"The decline in deposit interest rates is mainly affected by two factors: first, the interest rate market-oriented reform continuously promoted by the central bank to reduce the cost of social funds; Second, banks themselves are forced by revenue pressure caused by the narrowing of net interest margin. ”
Reporter | Wu Shuang
Edit | Zhou Yanyan
New Media Editor | Intern Zhao Yue
On May 15, a number of large state-owned banks began to lower call deposits and the upper limit of agreed deposit interest rates.
The reporter's inquiry found that the interest rate of ICBC's 1-day and 7-day call deposits dropped from 1.20% and 1.75% to 0.90% and 1.45%; The latest interest rates for deposits of Agricultural Bank of China, Bank of China and Bank of Communications are 0.45% and 1%; China Construction Bank shows a maximum interest rate of 1.45% per annum for call deposits.
Previously, the relevant departments issued a notice that for the call deposit interest rate, the state-owned banks cannot exceed the benchmark interest rate by 0.1 percentage points, and other banks cannot exceed the benchmark interest rate by 0.2 percentage points.
This means that the reduction in deposit rates has spread from long-term deposits to short-term deposits, from retail deposits to public deposits, and is also dominated by state-owned behavior.
In September last year, the banking industry began a downward wave of time deposits led by state-owned behavior, and six major state-owned banks successively issued announcements to reduce deposit interest rates, reducing time deposits by 10-15 basis points compared with before the adjustment.
The interest rates of three-month, six-month, one-year, two-year, three-year and five-year time deposits of the five major state-owned banks of Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank and Bank of Communications were reduced to 1.25%, 1.45%, 1.65%, 2.15%, 2.6% and 2.65% respectively.
After completing the first quarter of this year, small and medium-sized banks have also begun to focus on reducing long-term deposit rates. Moreover, a number of financial managers told reporters that "the deposit interest rate will be lower in the future."
01 Why is the deposit interest rate dropping?
The decline in deposit interest rates is mainly affected by two factors: first, the market-oriented reform of interest rates continuously promoted by the central bank to reduce the cost of social funds; Second, banks themselves are forced by revenue pressure caused by the narrowing of net interest margin.
In terms of market-oriented interest rate reform, Zeng Gang, director of the Shanghai Finance and Development Laboratory, told reporters that the previous interest rate market-oriented reform on the loan side has achieved good results through the linkage between LPR and MLF.
Since the LPR reform, the corporate lending rate has fallen from 5.32% in July 2019 to 4.05% in August 2022, the lowest level since statistics began, according to a paper by the Monetary Policy Department of the People's Bank of China.
At the same time, Zeng Gang pointed out that the current downward space of loan interest rates has been limited, and the marketization of deposit interest rates is not high, which restricts the downward trend of loan interest rates and brings net interest margin pressure to banks.
In this regard, the market-oriented reform of deposit interest rates has accelerated since April last year. In April 2022, the People's Bank of China established a market-oriented adjustment mechanism for deposit interest rates, and member banks of the interest rate self-discipline mechanism reasonably adjusted the level of deposit interest rates with reference to the bond market interest rate represented by the 10-year treasury bond yield and the loan market interest rate represented by the 1-year LPR.
This reform of deposit interest rates has initially formed a transmission mechanism of "policy interest rate - 1-year LPR and 10-year government bond interest rate - deposit interest rate", and promoted the further marketization of deposit interest rate. From the perspective of the 1-year LPR interest rate, it has shown a gradual downward trend in the past five years.
For banks, whether to reduce the deposit interest rate is a dilemma: if the deposit interest rate is lowered, it is equivalent to actively giving up the primary weapon of deposits, and the scale of deposits may be threatened, and deposits are the foundation of banks; If deposit rates are not lowered, net interest margins will narrow under downward pressure on loans, and banks' revenues will face challenges.
At present, the overall net interest margin of banks is not optimistic, and it is close to the regulatory warning line. The MPA (Macroprudential Assessment System) assessment requires that the net interest margin of not less than 1.8% is rated 100 points, the score below 1.8% and not less than 0.8% ranges from 60 to 100 points, and the score below 0.8% is 0 points.
According to the CBIRC, at the end of 2022, the overall net interest margin of commercial banks was 1.91%, down 17 basis points year-on-year, which is also the first time since 2010 that the net interest margin has fallen below 2%, and the net interest margin in the four quarters of last year showed a downward trend quarter by quarter.
So, when will it fall? How much to drop? Who descends first? These are all thorny issues for lowering deposit rates.
