Commercial banks are cutting interest rates on deposit products, reportedly betting that the Bank of Korea will cut the monthly benchmark rate by 25 basis points to 2.5 percent next week.

Amid their recent rush to lower the rates, there are few savings products that offer rates of 3 percent or more to depositors.

The nation’s two largest banks ― KB Kookmin and Woori ― decided to conduct the policy starting April 1.

Woori Bank has lowered the rates on 16 deposit products by 0.1 percentage point. As a result, the lender’s highest offer is the annual rate of 2.9 percent on the Woori Thomas Time Deposit.

KB Kookmin Bank also started offering the slashed rate of 2.97 percent on the Kookmin Super Time Deposit from Monday. Last month, it cut the rate on the leading deposit product twice ― to 3.08 percent and to 3.05 percent.

Korea Exchange Bank, which cut the rate on the Yes Big Joy Time Deposit from 2.95 percent to 2.9 percent in March, lowered it further to 2.8 percent on Monday.

Research analysts shared the view that banks are betting on a rate cut by the BOK in the monetary policy committee meeting, slated for April 11.

Their dominant prediction is based on the Park Geun-hye government’s strong willingness to boost the economy. A rate cut is a powerful remedy to vitalize sagging private consumption and corporate investment.

“Depositors are not welcomed by the banking sector as banks are saturated with cash,” a KB Kookmin Bank official said.

“On the contrary, banks ― as their investment target ― have been in competition to issue large-scale loans to borrowers with sound credit status,” he said.

Meanwhile, commercial banks’ profitability and earnings fell to their lowest since the 2009 global financial crisis due mainly to low interest rates.

According to the Financial Supervisory Service, Korean banks saw their three major indices for profitability mark a three-year low in 2012.

“The banking industry reported its worse performance in three indices ― return on assets (0.49 percent), return on equity (6.41 percent) and net interest margin (2.1 percent),” said the FSS.

The weak profitability invited a retreat in yearly net profit. The local banks posted 9 trillion won ($8.3 billion) in collective earnings, compared with 11.8 trillion won in 2011 and 9.3 trillion won in 2010.

In particular, their quarterly earnings continued to fall last year ― 3.3 trillion won in the first quarter, 2.1 trillion won in the second, 2 trillion won in the third and 1.5 trillion won in the fourth.

By Kim Yon-se (kys@heraldcorp.com)