The deposit interest rate of small and medium-sized banks will be lowered and then followed up by the pressure on net interest margin to be solved, and the next round of adjustment may be brewing

Finance Associated Press, February 22 (Reporter Shi Sitong) From 3.9% to 3.35% to 3.2%! Recently, the Bank of Guilin once again issued an announcement, announcing that it would adjust the implementation interest rate of the five-year deposit product of the unit's lump sum deposit to 3.2%. Coupled with the large-scale interest rate adjustment for deposit products just a month ago, the bank's five-year interest rate has fallen by 70 basis points since the beginning of the year.

In fact, the Bank of Guilin is not the only one that has recently lowered its deposit rate further. The reporter of the Financial Associated Press combed and found that just after the Spring Festival, a number of small and medium-sized banks such as Lingui Rural Commercial Bank, Huadian Rural Commercial Bank, and Lingchuan Shentong Village Bank announced the adjustment of the listed interest rate of RMB deposits. On the whole, most of the lowered products are long-term limited deposit interest rates, with varying magnitudes, and some banks have reduced their five-year interest rates by up to 65 basis points.

It is understood that the recent intensive cuts by some banks are mainly a follow-up to the interest rate adjustment actions of major banks at the end of last year. Industry experts told the Financial Associated Press reporter that small and medium-sized banks are under great pressure to collect deposits, and they will first increase their efforts to absorb deposits under the "good start" node, and then follow the adjustment of deposit interest rates after the year. At the same time, with the sharp adjustment of LPR, the follow-up loan interest rate has fallen significantly, but the cost of bank liabilities has remained relatively rigid, and the interest rate spread has continued to compress, which has increased the operating pressure, which needs to be alleviated by adjusting the deposit rate.

"However, given that the time of the latest adjustment is not far away, it may take some time for the next round of adjustments. Experts said.

A number of small and medium-sized banks have intensively adjusted deposit interest rates, with a maximum reduction of 65 basis points

Just after the Lunar New Year, a number of small and medium-sized banks have issued notices announcing the adjustment of deposit interest rates. The reporter of the Financial Associated Press noticed that most of the follow-up deposit interest rate cuts in this round are rural commercial banks and village banks in Guangxi, and the adjustment time is generally from February 21, 2024.

Among them, Lingchuan Shentong Rural Bank and Fusui Shentong Rural Bank have made the same adjustment to the listed interest rates of lump sum deposits, adjusting the five-year and three-year interest rates from 3.85 percent and 3.4 percent to 3.2 percent respectively, by 65 basis points and 20 basis points respectively, the two-year interest rate from 2.75 percent to 2.55 percent, a reduction of 20 basis points, and the one-year interest rate remaining unchanged at 2.15 percent.

Lingui Rural Commercial Bank, on the other hand, has adjusted the interest rates on demand deposits and time deposits. Among them, the listed interest rate of demand deposits was lowered by 5 basis points from 0.25% to 0.2%, the interest rates for five-year and three-year lump sum deposits were lowered by 30 basis points from 3.5% and 3.3% to 3.2%, and the one-year interest rate was lowered from 2.2% to 2.15%.

"When the People's Bank of China adjusts it, we will definitely follow suit, and we have already adjusted the deposit interest rate twice last year. The staff of Lingui Rural Commercial Bank told the Financial Associated Press. It is understood that just two months ago, the bank just lowered the listed interest rate on corporate demand deposits from 0.25% to 0.2%.

In addition, a number of local banking institutions in Guangxi, such as Qinnan National Village Bank, Nanning Xingning Changjiang Village Bank, Guangxi Fengshan Rural Commercial Bank, and some small and medium-sized banks in other regions have also followed up to adjust the deposit interest rate.

According to the latest announcement of Huadian Rural Commercial Bank, according to the market-oriented demand of interest rates, the bank will uniformly adjust the upper limit of the interest rate on demand deposits and partial lump sum fixed deposits from February 22, 2024. The interest rate on demand deposits was lowered by 5 basis points from the current 0.25% to 0.2%, and the three-year and five-year interest rates were reduced by 10 basis points from the current 2.8% to 2.7%.

The sharp drop in LPR continues to compress interest rate spreads, and there is still room for deposit rates to be lowered in the future

Since the market-oriented reform of deposit interest rates, commercial banks have used a variety of methods to manage deposit interest rates, and the overall situation has been that "large banks take the lead and small banks follow up". As for the recent intensive reduction of deposit interest rates by some small and medium-sized banks, the industry generally believes that it is a continuation of the third round of cuts set off at the end of December last year.

"Referring to past experience and the timing of adjustments, we believe that this is a follow-up of small and medium-sized banks to the interest rate adjustment actions of large banks at the end of last year. In the view of CITIC Securities Chief Economist Ming Ming, the reason why some banks are delayed is mainly due to the fact that the current pressure on small and medium-sized banks to collect deposits is greater, and it is a "good start", small and medium-sized banks first increase efforts to absorb deposits, and then follow the adjustment of deposit interest rates after the year.

Zhou Maohua, a macro researcher at the financial market department of Everbright Bank, believes that the adoption of "echelon" reduction of deposit interest rates by large, medium and small banks in China will allow the market to fully digest the impact of deposit interest rate reduction, which will help maintain the normal competition order of the deposit market. At the same time, in addition to the impact of the special macroeconomic and policy environment in recent years, the reduction of bank deposit interest rates also depends on the supply and demand of the deposit market, the assets and liabilities, net interest margin and operation of each type of bank.

From the perspective of time, the recent intensive adjustment announcements of the above-mentioned banks are all after the central bank announced a 25 basis point cut in the five-year LPR. In this regard, it is clearly pointed out that the LPR has been sharply adjusted, and the follow-up loan interest rate has fallen significantly, but the bank's debt cost has remained relatively rigid, and the interest rate spread has continued to compress, which has increased the operating pressure, and the follow-up deposit interest rate has to continue to be lowered. But at the same time, he believes that the next round of adjustment may have to wait for a while, considering that the time of the latest adjustment is not far away.

Looking to the future, Ming Ming believes that considering the background that financial concession entities and loan interest rates will continue to fall, the deposit interest rate will be easy to fall and difficult to rise in the future. Under this expectation, the cost of bank liabilities is expected to be controlled, and the pressure on net interest margins will be reduced, but at the same time, it will be more difficult to collect deposits, and more diversified channels for collecting deposits will need to be explored. At the same time, for depositors, the income brought by deposits is reduced, and some funds may be invested in low-risk asset management products such as bank wealth management.

"At present, there is still room for the deposit interest rate to be lowered, mainly because the deposit interest rate is still significantly higher than the market interest rate, but it is expected that the reduction will be significantly narrowed, or even not reduced. Zhou Maohua said that the main reason is that the economy is expected to recover steadily, the operating conditions will improve, the demand for physical financing will be further enhanced, and the financial market will pick up, so that the net interest margin of banks and market interest rates will remain stable, and the supply and demand of the deposit market will gradually return to normal. However, if the economic recovery is less than expected, the central bank will further guide the market interest rate center to move further downward, coupled with the pressure on the bank's net interest margin, it cannot be ruled out that the deposit interest rate may still be moderately lowered to expand the space for financial support for the real economy, which is also an inherent requirement to enhance the risk compensation capacity of the financial system and maintain the stable and sustainable operation of the financial system.

(Financial Associated Press reporter Shi Sitong)