South Korean banks' lending rates climbed in June from a month earlier due mainly to the rising costs of corporate lending, the central bank said Friday.

   The average rate for new loans extended to households and companies stood at 5.8 percent in June, up 0.04 percentage point from the previous month, according to the Bank of Korea (BOK). The June rate marked the second straight monthly gain.

   According to the BOK, the average rate for household loans slipped 0.02 percentage point, while the rate for corporate loans jumped 0.06 percentage point.

   In June, market rates for certificates of deposit, which are tied to banks' mortgage lending rates, gained 0.05 percentage point to 3.71 percent.

   The rate on mortgage loans, which account for the bulk of banks' household lending, slipped 0.03 percentage point to 4.87 percent in June, the BOK added.

   Meanwhile, the average rate on bank deposits reached 3.7 percent last month, up 0.03 percentage point from May and the highest level since it reached 3.87 percent in January 2010.

   South Korean lenders' loan-deposit spread, a gauge of banks' profitability from lending, came in at 3.01 percent last month, remaining unchanged from May, the BOK said.

   The average rate on savings bank deposits reached 5.06 percent as of end-June, up 0.15 percentage point from the previous month. The average lending rates of savings banks dropped 1.65 percentage points to 15.07 percent.

   "Deposit rates seemed to have climbed as savings banks hiked their rates in a bid to secure liquidity at quarter-end and also brace for a possible revamp of the savings bank industry in the second half," said Moon So-sang, an official at the BOK.

   The country's financial watchdog launched an inspection of 85 savings banks' financial health in July. Market watchers forecast savings banks that fail to meet required standards may face business suspensions when the results are announced in late September.

Source: Yonhap News (July 29, 2011)