Deposits "fall out of favor"? In April, new deposits decreased by nearly 4 trillion yuan, quietly flowing into the wealth management market

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On May 11, the People's Bank of China (PBoC) released the April 2024 Financial Statistics Report. According to the data, the mainland's RMB deposits increased by 7.32 trillion yuan in the first four months. Compared with the March data released by the People's Bank of China, the mainland's RMB deposits in April decreased by 3.92 trillion yuan.

This is in stark contrast to the previous market's preference for a sharp rise in bank deposits. Since the beginning of 2022, due to market volatility, low-volatility and stable bank deposits have become the first choice for institutional and individual investors. From 2022 to 2023, the new increase in deposits for the whole year reached 26.26 trillion yuan and 25.74 trillion yuan, respectively.

Under the influence of the decline in new deposits, the year-on-year growth rate of broad money (M2) and narrow money (M1) on the mainland also showed a downward trend at the end of April.

A number of industry insiders said that in the near future, deposits have been "diverted" to the financial market, and residents' enthusiasm for buying wealth management products has rebounded. However, there is no need to worry about the shortage of money supply in the market, and industry insiders expect the growth rate of money supply to stabilize in the coming months.

The bond market is active and money is quietly flowing into the financial markets

"Since the beginning of this year, the wealth management market has gradually become active, and I can clearly feel that more and more funds are returning." Recently, an insider of a wealth management subsidiary of a joint-stock bank told the Shell financial reporter that under the combined effect of the recent market performance and the decline in bank deposit interest rates, the amount of funds of both individual customers and institutional customers has increased.

Is the deposit really not fragrant? Some investors told the Shell financial reporter that the interest rate on bank deposits has fallen again and again, and there are fewer and fewer large-amount certificate of deposit products with higher interest rates in the past. This also made her have to "switch" to bank wealth management and other products to continue financial management.

In fact, new bank deposits reached about 4 trillion yuan in April. Many industry insiders believe that this is similar to the reverse process of the bond market adjustment at the end of 2022. At that time, it was deposits that "flowed back" to banks, and now bank deposits are "diverted" to the financial markets. Since the beginning of the year, the bond market has been bullish to boost the yield of asset management products such as wealth management, and bank deposits have been diverted to wealth management.

Dong Ximiao, chief researcher of Zhaolian, believes that with the recent recovery of the wealth management market and the rise in investment yields, residents' enthusiasm for purchasing wealth management products has rebounded, and residents' deposits have accelerated their transformation into wealth management products. According to data, the scale of wealth management products increased by about 2 trillion yuan month-on-month in April.

According to data released by China Merchants Securities, the asset shortage will intensify significantly in 2024, and bond yields have fallen sharply since December 2023. In March, the bond market was volatile, and the average semi-monthly annualized yields of fixed fixed income, fixed fixed income + and fixed income during the holding period in the second half of March were 2.5%, 2.8% and 2.4% respectively, a slight rebound from the first half of the month.

The People's Bank of China (PBoC) also pointed out in the recently released "First Quarter Monetary Policy Implementation Report" that the rate of return of various assets such as on-balance sheet deposits and off-balance sheet managed products will change among each other, which will affect residents' risk appetite and investment behavior, and residents will adjust their asset allocation accordingly, which is also an important factor affecting the proportion of residents' deposits.

For corporate deposits, Zhang Yu, chief macro analyst of Huachuang Securities, added that with the rise in bond prices, the yield on investment in related wealth management products has risen, and the situation of corporate demand deposits "moving" to wealth management is also more obvious.

It is worth noting that due to the large volatility of the bond market in April and the obvious adjustment in the second half of the month, the yield of fixed income wealth management fell in the second half of April. At the same time, the People's Bank of China (PBoC) has repeatedly warned of the risks in the bond market, and the yield on 10-year treasury bonds has risen since late April, resulting in fluctuations in wealth management yields and a decline in attractiveness. Some people in the industry pointed out that there have been some signs of financial management returning deposits in recent days.

