In 2024, a number of "holes" for high-interest savings will be plugged. Entering May, the news that the deposit listed interest rate will welcome a new round of reduction has once again stirred the nerves of depositors, and Xiaohui (pseudonym), who has a conservative financial concept, recently locked a 5-year fixed deposit in a joint-stock bank, although the annual interest rate is only 2.65%, which is already much higher than that of the same type of institutions.
From the reduction of interest rates on time deposits, call deposits, agreement deposits, and large-amount certificates of deposit, to the standardization of the crediting method of insurance asset management deposits, the standardization of "manual interest supplementation", to the suspension of the sale of some long-term large-value certificates of deposit, and the removal of innovative products such as smart notice deposits, the high-interest varieties of deposits are gradually "disappearing".
In the past two years, under the coordination and guidance of the market-oriented adjustment mechanism of deposit interest rates and the self-discipline mechanism of market interest rate pricing, the cost of individual retail deposits has been significantly reduced, but the cost of corporate deposits has risen instead of falling, and the "super-self-discipline" component is relatively high. A number of industry insiders interviewed by reporters believe that under the pressure of interest rate spreads, the cost of bank liabilities will continue to fall, and the deposit interest rate will continue to decline, but the new round of listed interest rate adjustment "may not be so fast".
In recent years, the market-oriented reform of interest rates has been one of the core contents of the structural reform of the financial supply side, and in the future, the transmission and linkage of interest rates from the asset side to the interest rate on the liability side will be smoother.
However, at present, the failure of monetary policy mentioned by Koo Chaoming, chief economist of Nomura Research Institute, is attracting more and more attention, and for the debt-free group, will the continued reduction of interest income exacerbate the conservative psychology of consumption and investment, thereby offsetting the effect of the low-interest policy? Some experts believe that, on the whole, the significance of lowering the deposit interest rate is to directly promote consumption and investment on the one hand, and on the other hand, to make more room for banks to support the real economy, and the so-called "side effects" are still difficult to judge.
The root of the problem is, where will depositors' money be put when deposit rates are lowered? This may be a "splashing wealth" for the asset management market and the huge wealth management market under the new asset management regulations, but it is also a huge test. Xiaohui said that she would consider "saving to move" and has already taken action, but her conservative style is difficult to change.
The deposit rivers and lakes have "changed the sky".
Recently, the news that some joint-stock banks have stopped selling medium- and long-term large-value certificates of deposit has attracted market attention. Looking at the mobile banking apps of most large state-owned banks and joint-stock banks, the most sought-after 3-year large-value certificates of deposit in the past are either empty or sold out, and 2-year products have become rare.
Another news in the deposit market is that China CITIC Bank, Ping An Bank, Everbright Bank, Guangfa Bank, Bohai Bank, Dalian Rural Commercial Bank and other banks announced that they will remove smart notice deposits in mid-to-late May. Judging from the statements of some banks, this is because of the regulatory policies introduced in May last year, and the one-year transition period has ended.
As an innovative product of traditional call deposit, smart call deposit not only achieves a higher interest rate than ordinary demand deposit and a more flexible term than fixed deposit, but also has an automatic rollover function, which used to be regarded as a great tool for banks to attract large amounts of deposits, but there is no lack of chaos in the fierce competition. In addition to call deposits, some banks have recently adjusted the interest rate of agreed deposits, and this product is also a powerful tool for the public sector.
In May last year, the self-discipline mechanism for market interest rate pricing regulated these two types of "quasi-demand" deposits, requiring banks to adjust the upper limits of interest rates on agreement deposits and call deposits, and requiring the suspension of intelligent automatic rollover of call deposits that do not require customer operation, and the stock will mature naturally. Among them, the upper limit of interest rates for state-owned banks (especially the four major banks of industry and agriculture and China Construction) and other financial institutions is 10BP and 20BP respectively.
Looking back on this year, some "hidden corners" of high-interest deposits have also been named by regulators one by one. In addition to the regulation of the inclusion method of insurance asset management deposits in individual provinces, the self-discipline mechanism for market interest rate pricing issued a document to member institutions in April, pointing out that some banks have broken through the authorized upper limit of deposit interest rates in disguise through "manual interest supplementation" and other methods, promised and paid high interest rates, greatly weakened the effect of the market-oriented adjustment mechanism of deposit interest rates, and required banks to conduct self-examination and complete rectification by the end of April.
