Invest1 publisher2 min readPublished
SBI's next year of deposit maturities exceeds its loan repayments by 3.27tn won
Korea's largest savings banks fund multi-year loans with deposits coming due inside twelve months, and industry data for the end of June measures the gap bank by bank at the biggest lenders.
The Investor · Invest desk
What happened
- SBI Savings Bank, the largest in the industry by assets, held 5.15tn won of time deposits maturing within one year at the end of June, 63.3% of its time deposit book, with none maturing beyond three years.
- SBI's lending runs the other way, with 4.15tn won maturing beyond five years, about 38% of the total, against 1.88tn won due within a year, about 17.2%.
- OK Savings Bank showed 3.82tn won of deposits due within a year against 6.82tn won of loans past a year, and Welcome's long-dated loans exceeded its short-dated deposits by 565.1bn won.
- Korea Investment Savings Bank, an affiliate of Korea Investment & Securities, was the exception, with 4.88tn won of deposits due within a year against 2.18tn won of loans maturing beyond one.
- Bank of Korea data put savings bank loans at 96.25tn won and deposits at 105.21tn won at the end of July, a sector loan-to-deposit ratio of about 91.48%.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- cost A bank short of cash to repay depositors has to offer higher rates or raise money from corporate and institutional clients on unfavorable terms, industry officials say, and they add that funding conditions turn against it precisely when liquidity must be secured quickly.
- constraint With loans of a year or longer at 1.74 times the deposits due inside one, SBI cannot shorten the asset side fast enough to close the gap, so any fix has to come from the funding side.
- contradiction Analysts in the report see run risk in the same maturity tables; the industry official quoted sees a drag on profitability. The two point to different responses from the banks.
- decision Market participants want the gap narrowed. Each bank then faces a choice between paying up for longer deposits now and holding on to the long-dated loans that earn more.
The twelve-month gap at SBI Savings Bank is 3.27tn won: deposit maturities of 5.15tn won less loan repayments of 1.88tn won [1]. A deposit book of that shape normally rolls, and the variable is the rate needed to make it roll. Every extra percentage point SBI has to pay to hold that 5.15tn won costs about 51.5bn won a year [10].
Four banks lean the same way. Time deposits due inside a year at SBI, OK, Welcome and Acuon come to 13.29tn won against 21.36tn won of loans running past one year, 1.61 times as much, a difference of 8.07tn won [5][6][7][8]. Those long-dated loans are about 22% of the sector's outstanding loan book [9]. SBI's own lending, at roughly 10.87tn won, is about 2.7tn won bigger than its 8.14tn won time deposit book [3][2][4].
"I think the maturity mismatch between deposits and loans becomes more of a problem when rates are rising," an industry official quoted by the Seoul Economic Daily said. "It will weigh on profitability for a long time to come." [14]
The same data holds the case for calm. SBI's share of time deposits maturing within a year is down 7.2 points from 70.5% a year earlier [6][13]. Korea Investment Savings Bank runs the gap in reverse, its short-dated deposits exceeding its long-dated loans by 2.70tn won [11]. Sector-wide, deposits exceeded loans by 8.96tn won at the end of July [12].
The compiled figures cover maturities, not asset quality, and they carry no delinquency rates or capital ratios. Market participants told the paper that the concern is sharpest if interest rates rise and delinquencies climb, leaving loans harder to collect just as short-term deposits come due [16]. On what is measured, the consequence I would expect at these four banks is margin compression, because the repricing happens whether or not a depositor leaves. The counter-case is that a funding book this short lets the cost of deposits jump as soon as savers are offered better elsewhere, and analysts quoted in the report go further, saying the mismatch could leave the lenders exposed to heavy liquidity demands if market jitters trigger a run [12]. If SBI's within-a-year share climbs back toward 70.5% while delinquencies rise, the liquidity case is the right one and mine is wrong.
"You can pull from assets other than loans to pay out deposits, but it is clear that savings banks need to change their maturity structure across the board," a senior industry official said [15].
What to watch
- Whether SBI's share of time deposits maturing within a year moves back toward last year's 70.5% at the December reporting date.
- Savings bank delinquency and loan-loss figures, which industry officials name as the condition that makes the gap bite and which the maturity tables leave out.
- The sector loan-to-deposit ratio in Bank of Korea monthly data, from 91.48% at the end of July, to see whether deposits are leaving.