The interest rate was as high as 3.25%, and small and medium-sized banks acted in reverse to rush to issue large-amount certificates of deposit

China Times

2024-04-17 22:08Posted on the official account of Beijing China Times

Recently, large state-owned banks and joint-stock banks have set off a wave of suspension of the issuance of large-value certificates of deposit, some banks have chosen not to sell new three-year and five-year certificates of deposit, and some banks have tightened the quota for large-value certificates of deposit.

In this case, some banks have started "reverse operations", taking this opportunity to "pick up leaks" and collect savings. Recently, a number of small and medium-sized banks in Shandong, Guangxi, Jiangxi, Shanxi, Fujian, Anhui, Guizhou and other provinces have begun to actively sell large-value certificates of deposit, which not only have sufficient quotas, but also reach 3.25% interest rates on some newly issued large-amount certificates of deposit, killing many large banks in seconds.

Relevant analysts said that different banks have different factors such as market competition, customer positioning, and liability structure, and the pace and magnitude of adjusting deposit interest rates are different, and the advantages of small and medium-sized banks in absorbing deposits are relatively weak, and their purpose of borrowing high interest rates to attract deposits cannot be ruled out. However, under the current market, investors should adjust their investment mentality as soon as possible and reduce their expectations of investment returns.

Small and medium-sized banks are actively issuing new certificates of deposit with large amounts

"Large-denomination certificates of deposit are coming! "Limited quantity, first come, first served!" "A good place to deposit, the speed is in demand!"

The reporter noted that at a time when some large banks and joint-stock banks are tightening the quota for large-amount certificates of deposit and lowering the interest rates on large-amount certificates of deposit, many small and medium-sized banks are seizing the opportunity to vigorously promote and actively issue new large-amount certificates of deposit with high interest rates.

On April 2, a piece of information on large-value certificates of deposit released by Guangxi Tengxian Rural Credit Cooperatives showed that the fifth phase of large-value certificates of deposit issued by the rural credit cooperatives from April 1 to April 15, 2024, the issuance interest rate of 3-year and 5-year certificates of deposit reached 3.25%, with a minimum deposit of 200,000 yuan.

In addition, the rural credit cooperatives also issued 3-month, 6-month, 1-year, and 2-year large-amount certificate of deposit products, with interest rates of 1.80%, 2.00%, 2.20%, and 2.60% respectively, all of which have a minimum deposit of 200,000 yuan.

In addition to the Guangxi Tengxian Rural Credit Cooperative, there are also many small and medium-sized banks that have recently issued large-value certificates of deposit.

The "China Times" reporter inquired and found that on February 1, Fujian Minqing Rural Credit Union issued a large-amount certificate of deposit with a three-year interest rate of 3.1%. According to information issued by Jiangxi Yichun Rural Commercial Bank in January this year, the interest rate on the three-year deposit of the bank's large-amount certificates of deposit can reach 3.05%. On March 26, in order to celebrate the eighth anniversary of its establishment and restructuring, Wenshang Rural Commercial Bank issued a three-year large-amount certificate of deposit with an interest rate of 3.0%. On March 8, Zhejiang Huangyan Rural Commercial Bank issued a three-year 3.0% certificate of deposit for women. On April 12, Jiangsu Xishang Bank launched a negotiable large-denomination certificate of deposit with a three-year interest rate of 3.00 percent, and on April 10, Shanxi Wenxi Rural Commercial Bank launched a three-year large-denomination certificate of deposit with an interest rate of 2.95 percent. On April 11, Weifang Bank sold negotiable certificates of deposit with an interest rate of 2.6%.

It is worth mentioning that the interest rates on large deposits issued by the above-mentioned small and medium-sized banks have been lowered. On February 5 this year, the interest rate of the 3-year and 5-year certificates of deposit of Xishang Bank was 3.45% and 3.95%, which were 45 and 105 bps higher than the current respectively.

