On 22 December, major banks and some joint-stock banks announced that they would once again lower their interest rates on deposits, casting a layer of financial frost over the market. This time, the 3-year and 5-year fixed deposit interest rates fell the most, reaching 25BP, while some banks' large-value certificates of deposit also saw adjustments of up to 30BP. What kind of changes in the financial landscape are these changes, and what kind of economic trends are hidden behind them?
Major banks, including the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of China, and the China Construction Bank, have lowered the listed interest rates on RMB deposits from today. Among them, the listed interest rate of one-year and one-year lump sum time deposits was reduced by 0.1%, the two-year period was reduced by 0.2%, and the three-year and five-year deposits were the most significant, as high as 0.25%.
This adjustment caused the 3-year fixed deposit rate to fall below 2% for the first time, from 2.2% to 1.95%. The adjustment of other tenors is also quite obvious, and the listed interest rates of 3-month, 6-month, 1-year, 2-year and 5-year fixed deposits are adjusted to 1.15%, 1.35%, 1.45%, 1.65% and 2.0% respectively.
The listed interest rates of China Merchants Bank's 1-year, 2-year, 3-year and 5-year lump sum deposit and withdrawal time deposits were 1.45%, 1.65%, 1.95% and 2.0% respectively, with a decrease of 10 BP, 20 BP, 25 BP and 25 BP respectively.
This is the third time this year that the listed deposit rate has been lowered, mainly due to the continued pressure on banks' earnings, which has adversely affected the sustainable services of the real economy. Industry insiders said that banks urgently need to reduce the cost of debt through adjustments to ease the current pressure on interest margins.
This adjustment not only involves the interest rate of deposits, but also affects the changes in the interest rates of other deposits. ICBC said that in addition to adjusting the listed interest rate of deposits, the bank has also adjusted the prime interest rate level of call deposits and time deposits (including large-amount certificates of deposit). At the same time, the interest rate of some banks on large certificates of deposit has dropped by up to 30BP, indicating that banks are more cautious about the liability side in the current economic situation.
Professional analyst Liang Fengjie believes that the main reason for banks' interest rate cuts is that interest rate spreads continue to be under pressure, which has an adverse impact on banks' sustainable services to the real economy. It is expected that the effect of LPR interest rate cuts will appear in early 2024, which will lead to a continued decline in the interest rate spreads of listed banks. At the same time, resolving local debt risks will also enable banks to follow the principle of capital preservation and small profits, increasing interest margins and putting additional pressure on them.
As the financial sector continues to evolve, how banks will respond flexibly and find new growth drivers has become a hot topic in the industry. This round of interest rate cuts will have a profound impact on banks' business and sustainable economic development, and the market needs to pay close attention. In the face of the financial winter, we are eager to look forward to the bank's strategic initiatives to inject new vitality into the economy.