A number of large state-owned banks have lowered their deposit interest rates, and small and medium-sized banks are expected to follow suit

Reporter Tan Zhijuan reports from Beijing

Towards the end of the year, following June and September this year, banks ushered in the third deposit rate reduction of the year, and at present, ICBC and Bank of China and many other banks have announced the adjustment of deposit interest rates.

At present, a number of large state-owned banks such as the Industrial and Commercial Bank of China and the Bank of China have lowered the listed interest rates on deposits, and the listed interest rates for different types and maturities of deposits have been reduced by 0.1 to 0.25 percentage points.

On December 21, the Industrial and Commercial Bank of China (ICBC) issued the "Explanation on the Adjustment of RMB Savings Deposit Interest Rates", stating that in order to further play the role of the market-oriented adjustment mechanism of deposit interest rates, continue to release the reform and transmission effect of the loan market prime interest rate, and improve the sustainability of serving the real economy, the listed deposit interest rate will be lowered from December 22, 2023.

According to the adjustment of the listed interest rate announced by the Industrial and Commercial Bank of China, from December 22, the listed interest rate of call deposits will be reduced by 0.2 percentage points, the listed interest rates of small deposits, lump sum deposits and interest will be reduced by 0.1 percentage points, the listed interest rates of three-month, six-month and one-year time deposits will be reduced by 0.1 percentage points, the listed interest rates of two-year time deposits will be reduced by 0.2 percentage points, and the listed interest rates of three-year and five-year time deposits will be reduced by 0.25 percentage points.

Similarly, the official website of the Bank of China also shows that the bank cut the interest rate on RMB deposits on December 22, including the three-month, half-year and one-year interest rates for fixed deposits and lump sum withdrawals by 10 basis points, the one-year interest rate to 1.45%, the two-year interest rate by 20 basis points to 1.65%, and the three-year and five-year deposits by 25 basis points to 1.95% and 2.00% respectively.

In this regard, Pan Xiangdong, director of the China Chief Economist Forum and chief economist of the Qi Rhenium Research Institute, said in an interview with a reporter from China Business News on December 22: "After three months, this new round of deposit interest rate cuts will be opened again, and the time point will be selected at the end of the year, which will effectively alleviate the rigidity of commercial banks' debt costs and continuous interest margin pressure, so as to ensure their own sound operation, thereby further enhancing the sustainability of financial institutions serving the real economy." In addition, from the central bank's monetary policy implementation report for the third quarter, it also released signals that commercial banks maintain reasonable profit margins and stable and reasonable interest margins, such as from the relevant statements that "the banking industry should grasp the balance between credit growth and net interest margin narrowing" and "commercial banks need to maintain reasonable profits and net interest margins to maintain sound operations and prevent financial risks". The reduction of deposit interest rates will also have an impact on resident depositors, which will help to improve the trend of fixed-term deposits to a certain extent, and will also help accelerate the conversion of residents' savings into consumption and investment. ”

Lowering the interest rate on deposits

"This is mainly due to the fact that some banks have made full use of the market-oriented adjustment mechanism of deposit interest rates to alleviate the pressure on net interest margins and expand space for banks to further benefit the real economy. For a number of banks to adjust the deposit listed interest rate, Zhou Maohua, a macro researcher at the financial market department of Everbright Bank, analyzed.

In Zhou Maohua's view, the reasonable adjustment of deposit interest rates, the steady recovery of the economy, and the gradual recovery of financial market sentiment will help domestic residents' savings return to normal and benefit consumption to a certain extent. At the same time, the reduction in deposit rates will help alleviate the pressure on banks' net interest margins to narrow, promote banks to further benefit the real economy, and help consumption and demand rebound.

Zhou Maohua said that as the economy gradually recovers to the trend level, interest rates will also be relatively stable.

Zhou Maohua also pointed out: "It is expected that the LPR will still be lowered to a certain extent in the future, mainly to guide financial institutions to reasonably reduce the comprehensive financing cost of the real economy, reduce the cost of consumption and investment, further boost the vitality of micro entities, and help accelerate the recovery of the economy." ”

"Considering that it will take some time for the pressure on banks' net interest margins to ease, it is expected that the follow-up LPR interest rate will need the support of the central bank number + price + reform, and guide the entire market interest rate center to move further downward. Zhou Maohua said.

