The "volume and price" of large-amount certificates of deposit have fallen, and the pressure on the liability side of banks still exists

Recently, in order to alleviate the pressure on the liability side, banks have continued to adjust their deposit products, removing long-term large-amount certificates of deposit and lowering deposit interest rates. However, the first financial reporter noticed that some regional banks are still issuing large-value certificates of deposit. In the view of industry insiders, there is still room for deposit rates to fall in the future, the overall situation of bank assets and liabilities is under pressure, and the pressure on high-cost deposits will continue.

A number of banks have removed long-term large-denomination certificates of deposit

A few days ago, China Merchants Bank removed the 3-year and 5-year large-value certificate of deposit products from the shelves, which attracted market attention. "The product is not suspended, but the current medium and long-term large-denomination certificate of deposit product quota is relatively limited, and the future issuance plan will be dynamically adjusted according to the situation on the asset side and the liability side in the future. A financial manager of the bank's Shanghai branch told reporters. At present, China Merchants Bank's large-value certificates of deposit products with 1-year and 2-year maturity are still on sale, with deposit interest rates of 2% and 2.15% respectively, and the minimum deposit amount is 200,000 yuan.

"If you don't buy it, you won't have a quota. A financial manager of the Bank of Ningbo in Hangzhou also told reporters that the interest rate of the 3-year large-amount certificate of deposit product on sale is 2.7%, with a minimum deposit of 200,000 yuan, but the quota is about to be sold out, and the issuance will be determined according to the overall situation of assets and liabilities.

Previously, a number of banks had also removed their large-value certificate of deposit products from the shelves. The reporter checked a number of bank apps and found that many banks have removed 5-year large-value certificate of deposit products from the shelves, and 3-year products have gradually stopped being issued. Only the Industrial and Commercial Bank of China still has a five-year large-value certificate of deposit product on sale, with an interest rate of 2.40 percent; Industrial Bank, Bank of Jiangsu, China CITIC Bank, China Merchants Bank, and Bank of Beijing have no new three-year large-value certificate of deposit quota; and Shanghai Pudong Development Bank has only one one-year large-value certificate of deposit product with a minimum deposit of 500,000 yuan on sale, with an interest rate of 2.00 percent.

A staff member of a joint-stock bank told reporters that in the second quarter, the bank continued to adjust the quota of medium and long-term large-value certificate of deposit products, and many varieties may only have quotas at the beginning of the month. At present, the bank deposit limit remains high, the deposit cost is high, and the asset and liability side of the bank continue to be under pressure in the case of low interest rates.

In addition to reducing the new quota, many banks are also lowering the interest rates of large-denomination certificates of deposit products to cope with the challenge of falling interest rates. This reporter learned that the interest rates on three-year large-amount certificates of deposit of Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China, and China Construction Bank are all 2.35 percent for deposits of 200,000 yuan, while the interest rates on three-year certificates of deposit for Ping An Bank are 2.5 percent, and the interest rate for fixed deposits of 10,000 yuan is 2.6 percent.

"Three years ago, the interest rate on large-amount certificates of deposit was close to 5.00%, and customers who have expired in the last three years will not have any advantage in purchasing large-amount certificates of deposit products. A staff member of the branch of the Wenzhou branch of a state-owned bank told reporters.

Some regional banks bucked the trend in their issuances

However, according to this reporter's understanding, the "short selling" of large-value certificates of deposit products of banks is not an overall phenomenon, and many regional banks in Shanxi, Guizhou, Shandong, Anhui, and other places are actively issuing large-amount certificates of deposit, and there is a trend of bucking the trend of collecting deposits. For example, Wuxi Xishang Bank sells large-amount certificates of deposit, with interest rates of 2.2%, 3.0%, and 2.9% for one-year, three-year, and five-year deposits, respectively, and the interest rate on three-year large-amount certificates of deposit issued by Shandong Wenshang Rural Commercial Bank reaches 3%, with a minimum deposit of 200,000 yuan.

A person from a regional bank told reporters that the pressure on regional banks to collect deposits this year is still very great, and the business type is relatively simple, especially after the sinking of large banks, regional banks are under greater competitive pressure, the cost of debt is higher, the return on assets is not good, and the profit margin is further compressed.

