Korea Development Bank to keep running the special deposit account until 2015 to attract 10 tln won in deposits
Korea Development Bank to keep running the special deposit account until 2015 to attract 10 tln won in deposits
Korea Development Bank has decided to keep running its KDB Direct deposit account that facilitates deposits directly at the KDB home office without going through branches or other outlets of the state-run bank until 2015, the year KDB expects the total amount in the deposit accounts to reach 10 trillion won, the bank said recently.
KDB Senior Vice President Kim Han-chul said in the seven months since its start in September, the KDB Direct deposit account attracted 1 trillion won in deposits. KDB projects the special deposit account will attract 2 trillion won by the end of this year, Kim said.
The special deposit account is opened through an online application and KDB sends a staff member to the potential depositor and takes care of the papers to fully open the deposit account for him or her. The deposit account pays 3.5 percent per annum for accounts that can withdraw money at any time and 4.3 to 4.5 percent for time deposit accounts ranging from three months to more than a year. The interest rate on free deposit accounts at KDB pays about 2 percent higher compared to the same deposit accounts at other banks and 0.5 percent higher on other deposit accounts.
Due to the higher interest rates, the KDB Direct account has attracted 1.7 trillion won as of early this month from around 40,000 depositors. KDB now has 8 trillion won in deposits from 180,000 depositors compared to 2 trillion won from 110,000 depositors at the end of 2010.
The special deposit account became very popular among the residents in the Gangnam area of southern Seoul, where many rich people make their homes, raising complaints from other banks.
Senior Vice President Kim said KDB Direct is not just a one-time business gimmick, but will continue to be an important deposit account for KDB as a source of its funds in the days to come under KDB’s management policies.
KDB countered its detractors’ claims that the special deposit accounts will lose money for the operator by saying that the net interest margin remains the same as other banks as it doesn’ t have to spend money to set up outlets to operate them. Last year, KDB’ s NIM stood at 1.46 percent °™ about 0.9 percent lower than rival banks, but due to lower operating costs its NIM came to about the same as other commercial banks, KDB officials said.
KDB will lend the funds created by its special deposits amounting to 2 trillion won to domestic firms to develop domestic industries, start-ups, and funding for financially poor firms at a 5 percent annual interest rate, the officials said.
In the meantime, Chairman Kang Man-soo of the KDB Financial Group said the group will look for proper-scale foreign banks for M&As if they are on the market during his visit to KDB Hungary in Budapest on March 19.
Under the group’ s M&A strategy, he told officials of the group’s Hungarian subsidiary, they should take a look at any proper-scale foreign banks if they are on the M&A market, saying that this is the right time as many foreign banks are going through tough times and may look for the opportunity to be taken over by a financially stronger financial institution.
Chairman Kang visited the Hungarian subsidiary for the first time since he became the chairman and the Korea Development Bank took over the bank in Budapest in 2002 from the now defunct Daewoo Group. It now operates six branches in Budapest engaged in such financial services as deposits, loans, credit cards, and leasing and housing loans, steadily expanding its profits every year since its launch about 10 years ago. He also made a brief visit to Dublin to visit the KDB operations in the Irish capital before his tour of Budapest.
