The loan-to-deposit ratio at major commercial banks in the first quarter fell to the lowest level in two years. After the Middle East crisis, risk-off sentiment intensified and deposits increased, but loans did not grow much due to tighter household loans regulations.
According to the financial sector on the 3rd, the average loan-to-deposit ratio at the five commercial banks—KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup—stood at 96% at the end of the first quarter. It was the lowest since the first quarter of 2024 (95.4%).
By bank, Shinhan Bank was the lowest at 93.6%. NH Nonghyup Bank (93.9%), Woori Bank (97.1%), Hana Bank (97.4%) and KB Kookmin Bank (97.9%) followed.
The average loan-to-deposit ratio at these banks rose from 96.6% at the end of the first quarter last year to 97% at the end of the second quarter, then fell to 96.3% at the end of the third quarter. The downtrend continued to 96.2% at the end of the fourth quarter and 96% in the first quarter of this year.
Deposits increased, while loans did not rise by as much. The won deposit aggregates at the five banks totaled 1,765.0823 trillion won at the end of the first quarter, up 4.6% from a year earlier. By contrast, total loans were 1,618.5159 trillion won, rising 4.1% over the same period.
Weak household loans led this trend. The outstanding loan balance of household loans at the five commercial banks was 765.8259 trillion won at the end of the first quarter, up 3.7% from a year earlier. That is lower than the overall loan growth rate (4.1%). The outstanding loan balance of corporations at these banks was 869.3109 trillion won at the end of the first quarter, up 4.3% over the same period, but it was not enough to offset the slowdown in household loans.
The gap between bank lending rates and deposit rates (loan-deposit rate spread) is widening. As banks' funding pressure for deposits eased, the rise in deposit rates slowed. According to the Korea Federation of Banks, the household loans loan-deposit rate spread (excluding policy finance for low-income borrowers) at the five banks averaged 1.512 percentage points at the end of Apr., up 0.04 percentage points from a year earlier (1.472 percentage points). It was the highest since disclosures of the loan-deposit rate spread began in July 2022.