A number of banks have "cut interest rates", high-interest deposits have decreased, and the industry expects that a new round of deposit interest rate cuts may be welcomed

Red Star Capital Bureau

2024-05-10 17:02Posted on the official account of Sichuan Red Star News Science and Technology Circle

Red Star Capital Bureau reported on May 10 that deposit interest rates continued to decline, large-amount certificates of deposit were "hard to find", and fixed deposits with an annual interest rate of more than 3% were almost extinct. Recently, Minsheng Bank and China Merchants Bank announced that they would stop selling large-amount certificates of deposit products with a maturity of more than half a year, and small and medium-sized banks have joined the army of deposit "interest rate cuts".

Industry insiders expect that with the decline in loan interest rates and the narrowing of banks' net interest margins, a new round of deposit interest rate cuts may be ushered in this year.

资料图 据IC photo

Reduction in high-interest deposits

Deposit rates continue to fall

"At present, the interest rate of a 5-year time deposit with a minimum deposit of 10,000 yuan is 2.40%, a decrease of 30 basis points from the end of last year, and the interest rate on a 30,000-year time deposit with a minimum deposit of 30,000 yuan is 2.60%." A financial manager of Bank of Jiangsu introduced.

The Bank of Guangzhou's "Ruyi Deposit" interest rate has also been lowered. The product was launched in February, and "the current 2-year, 3-year, and 5-year 'Ruyi Deposit' deposit rates are 2.20%, 2.65%, and 2.65% respectively, down 30, 20, and 25 basis points respectively from the end of last year." The financial manager introduced.

Since April, the listed interest rates of many small and medium-sized banks have been adjusted.

Bank of Guilin announced that from May 8, the annual interest rate of individual lump sum deposit and withdrawal of 5-year deposits will be adjusted to 2.8%, which is 40 basis points lower than the adjusted implementation rate of the term product in February. Since the beginning of this year, Bank of Guilin has adjusted the interest rate of time deposit products three times.

In April, the system-wide deposit execution interest rate of Qinghai Rural Commercial Bank (Rural Credit Cooperative) was adjusted, of which the execution interest rate of 3-year and 5-year time deposits was reduced by 25 and 70 basis points to 2.50% and 2.55% respectively; Guangxi Pingnan Guiyin Village Bank has lowered the interest rate on five-year time deposits by 40 basis points to 2.80% since May 8.

It is worth mentioning that recently, some banks' call deposit products have also ushered in adjustments. A number of small and medium-sized banks, such as Ping An Bank, Bohai Bank, Guangfa Bank and Dalian Rural Commercial Bank, announced that they would cancel the automatic rollover function of their call deposit products, or directly remove smart call deposit products. China Everbright Bank also announced a few days ago that it will adjust the RMB agreement deposit interest rate to 1.15%, and at the same time stop the automatic rollover function of corporate smart deposits.

In fact, as early as May last year, a number of banks, including large state-owned banks and joint-stock banks, have removed smart call deposit products from the shelves, or lowered the upper limit of call deposit interest rates. Looking back, in September 2022, major state-owned banks took the lead in lowering the listed interest rates on deposits, kicking off the prelude to the "interest rate cut" on deposits. So far, the deposit interest rate has gone through four rounds of reductions, usually the large state-owned banks are the first to cut them, and the joint-stock banks and small and medium-sized banks have followed up to adjust the deposit interest rates in "echelon" rotation.

The challenges posed by the regularization of deposits

Behind the decline in high-interest deposits is the "difficult scripture" of bank liability management.

At present, the lending rate is at a historically low level, and under the downward pressure of asset-side pricing, banks need to start to "reduce the burden" from the liability side, so as to ensure their long-term ability to serve the real economy.

"As the most important source of funds for banks, deposits have a profound impact on banks' costs and asset-liability management." Li Yifan, a postdoctoral fellow at the Bank of China Research Institute, said that to strengthen the ability of active liability management, banks should grasp the relationship between the scale, pricing and efficiency of the deposit business, as well as the appropriate ratio of time deposits and demand deposits, corporate deposits and individual deposits, and optimize the balance of assets and liabilities by constantly adjusting the deposit structure.

At present, the trend of fixed-term deposits is the main feature of the liability side of banks - long-term, high-cost fixed deposits continue to increase, but the activated funds of enterprises are decreasing, which directly pushes up the deposit interest payment ratio of banks and makes the pressure on the liability side increasing. Although the interest rate on deposits has fallen, residents' willingness to save has not decreased. Statistics from the People's Bank of China show that RMB deposits increased by 11.24 trillion yuan in the first quarter of this year, of which household deposits increased by 8.56 trillion yuan.

The dual pressures on both sides of the deposit and loan ends are directly reflected in the net interest margin. According to the data, the net interest margin of commercial banks has fallen to a record low of 1.69% by the end of 2023, which is below the level agreed by regulators. Among the 42 listed banks, only Bank of Qingdao will have a wider net interest margin in 2023, while the net interest margin of the remaining 41 listed banks will all narrow, with the largest decline of more than 40 basis points.

"The cost of core liabilities in the banking system is still high, showing certain rigid characteristics." Wang Yifeng, chief analyst of the financial industry at Everbright Securities, believes that the deposit interest rate cut has a certain effect on the cost of retail deposits, but for institutional customers and large enterprise customers with relatively strong bargaining power, the phenomenon of "super self-discipline" is widespread, and the reduction of the deposit listing rate is difficult to have a significant impact on this type of deposit. The large-scale "manual interest supplement" has pushed up the interest payment rate of deposits, and the situation is expected to improve after this phenomenon is regulated.

Industry insiders: It is expected that there will be multiple rounds of cuts in deposit rates this year

In order to alleviate the pressure on interest margins, a number of bank executives said that they will continue to reduce high-cost deposits and control the cost of debt. The management of Bank of China made it clear at the previous performance briefing that it will increase the pressure on high-cost deposits this year, including agreement deposits, structured deposits and large-denomination certificates of deposit with a maturity of more than three years.

At the same time, the market generally expects that there is room for further reductions in deposit rates. It is the consensus of all parties to lower the deposit interest rate and reduce the cost of bank liabilities. At the same time, the Politburo meeting held at the end of April once again mentioned the interest rate and reserve ratio policies, and the market has certain expectations for interest rate cuts and RRR cuts.

Xiao Yu, an analyst at Zhongtai Securities, said that on the one hand, considering that half of the listed banks and the overall net interest margin of commercial banks has been lower than 1.8%, some banks must find ways to increase loan interest rates or reduce deposit interest rates to expand net interest margins, and the latter is obviously more likely at present. On the other hand, some small and medium-sized banks have launched a "price war" in order to attract savings, resulting in high deposit interest rates, and the net interest margin of rural commercial banks is at a high level, and there is still room for decline.

Wang Jian, chief analyst of the financial industry at Guosen Securities, predicts that in order to alleviate the downward pressure on net interest margins, it is expected that the deposit interest rate may be lowered in 2024.

At the specific time, Zhongrong Huixin Futures Research Report said that the market expects that in the first half of 2024, large state-owned banks and joint-stock banks may usher in the first round of deposit "interest rate cuts" this year, with a reduction of 10 basis points to 15 basis points.

Edited by Yu Dongmei from Shanghai Securities News and China Securities Journal

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