Gangnam-Gu, Seoul -- (SBWire) -- 07/19/2011 --South Korean banks' deposits increased 3.2 percent in the first half as the economic recovery and higher deposit rates lured customers into relatively safe assets, industry data showed Tuesday.

Deposits held by local six banks including top lender Kookmin Bank amounted to 810.5 trillion won (US$761 billion) as of end-June, up 24.8 trillion won from the end of last year, according to the data.

Five major banks saw their deposits rise in the first half, but deposits at Korea Exchange Bank (KEB), controlled by U.S. buyout fund Lone Star Funds, declined in the cited period, spawning market concerns that its capacity to do business may be dented.

Deposits at KEB, South Korea's No. 5 lender, reached 67.5 trillion won as of the end of last month, down 1.8 trillion won from six months earlier. Compared with a year ago, its deposits fell by 1.97 trillion won, data showed.

The data came as the protracted sale of KEB and Lone Star's receipt of a record interim dividend are raising uncertainty surrounding the bank's business.

Hana Financial Group Inc. agreed on Friday to extend a deal to buy KEB within six months at a lower price of 4.41 trillion won amid the regulator's delay in its review of Lone Star's eligibility as the top shareholder of KEB.

KEB's decision to pay out a quarterly dividend caused Lone Star to rake in dividends worth 496.9 billion won. The decision invited public criticism that the fund is trying to exit the Korean market after fattening its pockets.

But an official at KEB said that the decline in deposits mainly resulted from seasonal factors, not from a customer exodus, adding that given the size of its assets, the volume of deposits and loans remained at an appropriate level.

KEB's total assets stood at 106.2 trillion won at the end of March, up 6.8 percent from three months earlier. KEB's market share in foreign exchange markets accounted for 47.5 percent as of end-May, up from 43.5 percent the previous month.

sooyeon@yna.co.kr

Fisher Capital Management Latest News: Bank deposits rise 3.2 pct in H1
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