In the eyes of industry insiders, these are all plugging the "holes" of high-interest deposits, and the main background is to protect the bank's net interest margin. Since 2022, major domestic banks have taken the initiative to reduce deposit interest rates four times, among which the one-year, two-year, three-year, and five-year fixed deposit listed interest rates of large state-owned banks have been reduced by 20BP, 50BP, 65BP, and 65BP respectively in 2023, and the listed interest rates have generally dropped to 2% and below, with the highest execution interest rate falling to about 2.35%, and the highest fixed deposit listing interest rate of joint-stock banks has also dropped to the edge of 2%, and most of the execution interest rates are not more than 2.65%.
However, the financial report data of brokerages and banks all point to the fact that the interest payment rate of retail deposits has declined significantly in the past two years, and the effect on the public is not as expected or even the interest rate has risen instead of falling, and the rigid pricing characteristics are more obvious. Judging from the direction of industry adjustment since the beginning of this year, the focus has also shifted to large-amount varieties mainly for corporate deposits, standardizing disorderly competition for high-interest deposits, and leveling the interest rates of various banks and deposits.
Taking some large state-owned banks and joint-stock banks as an example, according to incomplete statistics from the first financial reporter, the average interest payment rate of corporate deposits of the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Construction Bank, the Bank of Communications, the China Merchants Bank, Ping An and CITIC all increased compared with the previous year, among which the cost of demand deposits generally increased, while the cost of fixed deposits declined in the construction bank, postal savings and Bank of China, and the Industrial and Commercial Bank of China, the Agricultural Bank of China, the Bank of Communications, the China Merchants Bank, Ping An and CITIC all increased to varying degrees. In contrast, among the 9 sample banks, the average cost of individual fixed deposits and demand deposits decreased in 7 respectively.
The degree of marketization of interest rates has increased significantly
At present, the downward pressure on bank interest rate spreads remains severe. In 2023, the average net interest margin of China's banking sector fell to 1.69%, a decrease of 22 basis points from the end of 2022 and breaking the threshold of 1.8% in the Implementation Measures for Qualified Prudential Assessment. In addition, judging from the annual reports and first quarterly reports of listed banks, due to the relatively concentrated repricing of loans in the first quarter, although the asset-liability structure continued to be optimized and adjusted, the interest margin of many banks in the single quarter fell wider.
In the view of many industry insiders, there is no doubt that the trend of continuing to promote the steady decline of social financing costs and the continued downward trend of deposit interest rates is undoubted. But for ordinary savers like Xiaohui, they are now afraid to hear this kind of news, and they have just bid farewell to the era of 3% deposit interest rate, and now they are getting closer and closer to 2%.
Entering May, the news that a new round of deposit interest rate adjustment is coming makes Xiaohui nervous again. Looking back on 2022, the four rounds of centralized adjustment of listed interest rates of major financial institutions occurred in September, June, September and December of the following year, and the Political Bureau of the CPC Central Committee held a few days ago proposed to flexibly use policy tools such as interest rates and deposit reserve ratios to increase support for the real economy and reduce comprehensive social financing costs.
However, a number of financial industry analysts told reporters that it is the trend to continue to reduce the cost of bank debt, but a new round of listed interest rate adjustment may not come so soon. "This requires a certain 'inducement' factor, which is not so simple logic." A number of industry insiders told reporters that in the context of interest rate marketization, the adjustment of the deposit interest rate on the liability side ultimately depends on the yield on the asset side, and is also affected by other liability businesses, so it also depends on the changes in MLF (medium-term lending facility) and LPR (loan market prime rate).
The market-oriented reform of interest rates is one of the core contents of the supply-side structural reform of the financial sector. Over the past 10 years or so, the mainland's market-oriented interest rate reform has achieved remarkable results. Several rounds of interest rate adjustments since 2022 also reflect the further improvement of the marketization of deposit interest rates.
In retrospect, in 2012, the central bank allowed deposit rates to rise appropriately; In 2013, the People's Bank of China (PBOC) guided the establishment of a self-discipline mechanism for market interest rate pricing. In 2015, the People's Bank of China (PBOC) decided to no longer set a floating ceiling on deposit interest rates for commercial banks and rural cooperative financial institutions, marking the basic liberalization of administrative management of deposit interest rates. In 2019, the PBOC promoted the LPR reform, which further laid the foundation for the market-oriented reform of deposit interest rates.
By 2021, the self-discipline upper limit of the mainland deposit interest rate will be determined from multiplying the benchmark interest rate by a certain multiple, to adding points to the benchmark interest rate to eliminate the leverage effect. In April 2022, a market-oriented adjustment mechanism for deposit interest rates was established to guide members of the interest rate self-discipline mechanism to reasonably adjust the level of deposit interest rates with reference to changes in market interest rates.