Zhou Yiqin, founder of Guanyuan Consulting and senior financial regulatory policy expert, told reporters that at present, the risk of various assets fluctuates greatly, the entire market investment environment is becoming increasingly complex, for commercial banks, the pressure on net interest margin is increasing, but due to fierce market competition, banks are watching each other strongly, and no one wants to "take the first step".
Therefore, he believes that in this context, the regulatory authorities take into account the current potential problems such as high cost of liabilities of commercial banks and unreasonable structure of assets and liabilities, take the lead in breaking the "deadlock", and make forward-looking layout and risk reduction, which is helpful for alleviating the pressure on the net interest margin of commercial banks and increasing financial support for the real economy.
In particular, at this stage, there are phased fluctuations in net value in bank wealth management and insurance companies lowering predetermined interest rates, which also leaves a time window and potential space for commercial banks to reduce interest rates, effectively alleviating the pressure of interest rate reduction, and striving to achieve a "soft landing".
02 This reduction is mainly for corporate deposits
In the time deposit rate cut that began last year, it was mainly time retail deposits that were affected. The interest rate adjustment is mainly for regular corporate deposits.
Generally speaking, the two largest types of customer deposits in banks are corporate deposits and personal deposits, which account for about 50% each. The cost of time deposits in both is high: taking ICBC as an example, the average cost of ICBC's time deposits last year was 2.59%, and the demand period was 0.92%; The cost of personal fixed deposits was 2.89% and the demand period was 0.31%.
There are two types of deposits for this adjustment: one is call deposits; The second is agreement deposits. Among them, call deposits account for a relatively low proportion of the entire deposit; Agreement deposits are mainly deposits signed between banks and other institutional legal persons for a certain period of time and a certain amount of money, accounting for a large proportion.
Zhou Yiqin believes that in the process of adjustment, the regulatory authorities also consider that in order to prevent some banks from exploiting regulatory gaps, the agreement deposits and call deposit products other than traditional deposits are adjusted synchronously to maintain the scientificity, fairness and consistency of the overall guidance of supervision, leaving no dead ends.
According to Zhongtai Securities research, the proportion of agreed deposits of listed banks in total deposits is about 13%, of which joint-stock banks account for a relatively high proportion of 17.5%, and rural commercial banks account for the lowest proportion of only 3.7%.
Zeng Gang said that while lowering the interest rate of personal savings deposits, banks have further included deposits with public deposits into the scope of reduction, with large state-owned banks first adjusting the interest rates of call deposits and agreement deposits, and other banks following up, forming an orderly reduction of retail and public deposits as a whole, reducing the cost of funds, improving interest rate spreads, creating space for the downward movement of interest rates at the loan end, and creating better conditions for enterprise financing.
03 It is good for the wealth management market
Although the reduction in the deposit interest rate is mainly for corporate deposits, in the long run, whether it is corporate or retail, the interest rate of risk-free deposits is in the downward range and has a continuous downward trend.
In the face of the decline in deposits, the reporter learned that some wealth managers turned to recommend wealth management products with a longer closed period and using the amortized cost method or hybrid valuation method to help customers obtain higher returns under controllable risks; In addition, some wealth managers recommend bancassurance financial management, which is currently in the window period of interest rate reduction, so it has become a hot spot for promotion.
In the first quarter, the CBIRC organized a number of insurance companies to hold a symposium, focusing on the distribution of predetermined interest rates for general insurance, the predetermined interest rate of participating insurance and the level of dividends, and the impact of reducing the assessment interest rate of liability reserves on companies and industries.
It is understood that the regulatory decision will strictly review insurance products, and if the predetermined interest rate exceeds the following upper limit, it will not be recorded, that is, the upper limit of the predetermined interest rate of ordinary products is 3%, the upper limit of dividend products is 2.5%, and the upper limit of the guaranteed interest rate of universal products is 2%.
Liao Zhiming, chief analyst of the banking industry of China Merchants Securities, said that the decline in bank deposit rates may cause funds to spill over to wealth management, funds and other products, thus forming a positive.
Zeng Gang also believes that the yield of wealth management has fallen significantly in the past period, and in the process of lowering the deposit interest rate, the advantages of the long-term yield of wealth management have appeared, so the scale of bank wealth management has rebounded significantly in April.
However, there is still great uncertainty about the future financial income of residents. Zhou Yiqin told reporters that from the current situation, the income of fixed income products will continue to decline, including bank deposits, fixed income wealth management products, cash management wealth management products, monetary funds, insurance products and other products are adjusting downward, and the yield of resident wealth management will decline.