Retail Deposit Share Falls Below 40%... 'Valuable Funding Source' Under Pressure

October: 38.6%, down 4.1 percentage points from January
Corporate deposits rose by KRW 129 trillion as retail deposits fell by KRW 29 trillion
Driven by semiconductor fund inflows and a shift to the stock market
"Rising funding costs are add

Personal deposits accounted for less than 40% of deposits at South Korea's five largest banks, according to data. The share first fell below the 40% mark in June this year and remained in the 30% range for five consecutive months, hitting a record low last month. The decline is attributed to a large influx of funds earned by semiconductor companies into corporate deposits, as well as a shift of money into the stock market that has continued this year. As personal deposits, once regarded as a dependable source of funding, have shrunk, banks face a greater burden in managing liquidity and margins.

Personal Deposit Share Falls for Sixth Straight Month... Hits Record Low of 38.6% in October

According to the financial sector on Nov. 6, personal deposits accounted for 38.6% of total deposits at the five largest banks - KB Kookmin, Shinhan, Hana, Woori and NH Nonghyup - at the end of October, the lowest level so far this year. The balance of personal deposits stood at KRW 679.2014 trillion, up KRW 5.5159 trillion from the previous month amid a stock market correction and other factors, but their share fell nonetheless. This was because corporate deposits rose more sharply, increasing by KRW 11.3483 trillion from the previous month.

The share of personal deposits had remained in the 41%-43% range from 2022 through 2025. At the end of each year, it stood at 41.9% in 2022, 43.3% in 2023, 43.6% in 2024 and 42.3% in 2025. But after generally declining this year, it fell below the 40% mark for the first time in June, to 39.5%, and has remained below 40% for five consecutive months since. Compared with January this year, when it was 42.7%, the share had fallen by 4.1 percentage points by October.

The decline in the share of personal deposits from the start of the year was due to a drop in their balance. Personal deposits fell from KRW 707.8031 trillion in January to KRW 679.2014 trillion in October, a decrease of about KRW 28.6 trillion, or 4.0%. The decline was concentrated between May and July. As money moved actively into the stock market amid a rally, personal deposits fell by around KRW 11 trillion a month for three consecutive months, with a total of KRW 33.5 trillion flowing out. This coincided with the period when their share fell below 40%. Personal deposits have begun to flow back in since September, as a stock market correction coincided with rising interest rates. However, the inflows have not offset the outflows, as deposit-like products offered by securities firms have increased.

The sharp increase in corporate deposits also contributed to the smaller share of personal deposits. Corporate deposits rose from KRW 950.6857 trillion in January this year to KRW 1,079.5509 trillion in October, an increase of KRW 128.9 trillion, or 13.6%. The increase was fueled by a large influx of excess funds from booming industries such as semiconductors into the banking sector. Total deposits at the five largest banks rose by more than KRW 100 trillion during this period, with corporate deposits effectively accounting for the increase.

It's Not the Bigger Balance but Its "Quality" That's the Problem... Banks Face Greater Liquidity and Margin Management Burdens

The shrinking share of personal deposits has weakened what banks had regarded as a reliable source of funding. Personal deposits have long been considered advantageous in several respects, compared with corporate deposits, in terms of funding and asset management. While the larger total deposit balance may appear to have eased funding pressure, some say the quality of deposits has actually deteriorated.

Personal deposits are in fact banks' most preferred source of funding. "While individual deposits may be small, they add up to a considerable amount. Because money left behind after withdrawals accumulates, they tend to remain at a certain level," a banking industry official said. "They are highly predictable, allowing banks to manage funds stably."

Corporate deposits, by contrast, are often held for short terms of three months, and are less stable than personal deposits because funds move frequently depending on the interest rate environment. The large sums deposited by individual companies make them an efficient source of funding, but they also carry higher interest rates than personal deposits, and the impact of withdrawals is greater. As a result, some banks are said to feel uneasy about the large influx of excess funds from semiconductor companies.

This structure also increases the burden on banks to manage liquidity. Personal term deposits are often held for a year or longer, so they carry a low regulatory weighting when calculating the Liquidity Coverage Ratio (LCR), reducing the burden of holding high-quality liquid assets. Corporate deposits, on the other hand, carry a weighting of 25% to as much as 100%, limiting how banks can manage their assets. As the share of corporate deposits grows, funding costs can rise and margins can shrink due to the burden of liquidity management. "A large volume of bank bonds and deposits will mature in the fourth quarter, creating refinancing needs. We have to take in expensive, short-term funds and put them to work," a banking industry official said. "There is a dilemma in a structure where total deposits are growing, but corporate deposits are pouring in while personal deposits are flowing out."

Banks Raise Deposit Rates and Offer High-Interest Specials in Battle to Attract Personal Deposits

Banks are actively seeking personal deposits by raising deposit rates and offering high-interest special deals.

Shinhan Bank is offering products including its Super SOL Welcome Term Deposit, with an annual rate of up to around 4%, and the Solmate Term Deposit, a special offer for senior customers. KB Kookmin Bank has resumed sales of its Golden Life Pension Deposit, a product tailored to senior customers, while Woori Bank is offering high-interest special deals with annual rates of 7.75%-13%, including its Woori Heart-Thumping Lucky Savings. NH Nonghyup Bank has launched specialized savings products such as its NH All One e Mini Savings, with an annual rate of up to around 4.35%.

"We are doing everything we can to attract personal deposits, maintaining high-interest products with annual rates of 4% or more and putting customized special offers at the forefront," a banking industry official said.

This content was produced with the assistance of AI translation services.