Dong Ximiao, chief researcher of Zhaolian, also told reporters: "Since the beginning of this year, in order to better support the sustained economic recovery, commercial banks have taken the initiative to take a variety of measures to increase fee reductions and concessions to the real economy. At the same time, due to the lack of effective financing needs of enterprises and residents, some banks have attracted more customers by reducing loan interest rates. The interest rate of the existing first home loan has been lowered, reducing the interest income of banks by nearly 200 billion yuan every year. Under the influence of a variety of factors, the net interest margin of banks has narrowed significantly since the beginning of this year, and the growth rate of operating income and profit has declined. ”

According to data released by the State Administration of Financial Regulation, in the third quarter of 2023, the net interest margin of commercial banks was 1.73%, down 0.21 percentage points from 1.94% in the same period last year.

Dong Ximiao said: "In order to maintain the basic stability of interest margins and reasonable profit growth, and enhance the sustainability of serving the real economy and the stability of high-quality development, it has become an inevitable choice for banks to reduce the cost of debt by lowering deposit interest rates. ”

In terms of impact, Zhou Maohua said: "The reduction of deposit rates is good for market sentiment. On the one hand, the reduction of deposit interest rates will enhance the soundness of banks' operations, expand space for banks to further rationally benefit the real economy, and at the same time, help improve consumption, the overall development of the real economy, and help improve the credit environment. ”

Dong Ximiao told reporters: "The decline in deposit interest rates will reduce the interest on deposits of enterprises and residents, or will promote enterprises and residents to expand investment and consumption to a certain extent, which will help boost consumption and expand domestic demand." ”

Small and medium-sized banks are expected to follow suit

The interviewed experts believe that as large banks take the lead in lowering the interest rate on deposits, it is expected that small and medium-sized banks may also follow suit in the future.

Zhou Maohua said: "Combined with the previous experience of the reduction, it is expected that the domestic large, medium and small banks will follow up and reduce the deposit interest rate in order to ensure a stable and orderly deposit market." ”

Dong Ximiao predicts: "In the next step, joint-stock banks and other small and medium-sized banks will follow up and adjust deposit interest rates. However, due to different banks' deposit pricing strategies and asset-liability management, there may be certain differences in the timing, rhythm and magnitude of deposit interest rate adjustments. ”

CITIC Securities also believes that "in the future, small and medium-sized banks may also follow suit, but the time point may be after the year, or the magnitude may not be as large as that of large banks." It is estimated that the deposit interest rate cut 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. ”

Industry experts also said that the possibility of a further reduction in the deposit rate next year cannot be ruled out.

Wang Qing, chief macro analyst of Oriental Jincheng, said that the recent Central Economic Work Conference required to promote the steady decline of comprehensive social financing costs; coupled with the fact that there is still a large downward space for new mortgage interest rates next year, banks will cut deposit interest rates now in order to avoid the future net interest margin falling too quickly. Taking into account the future policy interest rate and the trend of the economy and prices, it cannot be ruled out that the deposit rate may be further lowered next year.

Pan Xiangdong also told reporters: "In the context of reducing the comprehensive financing cost of the society to support the real economy, it is expected that the regulator and commercial banks may take a variety of ways to ease the pressure on bank interest margins." Combined with the monetary policy tone of 'flexible, moderate, precise and effective' put forward by the Central Economic Work Conference, the possibility of further reduction of deposit interest rates next year cannot be ruled out. ”

Pan Xiangdong also said: "Under the guidance of policies and market adjustments, commercial banks themselves still have the motivation to push deposit rates down. In terms of monetary policy operation, it is expected that the follow-up will be whether it will further cut the RRR to supplement the current liquidity, or cut interest rates to reduce social financing costs. In particular, the market has high expectations for the LPR interest rate cut next year, and if the 1-year LPR interest rate falls to the ground, it will also bring the deposit rate further down. ”

(Editor: Hao Cheng Proofreader: Yan Jingning)