Summary
In order to cope with the pressure on the liability side, small and medium-sized banks in many places continue to announce the reduction of deposit interest rates, involving various types of deposit products such as demand deposits, time deposits, and large-amount certificates of deposit
Text: Chen Hongjie
Editor|Hu Rongping, Yuan Man
Recently, a certain joint-stock bank has stopped issuing new three-year and five-year certificates of deposit, and some other large state-owned banks and joint-stock banks have also seen a shortage of long-term certificates of deposit. "I found a large-denomination certificate of deposit product with only two years or less in the deposit section of a bank, and when I called and asked, it turned out that the issuance of three-year and five-year terms had been suspended. At present, it is not easy to buy large certificates of deposit with a long maturity in other large state-owned banks and joint-stock banks. Some depositors said.
The crisis of long-term large-denomination certificates of deposit reflects the current situation of relatively abundant liquidity and high growth of fixed deposits. As of April 12, Wind showed that in the recently released data of 23 listed banks in 2023, the balance of fixed deposits totaled 99.36 trillion yuan, an increase of 16.8 trillion yuan, or 20.33%, compared with 82.57 trillion yuan in 2022.
Further, the balance of personal time deposits of these 23 listed banks will grow particularly rapidly in 2023, reaching 57.75 trillion yuan, a year-on-year increase of 22.28%, and the balance of corporate time deposits will be 41.61 trillion yuan, a year-on-year increase of 17.72%.
The growth of demand deposits was relatively weak. The total demand deposit balance of the above 23 listed banks will only increase by about 40 billion yuan in 2023 compared with 2022. Among them, the balance of personal demand deposits increased by 186.6 billion yuan, and the balance of corporate demand deposits decreased by 147.1 billion yuan.
"Residents' deposits have shown the characteristics of high growth and obvious trend of regularization, indicating that residents' consumption and investment demand are weak. In the face of some uncertainties, companies are also gravitating towards fixed deposits. A number of bankers said that the proportion of current accounts has declined due to the decline in customer risk appetite and the lack of activation of corporate funds.
In 2024, the strategy of many banks on the liability side will still be to maintain appropriate costs and strive to achieve coordinated development of debt volume and price. "Focus on promoting the growth of low-cost settlement demand deposits, and effectively take advantage of the opportunity of lowering the self-discipline upper limit of deposit interest rates to guide the rapid decline of debt costs. A senior executive of a joint-stock bank said.
1. The main force of deposit growth
Deposits are the most important liabilities and source of funds for banks, as well as the basis for carrying out various businesses. "In the past, we were eager to deposit for a long period of time, even if the interest we paid was higher. However, in recent years, residents and enterprises have a strong willingness to deposit, but the asset side is relatively weak and interest rates have fallen significantly, so we are reducing high-cost long-term deposits. A bank executive said.
Wind shows that among the relevant data of the 23 listed banks that have been released in 2023, the balance of fixed deposits totals 99.36 trillion yuan, an increase of 20.33% year-on-year. In the balance of demand deposits, the total of the 23 listed banks in 2023 will only increase by about 40 billion yuan compared with 2022.
Data from the People's Bank of China also showed that the deposit balance in 2023 will be 284.26 trillion yuan, a year-on-year increase of 10%. Deposits increased by 25.74 trillion yuan, a year-on-year decrease of 510.1 billion yuan. Among them, household deposits increased by 16.67 trillion yuan, deposits of non-financial enterprises increased by 4.22 trillion yuan, fiscal deposits increased by 792.4 billion yuan, and deposits of non-banking financial institutions increased by 1.64 trillion yuan.
(Source: Wind)
Specific to the listed banks that have disclosed data, the six major banks are the main force in the growth of fixed deposits. In 2023, the balance of personal fixed deposits of the six major banks will be 48.73 trillion yuan, and the balance of corporate fixed deposits will be 2.846 billion yuan, an increase of more than 14 trillion yuan from the total of the previous year.
Among them, the Industrial and Commercial Bank of China, the Agricultural Bank of China, the China Construction Bank and the Bank of China all increased by more than 20% in the balance of fixed deposits. "In terms of term structure, time deposits increased by 4.18 trillion yuan, an increase of 27.6 percent, while demand deposits decreased by 0.62 trillion yuan, a decrease of 4.4 percent. In terms of currency structure, deposits were 31.84 trillion yuan, up by 3.68 trillion yuan, up by 13.1 percent, while foreign currency deposits were equivalent to 1.68 trillion yuan, down by 34.138 billion yuan, down by 2.0 percent. ICBC's 2023 annual report shows.
In addition, the balance of personal fixed deposits of ABC in 2023 will be 10.45 trillion yuan, a year-on-year increase of 23.28%, and the balance of corporate fixed deposits will be 5.07 trillion yuan, a year-on-year increase of 37.49%. CCB's 2023 annual report also shows that domestic demand deposits were 12.02 trillion yuan, a decrease of 26.458 billion yuan or 0.22% from the previous year, and the proportion of domestic deposits decreased by 4.85 percentage points to 44.99%, and domestic time deposits were 14.70 trillion yuan, an increase of 2.58 trillion yuan or 21.25% from the previous year, and the proportion of domestic deposits increased by 4.85 percentage points to 55.01%.
Among the joint-stock banks, China Merchants Bank's fixed-term performance is more prominent. According to the data, in 2023, the bank's retail customer time deposit balance will be 1.67 trillion yuan, a year-on-year increase of 48.58%, and the company's time deposit balance will be 2.02 trillion yuan, a year-on-year increase of 20.79%.