In stark contrast, China Merchants Bank has recently stopped issuing new quotas for 3-year and 5-year large-denomination certificates of deposit. A reporter from the "China Times" visited a number of banks and found that at present, state-owned banks still offer three-year large-value certificates of deposit products with an interest rate of 2.35 percent; a very small number of joint-stock banks can transfer three-year large-amount certificates of deposit products with an interest rate of up to 2.6 percent, while five-year large-amount certificates of deposit products are almost nowhere to be found.

From the perspective of interest rates, the two-year interest rate of large-amount certificates of deposit of Guangxi Tengxian Rural Credit Cooperatives has a relative advantage over the three-year large-amount certificates of deposit of large state-owned banks and joint-stock banks.

It can be seen that although the deposit interest rate has fallen, the interest rate of large certificates of deposit of small and medium-sized banks still has a clear advantage over large state-owned banks and joint-stock banks.

Bucking the trend to grab a position?

According to data released by the State Administration of Financial Supervision and Administration, as of the end of 2023, the net interest margin of mainland commercial banks has fallen to 1.69%, a decrease of 0.04 percentage points from the first three quarters of 2023, falling below the 1.7% mark for the first time, and the net interest margin of China's large banks has fallen to 1.62%.

The annual reports of a number of listed banks show this trend of narrowing spreads. As a result, the net interest income of many listed banks declined. At the results conference, a number of banks stated that they would take active measures to control the cost of debt.

The management of Bank of China, China Construction Bank, Postal Savings Bank and other banks have also revealed their intention to increase the proportion of demand deposits in 2024 and continue to control medium and long-term deposits with a maturity of more than 3 years.

Zhang Yi, deputy governor of the Bank of China, said that this year, the Bank of China will reduce the pressure on high-cost deposits, including agreement deposits, structured deposits, and large-value certificates of deposit with a maturity of more than 3 years. "We have set some reasonable growth targets, and we will have appropriate controls on the proportion of these aspects. Zhang Yi said.

Li Bin, vice president and secretary of the board of directors of Minsheng Bank, also said at the results conference that the overall cost of deposits is relatively high, and efforts should be made to broaden low-cost and stable sources of funds.

At the same time that large banks and joint-stock banks have suspended the issuance of large-denomination certificates of deposit and tightened their quotas, many of their medium- and long-term large-denomination certificates of deposit that have been sold no longer have the interest rate advantages of the past. For example, the interest rate of the 3-year negotiable large-denomination certificate of deposit of IB is 2.6%, which is the same as the interest rate of the bank's 3-year time deposit with a minimum deposit of 50 yuan. The interest rates of ICBC's 3-year and 5-year large-denomination certificates of deposit are also the same as those of ordinary time deposits of the same maturity.

Dong Ximiao, chief financial researcher of Zhaolian Financial, told the China Times that commercial banks will continue to reduce deposit interest rates in 2024 to further reduce the cost of funds and ease the pressure of narrowing interest rate spreads. In addition to lowering deposit interest rates, commercial banks should also reduce interest subsidies and fees other than interest on deposits, so as to further reduce the hidden costs of deposits.

"In the case of the continuous decline in the yield of various asset management products and deposit interest rates, investors should adjust their investment mentality as soon as possible and reduce their expectations of investment returns. He said.

Some market analysts believe that small and medium-sized banks have relatively insufficient advantages in absorbing deposits, and while large state-owned banks and joint-stock banks manage their net interest margins by adjusting large-denomination certificates of deposit, some small and medium-sized banks still do not reduce their enthusiasm for issuing large-denomination certificates of deposit, and do not rule out their purpose of using this to attract savings and gain customers.

However, some brokerage banking analysts said that after the deposit interest rate is lowered, the faster the growth of bank deposits, the lower the cost of funds, and the more room for banks' interest margins. Therefore, small and medium-sized banks will be more able to balance the stock of high-cost funds with low-cost funds by increasing their efforts to attract deposits.

Editor-in-charge: Meng Junlian Editor-in-chief: Zhang Zhiwei

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