South Korean banks’ lending rate declined last month as market rates fell amid growing appetite for risk aversion, the central bank said Tuesday.
The weighted average annual rate for new loans extended by local banks to households and companies stood at 5.71 percent in April, down 3 basis points (bps) from a month earlier, according to the Bank of Korea (BOK).
The April decline was attributed to a fall in market rates stemming from solid risk aversion sentiment amid resurfacing Europe’s debt crisis. “Market rates such as the yields on the Treasury, bank debenture and corporate bonds went down last month, leading to a fall in banks’ deposit and lending rates that were linked to the market rates,” said an official at the BOK.
The rate for household loans dropped 8 bps on-month to 5.54 percent in April, while the one for loans to companies was down 3 bps to 5.76 percent.
Meanwhile, the average annual rate on bank deposits came in at 3.70 percent in April, down 2 bps from a month before, according to the BOK.
The rate for savings deposits fell 1 bp on-month to 3.70 percent in April, and the one for market-type financial products such as certificate of deposits (CDs) retreated 5 bps to 3.73 percent.
South Korean lenders’ loan-to-deposit spread, a gauge of banks’ profitability from lending, came to 2.01 percentage points, down 1 bp from the previous month, Xinhua reported.