Ahead of the next round of deposit rate cuts, regional banks have opted to issue large certificates of deposit. Industry insiders told reporters that for rural financial institutions, the source of deposits is relatively limited, and large-amount certificates of deposit, as a product that banks can adjust the interest rate level on their own, can help banks lock in deposit liquidity.

According to the data of Rong 360, among the newly issued large-value certificates of deposit in the past three years, the interest rates of rural financial institutions have generally been raised, and the interest rates of large banks have been lowered. At present, the average interest rates of 2-year and 5-year rural commercial banks are the highest, at 2.459% and 3.638% respectively. The average interest rates of 1-year and 3-year certificates of deposit of city commercial banks were 2.118% and 2.946% respectively.

However, in the view of the above-mentioned industry insiders, the issuance of large-value certificates of deposit by regional small and medium-sized banks is only a temporary move, and the adjustment of large-amount certificates of deposit products will be carried out in the future following the interest rate reduction of small and medium-sized banks. According to the reporter's incomplete statistics, more than 10 small and medium-sized banks have recently intensively lowered deposit interest rates, and the reduction range is between 25bp~80bp.

Reduce the cost of debt

As one of the deposit products with the advantage of high interest rates, maintaining high interest rates will become a "burden" on the liability side for most banks at a time when bank profits are declining.

Industry insiders interviewed by reporters believe that the main reason for banks to suspend the issuance of new three-year and five-year large deposit quotas and reduce product interest rates is that under the pressure that the net interest margin is expected to further narrow, the cost of funds will be reduced to maintain operations, and the adjustment of high-interest products such as large-amount certificates of deposit will be used to reduce the cost of liabilities, which is one of the steps.

Ming Ming, chief economist of CITIC Securities, said that with the trend of fixed-term deposits becoming more and more obvious, and the pricing of long-term deposits and some special deposit products is high, the cost of liabilities of banks remains relatively rigid, while the loan interest rate has fallen significantly, and the interest rate spread has continued to compress, increasing the operating pressure.

"At present, the proportion of fixed deposit liabilities in the banking system is still significantly higher than the average level. Zhou Maohua, a macro researcher at the financial market department of Everbright Bank, pointed out that as long as the current pressure on banks' debt costs and net interest margins does not decrease, banks still need to continue to optimize the asset-liability structure to alleviate the rising cost of liabilities and the pressure of narrowing net interest margins, and the issuance of some high-interest deposit products will be controlled at a low level.

Xue Hongyan, vice president of Xingtu Financial Research Institute, pointed out that from the industry level, at the end of 2023, the average net interest margin of commercial banks was 1.69%, a decrease of 0.22 percentage points from the end of the previous year. For a number of reasons, there will still be pressure on the net interest margin of the banking industry to narrow in 2024, one is the repricing effect of existing loans, and part of the effect of the interest rate cut in 2023 and the reduction of the interest rate of the existing housing loan will be reflected in 2024; second, the real interest rate is at a high level, and there is still a need to continue to cut interest rates in 2024, and the interest rate cut will continue to reduce the net interest margin in the context of deposit regularization; third, the debt swap of local government platforms, as well as the increase in the proportion of low-interest infrastructure loans and inclusive small and micro loans, will also put pressure on the interest margin.

Liang Fengjie, chief banking analyst at Zheshang Securities, believes that it is expected that deposit interest rates will be cut in April. The main consideration of deposit pricing refers to the 10-year Treasury bond and the 1-year LPR, of which the yield of the 10-year Treasury bond in the first quarter of 2024 decreased by 25BP compared with the fourth quarter of 2023.

In the recent annual report disclosure season, many banks have also proposed to strengthen the control of deposit costs. Zhang Yi, deputy governor of the Bank of China, said at the results meeting: "This year, the bank's pressure on high-cost deposit business will be very large. He said that he has set a reasonable growth target for products such as agreement deposits, structured deposits, and large-value certificates of deposit with a maturity of more than three years, and will appropriately control the proportion of business in this area. Wang Liang, president of China Merchants Bank, also said that this year, in accordance with the requirements of the board of directors to live a tight and strict life, reduce various costs and expenses, and promote income growth by reducing costs and increasing efficiency.

(This article is from Yicai)