A senior analyst told reporters that the current focus of banks on the reduction of debt costs is in the category of non-listed interest rates, and there is still room and necessity for adjustment in this part. In particular, since last year, the reduction of corporate activation funds and the continuous increase in long-term and high-cost fixed deposits are the main reasons for the pressure on interest margins in the banking industry.
"The reduction of the listed deposit rate will help improve the cost of retail deposits, but it will have little impact on the corporate side, and there is a relatively common 'super-self-discipline' behavior due to the difference in bargaining power." Wang Yifeng, a banking analyst at Everbright Securities, believes that due to the relatively strong bargaining power of institutional customers and large enterprise customers, commercial banks have a strong demand for the stability of core deposits due to the need for "stable deposit and increased deposit", and will provide key corporate customers with preferential interest rates with ultra-self-discipline upper limits through prior commitments and "manual interest supplements" at maturity, especially for banks with a high concentration of deposits in individual enterprises. However, the deposit interest rate of some enterprises is too high and the loan interest rate is abnormally low, resulting in an inflated balance sheet in the financial system and a precipitation of funds and idling arbitrage.
Wang Jian, a banking analyst at Guosen Securities, believes that since the beginning of 2024, due to the decline in the increment of bank credit-derived currency, the scale of new deposits has increased slightly year-on-year; At the same time, due to the increase in the allocation of financial products such as wealth management and debt base in the real sector, general deposits have been diverted, so under the pressure of a good start, banks have to increase their efforts to collect deposits, and the phenomenon of high-interest deposits (in the form of manual discounts or subsidies other than interest) has been further intensified.
Shang Hangfei, the Asset and Liability Management Department of the Postal Savings Bank, pointed out in an article in March this year that there may be three main reasons: first, the decline in loan interest rates is greater than that of deposit rates; Second, there are differences in the pace of deposit and loan repricing; Third, the trend of fixed-term deposits continues.
Shang Hangfei further pointed out that the reduction of deposit interest rates is mainly concentrated in 2023, and medium and long-term deposits may need to be gradually matured and rolled over in the next few years before they can be reflected in the current net interest margin; On the other hand, on the loan side, it is generally repriced at the beginning of the next year or on the loan disbursement date, and the repricing speed is relatively fast.
How much downside there is
Judging from the decline in loans and deposits, in December last year, the weighted average interest rate of mainland loans was 3.83%, down 0.31 percentage points year-on-year. In the first quarter of this year, the interest rate on newly issued corporate loans was 3.75 percent, down 0.22 percentage points year-on-year, and the interest rate on new personal housing loans was 3.71 percent, down 0.46 percentage points year-on-year, ending the upside down.
In the last week of April 2022, the weighted average interest rate on new deposits of financial institutions nationwide was 2.37%. According to the latest data, the weighted average interest rate of time deposits has dropped to about 2%, a decrease of about 0.3 percentage points from the same period last year.
"In order to alleviate the downward pressure on net interest margins, it is expected that deposit rates may be lowered in 2024, and in addition, banks will continue to reduce interest subsidies and fees other than interest on deposits to further reduce the hidden costs of deposits." Wang Jian made such a judgment in the research report.
Dong Dezhi, a fixed income analyst at Guosen Securities, previously said that the current policy interest rate adjustment has reflected the new ideas of monetary policy, and the deposit interest rate is expected to become an "interest rate anchor" in stages. At present, the main constraint facing the transmission of monetary policy in the mainland is to protect the net interest margin of banks while promoting a steady decline in the comprehensive financing cost of the society, which means that the deposit rate will play a more important role than the policy rate at this stage.
Zeng Gang, director of the Shanghai Finance and Development Laboratory, believes that it mainly depends on the income of the asset side, and it is difficult to generalize, but one of the criteria is when the interest rate spread will stabilize. Dong Ximiao, chief researcher of Zhaolian Financial, said that under the market-oriented adjustment mechanism, different banks have different business development positioning, asset-liability structure, marketing strategy and other aspects, and there are certain differences in the pace and intensity of deposit interest rate adjustment.
In accordance with the requirements of the market-oriented adjustment mechanism for deposit interest rates, the member banks of the self-regulatory mechanism shall reasonably adjust the deposit interest rates with reference to the bond market interest rate represented by the yield of 10-year treasury bonds and the loan market prime rate represented by the 1-year LPR.
Shang Hangfei believes that the adjustment of deposit interest rates may become a normalized policy option in the future, but the specific direction and magnitude of the adjustment may depend on factors such as the process of economic recovery and the trend of market interest rates, the growth trend of banks' net interest margins and profits, and the "price comparison effect" of investment products.