Banks are actively reducing their high-interest liabilities

In the view of many industry insiders interviewed, the decline in the scale of new bank deposits is not unexpected. Since last year, the financial regulatory authorities have been guiding banks to standardize deposit products, reduce the scale of high-interest deposits, and reduce deposit interest rates several times to reduce the cost of bank liabilities, thereby reducing the pressure on bank interest margins, which will help keep the real financing costs of the real economy at a low level.

Recently, more and more banks have suspended long-term large-value certificates of deposit products and removed smart notice deposits, and some banks have further controlled the quota of long-term ordinary time deposit products. Many small and medium-sized banks continue to cut deposit rates.

At the same time, the financial regulators are also guiding banks to "squeeze out" the "water" of irregular high-interest deposits.

Zhang Yu said that recently, many departments have increased the standardization of the phenomenon of "low loan and high deposit" idling arbitrage of funds, and manual interest payment by banks, and a considerable part of the inflated and non-standard deposits and loans in the past have decreased, and there is a "squeeze" effect in the short term.

"However, the demand of financial institutions for an effective real economy is still fully satisfied, and the financial aggregate supports the economy more effectively and efficiently." Zhang Yu said that this is not only a manifestation of high-quality financial development, but also can promote the main business entity to base itself on the main business and avoid the precipitation of funds and idling.

M1M2 growth rate both fell The growth rate of money supply will stabilize in the next few months

The decline in new deposits in April, in the view of many industry insiders, has also become an important reason for the decline in the growth rate of M2 and M1 in April.

According to the data released by the People's Bank of China, the year-on-year growth rates of M2 and M1 at the end of April were 7.2% and -1.4%, down 1 percentage point and 2.5 percentage points respectively from the end of March, and the growth rates of both were at historical lows.

M1 is the sum of cash in circulation and demand deposits in banks. Among them, demand deposits mainly refer to corporate demand deposits. On the other hand, M2 is based on M1, plus the fixed deposits of government agencies, organizations, troops, enterprises and institutions in banks, savings deposits of urban and rural residents, foreign currency deposits and trust deposits. Therefore, in the view of many industry insiders, the "moving" of corporate demand deposits will have an impact on the growth rate of M1; The "diversion" of deposits to the financial market has caused a decline in M2 growth.

Regarding the decline in the growth rate of M1 and M2, Wen Bin, chief economist of Minsheng Bank, also pointed out that this is also related to the optimization of value-added accounting in the financial industry. At present, the motivation of individual local governments to increase the added value of finance through the expansion of deposits and loans has weakened significantly.

It is understood that since the first quarter of this year, the Bureau of Statistics has revised it to refer to indicators such as net interest income, fee and commission income, which can more objectively reflect the contribution of the financial industry to the real economy and be more connected with the annual accounting data. However, Zhang Yu believes that efficient enterprises that really need funds will get more financing, and financial support for the real economy has not weakened.

Will a decline in M2 growth lead to a shortage of money supply? In this regard, the People's Bank of China has pointed out in the "First Quarter Monetary Policy Implementation Report" that the current money stock is already quite large. With the recovery of effective demand, the improvement of social expectations, the efficiency of capital turnover has improved, and the phenomenon of capital precipitation is also alleviating. The growth of the huge monetary aggregate may slow down, which does not mean that the strength of financial support for the real economy is weakened, but rather a reflection of the improvement of the quality and efficiency of financial support.

Many industry insiders expect the growth rate of money supply to stabilize in the coming months.

Wen Bin believes that in the next few months, with the gradual improvement of the financing demand of the real economy, the acceleration of government financing and the gradual return of the bond market to the fundamental logic, the growth rate of money supply should stabilize.

Zhang Yu also said that the current economic operation of positive factors has increased, the momentum continues to increase, the economic recovery trend is obvious, and the financing needs in the fields of scientific and technological innovation, green development, and inclusive small and micro enterprises will also be more visible. At the same time, the countercyclical adjustment of fiscal policy will gradually accumulate strength, issue and make good use of ultra-long-term treasury bonds as soon as possible, and accelerate the issuance and use of special bonds, which will also support the growth of monetary aggregates.

Beijing News Shell Financial Reporter Jiang Fan

Edited by Wang Jinyu

Proofreading Fu Chunshu