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Recently, small and medium-sized banks such as Huaibin Rural Commercial Bank and Gushi Rural Commercial Bank have announced phased increases in the interest rate of some term time deposits, with an increase of between 5 basis points and 15 basis points. This means that the deposit rate has increased in the short term, but it is also accompanied by some requirements such as the minimum deposit amount.
Huaibin Rural Commercial Bank announced that it will raise the interest rate of new individual lump sum deposit and lump sum time deposit in stages from December 12. According to the regulations, the original interest rate will be implemented if the minimum deposit amount is less than 10,000 yuan, and the interest rate after the increase will be implemented if the minimum deposit amount is greater than or equal to 10,000 yuan. The interest rates on 3-month, half-year, 1-year, 2-year and 3-year fixed deposits were raised from 1.40%, 1.65%, 1.80%, 2.00% and 2.35% to 1.50%, 1.70%, 1.95%, 2.15% and 2.40% respectively. Among them, the 1-year and 2-year tenors of individual lump sum deposits and withdrawals were both raised by 15 basis points.
In addition, the interest rate of 3-year fixed deposits of some village and township banks is as high as 3.3%. On November 30, Guilin National Village Bank announced that from December 1, the bank's 6-month, 2-year and 3-year lump sum fixed deposits will implement new interest rates of 2.05%, 2.75% and 3.3%.
Industry insiders said that the end of the year and the beginning of the year is the peak season for savings, and some banks have raised deposit interest rates to attract depositors and strive to achieve a "good start", but this does not mean that the trend of deposit interest rates has changed. Small and medium-sized banks are at a disadvantage compared with large banks in terms of branch coverage and brand recognition, so they are facing greater pressure in terms of deposits. In order to attract more depositors, small and medium-sized banks have had to adopt more flexible interest rate policies. By raising the deposit interest rate, small and medium-sized banks can make up for their own shortcomings in terms of brand and outlets to a certain extent, thereby increasing the competitiveness of collecting deposits.
However, experts said that the phenomenon of raising deposit interest rates of small and medium-sized banks needs to be viewed rationally. They believe that although small and medium-sized banks can attract more funds and customers by raising deposit rates in the short term, in the long run, they need to pay attention to risk prevention and maintain a reasonable asset-liability structure. Otherwise, once the market fluctuates or the policy changes, it is easy to fall into a passive situation or even trigger risk events.
-- The benchmark interest rate of the banking sector is low and stable
From the perspective of deposit interest rates, since 1994, the benchmark deposit interest rate in mainland China has experienced a return to a high level, and has now remained stable at a historically high level for more than seven years. According to data from the People's Bank of China, as of February 2023, the indicators of the mainland's benchmark deposit interest rates are: demand deposit interest rate is 0.35%, 3-month time deposit interest rate is 1.1%, 1-year time deposit interest rate is 1.5%, 3-year time deposit interest rate is 2.75%, and 5-year time deposit interest rate is 4.75%.
-- Loan issuance and deposit absorption by the banking industry on behalf of enterprises: ICBC is the largest
Judging from the performance of representative enterprises in the banking industry, in the first three quarters of 2022, ICBC's loans and advances and deposits reached the highest levels, reaching 22.30 trillion yuan and 30.09 trillion yuan, respectively. In addition, state-owned banks remain industry leaders in loan origination and deposit absorption. Compared with joint-stock banks, the gap between the amount of deposits absorbed by state-owned banks and the amount of loans issued is larger, reflecting the willingness of residents to trust state-owned banks. Even though joint-stock banks offer higher deposit rates, residents still perceive state-owned banks as more in line with their risk appetite.
Against the backdrop of pressure on net interest margins and banks controlling the cost of liabilities, deposit rates of most banks are still showing a downward trend.
Dong Ximiao, chief researcher of Zhaolian, said that the rise in deposit interest rates against the trend is a phased and seasonal promotion method for banks. Small and medium-sized banks should rationally expand their deposit business according to their own assets and liabilities, not only to maintain an appropriate growth in deposits, but also to control the cost of liabilities within a reasonable range to avoid an imbalance between assets and liabilities. He suggested that small and medium-sized banks should rationally collect savings and abandon the scale complex and speed complex.
Lou Feipeng, a researcher at the Postal Savings Bank, pointed out that during the peak season when banks are collecting deposits, some small and medium-sized banks have raised the interest rates on deposits of some maturities in stages, which is conducive to absorbing deposits and optimizing the deposit structure. On the other hand, Ming Ming, chief economist of CITIC Securities, believes that no matter how banks ultimately manage the cost of debt, in the long run, the reduction of deposit rates will reduce the attractiveness of depositors and may strengthen the phenomenon of "deposit moving".
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