Keeping money in the bank is the choice of most residents, and the deposit interest rate is also a topic of great concern to everyone. In recent years, bank deposit interest rates have been declining, taking the listed interest rates of the four major banks as an example.
2022.09.15-2023.06.07：
1. Current interest rate: 0.25%.
2. Fixed deposits
(1) Lump sum deposit: 1.25% for three months, 1.45% for half a year, 1.65% for one year, 2.15% for two years, 2.6% for three years, and 2.65% for five years.
(2) Lump sum deposit, lump sum deposit and interest withdrawal: 1.25% for one year, 1.45% for three years, and 1.45% for five years.
2023.06.08-2023.08.31：
1. Current interest rate: 0.2%.
2. Fixed deposits
(1) Lump sum deposit: 1.25% for three months, 1.45% for half a year, 1.65% for one year, 2.05% for two years, 2.45% for three years, and 2.5% for five years.
(2) Lump sum deposit, lump sum deposit and interest withdrawal: 1.25% for one year, 1.45% for three years, and 1.45% for five years.
2023.09.01-2023.12.21：
1. Current interest rate: 0.20%.
2. Fixed deposits
(1) Lump sum deposit: 1.25% for three months, 1.45% for half a year, 1.55% for one year, 1.85% for two years, 2.20% for three years, and 2.25% for five years.
(2) Lump sum deposit, lump sum deposit and interest withdrawal: 1.25% for one year, 1.45% for three years, and 1.45% for five years.
2023.12.22-2024.05.11：
1. Current interest rate: 0.20%.
2. Fixed deposits
(1) Lump sum deposit: 1.15% for three months, 1.35% for half a year, 1.45% for one year, 1.65% for two years, 1.95% for three years, and 2.0% for five years.
(2) Lump sum deposit, lump sum deposit and interest on principal deposit: 1.15% for one year, 1.35% for three years, and 1.35% for five years.
It is clear that the interest rate on bank deposits is on a downward trend. The interest rate on five-year deposits is not much different from the interest rate on three-year deposits, which means that banks are less willing to absorb long-term savings and are unwilling to pay higher costs for long-term deposits.
In addition, the variety of long-term deposits has also been decreasing, with many banks suspending the issuance of three-year and five-year certificates of deposit, and most of them have a deposit period of less than two years.
For example, in 2024, only ICBC will issue large-denomination certificates of deposit products sold by the four major banks with a five-year term. Bank of China only issued products with maturities of two years or less. In April 2024, China Merchants Bank announced that it would stop issuing 3-year and 5-year large-denomination certificate of deposit products, mainly providing customers with large-denomination certificate of deposit products with a maturity of less than 3 years.
As you can see, high-interest deposits are gradually disappearing.
Why does the interest rate on deposits continue to fall?
This is mainly due to the continuous narrowing of banks' net interest margins, which are under pressure in the banking sector.
According to the data of the 2023 annual report and the first quarter report of 2024 of A-share listed banks, as of the end of 2023, among the 42 listed banks, only Bank of Qingdao has achieved an increase in net interest margin, with an increase of only 0.07 percentage points.
Compared with the increase, the interest margin of many banks fell by a staggering amount: Ruifeng Bank led the decline with a decline of 0.48 percentage points, Industrial and Commercial Bank of China, China Construction Bank and Agricultural Bank of China also fell by more than 0.3 percentage points, and more than half of the banks' net interest margins fell by more than 0.2 percentage points. Bank of Communications and Bank of Xiamen tied for the lowest net interest margin at 1.28%.
This narrowing trend continued in the first quarter of 2024, with 23 of the 25 banks that disclosed their Q1 net interest margins (annualized) values continuing to narrow. As banks' net interest margins continue to decline, bank cuts in deposit rates will help ease the pressure on the liability side.
Drivers for the continued adjustment of deposit rates include:
1. In the context of financial support entities, loan interest rates have fallen significantly, but banks' debt costs have remained relatively rigid, and interest margins have continued to compress, increasing operating pressure. Considering that the reduction of the interest rate on existing mortgage loans will further depress the profit margins of banks, it is difficult for the current adjustment of deposit interest rates to fully offset the impact of the adjustment of loan interest rates.
2. The trend of fixed-term deposits is becoming more and more obvious, and the pricing of long-term deposits and some special deposit products is on the high side.
3. Commercial banks have enhanced their active liability management capabilities, and it is expected that deposit interest rates will also be adjusted along with the downward trend of interest rates on financial bonds, interbank certificates of deposit and other products under the process of marketization.
So, where will everyone's money go in the future?
1. In the short term, residents' willingness is still dominated by deposits
Although deposit interest rates have been lowered in recent years, deposit returns have decreased significantly, but because of the safety of deposits, capital and interest protection, it is still the choice of most investors. Most customers have reduced their investment risk appetite, and deposits are still the main hedging products, and the impact of the reduction of deposit interest rates on the stability of bank deposits is expected to be small at this stage.
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. The new RMB deposits were 11.24 trillion yuan, a decrease of 4.15 trillion yuan over 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.
2. Treasury bonds
Treasury bonds are guaranteed by national credit and can be called a risk-free interest rate product, which has always been a popular product for residents to invest, especially savings treasury bonds, which have a limited issuance quota per issue and have always needed to be snapped up.
From the point of view of interest, the interest rate of treasury bonds is a little higher than that of large-amount certificates of deposit and fixed deposits.
For example, on May 10, 2024, the interest rate of savings bonds will be 2.38% for the three-year and 2.5% for the five-year bond.
The listed interest rate of the four major banks is 1.95% for three years and 2.00% for five years. The upgraded interest rate is 2.35% for three years and 2.40% for five years.
ICBC interest rate on large certificates of deposit: 200,000 deposits, 2.35% for three years and 2.40% for five years.
In addition, from the point of view of capital flexibility, government bonds are also more flexible. The interest rate is calculated at the current interest rate for the early withdrawal of personal large-amount certificates of deposit and fixed deposits, and the current interest rate is about 0.2%, and the interest lost is very large. On the other hand, savings bonds will accrue interest in stages according to the holding period, and the interest lost in early withdrawal is relatively small. Book-entry treasury bonds can be bought and sold at any time for cash, and the liquidity of funds is higher.
However, in recent years, the interest rate on treasury bonds has also been declining, so it will not make everyone give up their deposits to buy treasury bonds, and the limited issuance of treasury bonds will have a limited impact on the deposit market.
3. Repay the loan
In the context of declining interest rates, the most discussed is prepayment, including housing loans, car loans, etc. Instead of putting your savings in a bank at a low interest rate, it is better to take the initiative to repay a loan with a high interest rate.
4. Bank wealth management products and public funds
After the interest rate cut, there will be many investors who pursue a certain income to turn their bank deposits to places with higher returns, but on the whole, they will mainly focus on stable investment, mainly turning to low-risk wealth management products and public fund products of banks.