an official at the BOK said.
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.
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
(END)