According to another data from China Merchants Bank, the average daily balance of demand deposits will account for 57.08% of the average daily balance of customer deposits in 2023, a year-on-year decrease of 4.55 percentage points. Among them, the average daily balance of corporate customers' demand deposits accounted for 57.31% of the company's average daily balance, down 2.67 percentage points year-on-year, and the average daily balance of retail customers' demand deposits accounted for 56.74% of the average daily balance of retail customers' deposits, down 7.69 percentage points year-on-year.
China Merchants Bank mentioned in its 2023 annual report that the economic recovery is less than expected, the expected recovery of enterprises is slow, the degree of capital activation of enterprises is low, the willingness to invest and finance is insufficient, and the derivation of demand deposits is small. At the same time, the capital market disruption and residents' demand for savings, especially the demand for medium and long-term time deposits, led to an increase in the proportion of time deposits.
In addition, the stock market volatility in the first half of 2022 and the bond market volatility at the end of 2022 caused wealth management products to experience two large rounds of net breaking, and investors became less receptive to medium and high-risk products with large fluctuations in net value and turned to deposits. "People's investment preferences tend to be more conservative, and many people go to banks to do business, emphasizing that they only buy deposits and do not invest in financial management. A person from a major state-owned bank said.
2. Deposit rates are expected to be lowered again in the second quarter
How big is the impact of fixed-term deposits on banks?
Taking ICBC as an example, its 2023 annual report shows that the deposit interest expense was 589.68 billion yuan, an increase of 109.605 billion yuan or 22.8% over the previous year, mainly due to the 13.8% increase in the average balance of customer deposits and the 14 basis points increase in the average interest payment rate. ICBC's net profit in 2023 will be 365.116 billion yuan, an increase of 3.006 billion yuan or 0.8% over the previous year.
Many other banks, such as the Agricultural Bank of China and the China Construction Bank, also saw double-digit year-on-year growth in interest payments. The interest expense of deposits absorbed by ABC was 475.534 billion yuan, an increase of 86.988 billion yuan over the previous year, mainly due to the increase in the scale of deposits absorbed. The interest expense of CCB on deposits was RMB468.003 billion, an increase of RMB65.753 billion or 16.35% over the previous year, mainly due to the increase of 13.46% in the average balance of deposits and the increase of 4 basis points in the average cost ratio over the previous year.
In addition, there are many banks with an average cost ratio of more than 3% for personal fixed deposits in 2023, such as Bank of Communications at 3.1%, Industrial Bank at 3.11%, Bank of Qingdao at 3.15%, Bank of Chongqing at 3.53%, Bank of Zhengzhou at 3.64%, etc.
(Source: Wind)
In 2023, the reduction in the liability side of commercial banks will be relatively small, relatively rigid. For example, the average cost ratio of individual time deposits of the Agricultural Bank of China decreased by 0.19 percentage points, and the average cost ratio of corporate time deposits increased by 0.21 percentage points. The average cost ratio of ICBC's personal time deposits decreased by 0.22 percentage points, while corporate time deposits increased by 0.06 percentage points. CCB achieved a double decline, with the average cost ratio of personal time deposits falling by 0.23 percentage points and corporate time deposits falling by 0.14 percentage points.
Compared with the decline in income on the asset side, the deposit cost on the liability side of banks is relatively rigid. According to data from the People's Bank of China, the weighted average interest rate of corporate loans in 2023 will be 3.88%, down 0.29 percentage points year-on-year, continuing to hit a new low since statistics; the interest rate of more than 23 trillion yuan of existing housing loans has been lowered, with an average decrease of 0.73 percentage points, reducing the interest expenses of mortgage borrowers by about 170 billion yuan per year.
In February 2024, the People's Bank of China made an asymmetric reduction in the LPR (loan market prime rate), of which the 1-year LPR was quoted at 3.45%, unchanged from the previous value. The LPR of more than 5 years was reported at 3.95%, down 25 basis points, a record high.
"In 2024, the proactive fiscal policy and prudent monetary policy will continue to exert force, the macro economy will further rebound, and it is expected that the external environment for the growth of commercial bank deposits may improve marginally, (however) the trend of deposit regularization may continue. A leading listed bank said.
In addition, on April 8, 2024, the self-discipline mechanism for market interest rate pricing issued the "Initiative on Prohibiting the Acquisition of Deposits by Manually Raising Deposits with High Interest Rates to Maintain the Order of Competition in the Deposit Market", which requires that from now on, banks shall not promise or pay supplementary interest to customers in any form that exceeds the authorized upper limit of the deposit interest rate.
In order to cope with the pressure on the liability side, small and medium-sized banks in many places continue to announce the reduction of deposit interest rates, mostly between 10 basis points and 60 basis points, involving various types of deposit products such as demand deposits, time deposits, and large-amount certificates of deposit.
"In the second quarter of this year, large state-owned banks are expected to continue to lead a new round of deposit rate cuts and continue to reduce the proportion of long-term deposits. A banker said.
For the bank's own operation, it is necessary to balance scale growth and cost control. "The following measures will be taken: first, to return to the origin of customers, through the expansion of the customer base to consolidate the foundation of deposit growth, second, adhere to the core deposit-based promotion strategy, through settlement services, wealth management, product innovation and other ways to expand stable low-cost deposits, the third is to use classified management as a means to ensure that the annual deposit cost rate remains at a satisfactory level. Recently, the management of a leading bank said.
"Commercial banks should predict the inflection point of macro trends and deposit flows, and make corresponding asset-liability arrangements, and comprehensively use financial bonds and other means to supplement long-term liquidity. Seize the opportunity of deposit activation in the process of economic recovery, tap the potential of financial investment, bulk consumption, mortgage loans and other financial scenarios, and leverage custody, third-party depository and other businesses through the consignment sales of financial products. Another analyst said.