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S.Korean banks' lending rates drop to 5.58 pct in June

07-27-2012 14:37 BJT

SEOUL, July 27 (Xinhua) -- South Korean banks' lending rates dropped in June to 5.58 percent amid expectations that Bank of Korea (BOK) will cut its policy rate, a report by the central bank showed Friday.

The weighted average annual rate for news loans extended by local banks to households and companies came in at 5.58 percent in June, down 8 basis points (bps) from a month earlier, according to the BOK.

The June decline was the biggest since February when the lending rates dropped to 5.71 percent from 5.79 percent in the previous month.

The sharp fall came as expectations spread that the central bank may cut its policy rate amid growing concerns over Europe's debt crisis and global economic slowdown. The BOK cut its policy rate by 25 bps to 3 percent at the July rate-setting meeting.

The rate for household loans dropped 13 bps on-month to 5.38 percent in June due to a growth in low, fixed-rate home-backed loans and a decrease in COFIX rates. The COFIX, or the cost of funds index, is calculated based on information about funding costs that 9 local commercial banks provide.

The rate for loans to companies declined 7 bps on-month to 5. 67 percent last month amid lowering market interest rates.

Meanwhile, the average annual rate on bank deposits came to 3. 63 percent in June, down 1 bp from a month before, according to the BOK.

The rate for market-type financial products such as certificate of deposits (CDs) tumbled 10 bps on-month to 3.60 percent in June, but the one for savings deposits stayed unchanged at 3.63 percent.

South Korean lenders' loan-to-deposit spread, a gauge of banks ' profitability from lending, stood at 284 bps in June, down 1 bp from the previous month.



Editor:James |Source: Xinhua

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