Now I hear the words "interest rate cut", is it numb?
Since the central bank offered the largest interest rate cut in history in February, since the "killer weapon", all small and medium-sized banks have cut interest rates one after another to "keep up", and the wind has blown again and again, and small and medium-sized banks from Henan, Shaanxi, Shanxi, Guangdong and other places have issued announcements intensively, announcing that they will reduce the implementation interest rate of fixed deposits, and the interest rates of different periods such as three months, six months, and one year are involved.
In this interest rate cut, the number of banks in Henan is the majority, and dozens of rural commercial banks and village and township banks have announced a reduction in the interest rate on fixed deposits.
Image source: Zhumadian Rural Commercial Bank, Xinmi Rural Commercial Bank official account
Interest rates have been cut, and the tears of the banks are flying. This wave belongs to the tearful "rush to the money and leave".
As for the reasons for the reduction of deposit interest rates, in official terms, on the one hand, the market interest rate level has fallen as a whole due to the impact of macroeconomic recovery, monetary policy regulation and other factors. On the other hand, the growth rate of social financing demand has slowed down significantly, especially under the influence of factors such as the replacement of residents' stock housing loans, the structure of bank assets has changed.
To put it bluntly, it's about liquidity.
Why are the days of the bank "difficult"?
Cases of illiquidity are also not uncommon throughout history. For example, the entire Northern Song Dynasty was in a state of "money shortage". The Northern Song Dynasty minted a huge amount of copper coins every year, but because there was no modern financial institution only money village, the liquidity was poor, and the people saved the money they made, such as digging a money cellar to hide the copper money in the ground, until today from time to time to find a Song Dynasty money cellar, often dozens of tons, it can be seen that the wealth of money is hidden.
This thrifty habit of the common people led to a certain extent that although the Song court vigorously "made money", it was still short of money. Therefore, Fan Zhongyan's "Qingli New Deal" and Wang Anshi's reform fundamentally solve this problem.
Looking back at modern times, everyone seems to have the expectation of a tight life, and various benefits have been reduced. At the end of the day, banks are profitable businesses. In fact, as long as the deposit interest and loan interest fall at the same time, and the interest rate difference exists, the bank will not be affected too much. This is also the reason why we see that in the 2023 annual reports of many excellent banks, the revenue is reduced, but the profits are still considerable or even positive.
What's the most terrifying thing -- it's an asymmetrical descent. Some small banks have a very high cost of depositing, originally, ordinary people must feel that the four major banks are the safest to save money, and small banks can only attract everyone to save money through high interest rates. It is very difficult to reduce the cost of deposits. At the same time, loan interest rates are being dragged down by the market. Some financial institutions have achieved an annualized rate of more than 2 points, and if you make an annualized rate of more than 10 points, who will take out a loan?
Therefore, if a small bank chooses to lend to high-quality customers, it can only invert the interest rate spread, that is, to put a lump sum and lose a lump sum. The risk never goes away, it's only a matter of time. The first to be affected were the village and township banks.
What happened to village and township banks?
Recently, a number of village and township banks have announced their dissolution, and as representatives of small banks, village and township banks are really a very embarrassing existence. In addition to the "regular army" of the four major banks, there are urban commercial banks in cities, and rural commercial banks or rural credit cooperatives in towns and villages.
In the early days, when rural urbanization was insufficient, a large number of village and township banks emerged, which assumed the important function of deposit and loan in rural areas. However, with the continuous development of the economy, in order to compete for business, major banks have been involved in flying, and the internal assessment has reached the point of "extremely vicious". How many of the village and township banks that were opened in the first swarm were profitable? Deposits could not be raised, there were a lot of risks, shareholder problems and case problems were frequent, and small village and township banks were no longer able to roll them out.
Image source: Beijing Daxing Bank
You must know that banks make money through the interest rate difference between deposits and loans, desperately collecting savings, but the loans cannot be released, and the volume is small, and the risks behind it can be imagined. Shareholders are uneven, corporate governance is chaotic, risk control system is weak, etc., all kinds of undesirable factors are mixed, and business risks explode. According to industry insiders, some village and township banks even ignore credit reporting and dare to lend without collateral. The disappearance of such banks in bulk is becoming more and more common. Those who can't keep up with the times will eventually be abandoned!
Are large certificates of deposit going away?
While the interest rate cut has sparked heated discussions, the once sought-after large-denomination certificate of deposit product is now disappearing. Many banks have no quota for large-denomination certificates of deposit for three years, and they are out of stock. China Merchants Bank, known as the "king of retail", decided to suspend the issuance of new three-year and five-year large-denomination certificates of deposit, which brought a lot of shock to the market. You must know that the landlord's family has no surplus grain, and the bank can no longer afford the high interest rate, and the bank cannot afford to pay the 3% or 4% interest.
The further tightening of the deposit and loan spread space has caused the "gold mine" on which banks rely to survive is collapsing, so what is the biggest impact and guiding effect of reducing deposit interest?
One is that the arbitrage space between the corporate sector and banks is further compressed, especially in shadow banking, where profit margins disappear visibly. Interests are always the best driving force for economic behavior, and a series of policies for national economic development have reduced the resistance.
One is the income squeeze of the rentier class, which stimulates the savings and wealth of these groups to move, carry out asset allocation and investment, which is the big part.
In general, the reduction of deposit interest rates is always on the way, and the continuous suppression of deposit rates is the medium and long-term direction, and the era of low interest rates in China is coming, and there are not many good days for financial institutions and banks, including state-owned enterprises, to lie down and make money.
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