Based on the fact that the interest rate spread of the banking industry is still under pressure, Shang Hangfei judges that the current reduction in deposit interest rates may not be able to fully offset the impact of the decline in loan interest rates and the fixed deposit on the net interest income of the banking industry, and there may still be a large room for the deposit interest rate to be reduced. However, "if the mainland's economic growth improves significantly in the future, it cannot be ruled out that there may be marginal changes in monetary policy, which will affect the trend of market interest rates, and the room for deposit interest rate reduction may shrink." ”
However, the above-mentioned senior analysts believe that in addition to the deposit rate, the current focus is on the ability of banks to actively manage the cost of liabilities. Judging from the information revealed at the 2023 results briefing, many banks have focused on adjusting their assets and liabilities, especially the liability structure.
For example, the management of China Construction Bank revealed that considering that there may be some downside in the LPR on the asset side during the year, it will spend more efforts on controlling the cost of liabilities this year.
Another senior executive of the Bank of China said that the pressure on high-cost deposits will be very strong this year, including agreement deposits, structured deposits, and large-amount certificates of deposit with a maturity of more than three years. At the same time, the bank has set some reasonable growth targets, and the proportion of high-cost deposits will be appropriately controlled.
Where is the money going in the future
Regarding the space and rhythm of deposit interest rate adjustment, Shang Hangfei also indirectly mentioned the pressure of banks to collect deposits.
In his view, from the perspective of market performance, the volatility of the capital market and the attractiveness of related wealth management, funds and other products have decreased compared with the past, superimposed on the customer's investment risk appetite has decreased, deposits are "forced" to become the main product of customer hedging, and the impact of the current deposit rate reduction on the stability of bank deposits is expected to be small. Therefore, in the short term, the "price comparison effect" of various investment products may not be the main constraint to the continued reduction of deposit interest rates. If the capital market improves in the future, the attractiveness of lower-interest rate deposits will decline marginally, and the phenomenon of "deposit moving" may occur.
As a "senior" depositor with conservative financial management, Xiaohui has planned to diversify some of her savings into wealth management products, but the majority is still in fixed deposits. "The fund will not be considered for the time being, and savings insurance is optional." Xiaohui told reporters.
Judging from the data, although the deposit interest rate has dropped significantly, residents' willingness to save has not decreased significantly, and it is still standing at a high level. According to the statistics of the central bank, in the first quarter of this year, the total amount of RMB deposits in the mainland moved towards the 300 trillion yuan mark, but the pace of growth is slowing down - new RMB deposits were 11.24 trillion yuan, an increase of 4.15 trillion yuan less than the same period last year, of which household deposits and deposits of non-financial enterprises increased by about 1.3 trillion yuan and nearly 3 trillion yuan respectively year-on-year.
During the same period, the rebound in the scale of wealth management was also regarded by the market as a seesaw effect. According to statistics from CITIC Securities, the scale of wealth management in April increased by about 2.3 trillion yuan month-on-month to 28.63 trillion yuan, with a month-on-month growth rate of 8.74%. In this regard, many analysts mentioned the stabilization of wealth management income, deposit interest rate cuts, "manual interest supplement" and other high-interest savings behaviors have been prohibited, and the scale of wealth management has been expected to exceed 30 trillion yuan during the year.
However, with the changes in the trust and wealth management markets brought about by the new regulations on asset management, coupled with the poor performance of the capital market, many conservative investors like Xiaohui are more confused.
Dong Ximiao reminded that 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. In general, investors should balance the relationship between risk and return to make a comprehensive asset allocation. If you want to get a higher return, then you should take a higher risk; If you don't want to take on a higher risk, then you should accept a lower return. If investors pursue stable returns, they can appropriately allocate cash management wealth management products, money market funds, savings treasury bonds and other products in addition to deposits.
However, there are also different voices in the market about the effect of the continued decline in deposit rates, including the shortage of credit assets to increase the space for banks to buy bonds, and the debt-free group will be more conservative in consumer investment due to the reduction of interest income, thereby offsetting the effect of the low-interest policy.
In this regard, Dong Ximiao said that under normal circumstances, the decline in risk-free returns will promote consumption and investment, and the decline in deposit interest rates is conducive to making more room for banks to support the real economy. Zeng Gang believes that depositors have a variety of financial options in addition to deposits, but when banks increase credit and asset risks may increase, it is more important to maintain stable interest margins and profits, which should be viewed comprehensively. (Source丨Yicai)