Image source: Photo.com
Towards the end of the year, banks ushered in the third round of "interest rate cuts" in 2023, and many banks adjusted their deposit listing rates from today. On December 22, Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China, and Bank of Communications took the lead in adjusting the listed interest rates on deposits. According to the latest RMB deposit interest rate table of various banks, the current 3-year fixed deposit interest rate of banks (whole deposit and withdrawal, the same below) is 1.95%, down 25 basis points from before, entering the "1 era"; The interest rate on 5-year fixed deposits was reduced by 25 basis points.
In addition, the interest rate on 1-year fixed deposits was 1.45%, a reduction of 10 basis points; The 2-year term deposit rate was reduced by 20 basis points to 1.65%. The interest rates on zero deposits, lump sum deposits and principal deposits will be lowered by 10 basis points, and the listed interest rates on call deposits will be reduced by 20 basis points.
It is reported that the state-owned banks have cut interest rates again, which is the third time this year that the listed interest rates on deposits have been lowered. According to this calculation, if the interest rate is reduced from 2.2% to 1.95%, the accumulated interest due after the interest rate is lowered will be reduced by 750 yuan.
-- The scale of bank deposits
In terms of the scale of deposits, the scale of deposits of large Chinese-funded national banks in mainland China has continued to rise. According to data from the People's Bank of China, from 2017 to 2022, the deposit scale of large national banks with Chinese background in mainland China increased from 79.31 trillion yuan to 119.24 trillion yuan, with a five-year compound growth rate of 8.50% and a year-on-year growth rate of 13.30% in 2022. From the perspective of deposit items, the scale of personal domestic deposits accounted for the largest proportion of all deposits, and the proportion continued to increase, from 47.45% in 2017 to 53.05% in 2022. In January 2023, the total size of deposits in mainland China was 123.42 trillion yuan, and the scale of personal deposits reached 66.79 trillion yuan, accounting for 54.12% of the total deposits.
-- Changes in benchmark interest rates in the banking sector
From the perspective of deposit interest rates, since 1994, the benchmark deposit interest rate of the mainland has experienced a return to a high level, and is now at a historical position, which has been at a stable level for more than seven years. According to the People's Bank of China, the indicators of the benchmark interest rate for deposits in mainland China in February 2023 are: demand deposit interest rate of 0.35%, 3-month time deposit interest rate of 1.1%, 1-year time deposit interest rate of 1.5%, 3-year time deposit interest rate of 2.75%, and 5-year time deposit interest rate of 4.75%. Stable interest rates will help the market develop smoothly and be more suitable for China's economic development model and financial market conditions.
-- Deposit absorption in the banking sector
Judging from the performance of representative enterprises in the banking industry, in the first three quarters of 2022, ICBC issued the highest amount of loans and advances and absorbed deposits, with 22.30 trillion yuan and 30.09 trillion yuan respectively. In addition, state-owned banks are still in the leading position in the industry in loan issuance and deposit absorption business, and the gap between the amount of deposits absorbed by state-owned banks and the amount of loans issued by state-owned banks is wider than that of joint-stock banks, reflecting that residents are more willing to trust state-owned banks in terms of deposits, and even if joint-stock banks have higher deposit interest rates, residents still believe that state-owned banks may be more suitable for their own risk appetite.
The CITIC Securities research report pointed out that a number of state-owned banks will cut the listed interest rate on deposits on December 22. We believe that small and medium-sized banks may also follow suit in the future, but the time point may be after the year, or not as large as large banks. According to our calculations, the reduction of deposit interest rates will reduce the average deposit cost of commercial banks by about 3-5bps, which will help alleviate the pressure on banks' net interest margins, and in addition, the probability of LPR quotation reduction has also increased.
As for whether there is still room for the deposit interest rate to be lowered, Zhou Maohua, a macro researcher at the financial market department of Everbright Bank, said that from the trend point of view, as well as the current market interest rate, the income of wealth management products and the interest rate of 10-year treasury bonds, there is still some room for adjustment of bank deposit interest rate. The subsequent reduction of bank deposit interest rates depends more on the supply and demand conditions of the deposit market, the assets and liabilities of each type and each bank, the pressure on net interest margins and the operation of each bank.
Prospective Economist APP Information Group
For more research and analysis of this industry, please refer to the "Analysis Report on China's Banking Market Prospect and Investment Strategic Planning" by Qianzhan Industry Research Institute.
At the same time, the Prospective Industry Research Institute also provides solutions such as industrial big data, industrial research reports, industrial planning, park planning, industrial investment, industrial mapping, smart investment promotion system, industry status certification, IPO consulting/fundraising feasibility study, IPO working paper consulting, etc. To quote the content of this article in any public information disclosure such as prospectus and annual report, formal authorization from Qianzhan Industry Research Institute is required.
More in-depth industry analysis is available in the [Prospective Economist APP], and you can also communicate and interact with 500+ economists/senior industry researchers.