Manual interest payment, smart notice deposit, medium and long-term large-amount certificate of deposit, structured deposit...... These innovative products, which were once regarded as "sharp tools" for banks to attract savings, are withdrawing from the stage of history one by one. "Now I go to the bank and don't know what to buy. The deposit products that previously guaranteed principal and interest were either tightened or removed from the shelves for rectification, and the remaining interest was too low. I was in a panic when I held the money in my hand, so I went to a bank branch near my home to find out when I had time. In mid-May, Ms. Bian, who lives in Shanghai, told the Economic Observer.
Ms. Bian has always been accustomed to going to the bank to choose the right products to preserve and increase the value of her savings. What she didn't expect was that deposit products, which had yields of 5% or even 6% in previous years, have not only dropped again and again, but also often can't grab them.
In response to the decline in net interest margins and the strengthening of liability management, banks' high-interest deposit products have gradually withdrawn from the market. In the future, what are the new ways for banks to collect deposits? What should savers do?
The High Interest Deposit product is gone
Throughout 2023, the listed deposit interest rate has experienced "three consecutive declines", and the three-year time deposit interest rate has entered the "1 era".
Recently, Ms. Bian has felt that the interest rate on fixed deposits is getting lower and lower, and banks are reluctant to let her buy a five-year fixed deposit. Moreover, the interest rate of five-year (fixed deposit) is particularly low, and there is even no difference between the interest rate of some five-year and three-year tenors. She has given up saving time in Daxing. The interest rates of joint-stock banks and city commercial banks are slightly higher, but they are also falling all the way. In the past, if the deposit amount was high, the bank would negotiate with Ms. Bian to make a private interest payment. Nowadays, the room for this type of operation is getting smaller and smaller.
Moreover, Ms. Bian found that in the past, at the end of the year, banks were vigorously pulling deposits, and there were more various marketing activities, and banks would make up interest by giving gifts and other means. However, at the end of last year, the banks' efforts to solicit deposits were far less than before, and some banks even stopped doing marketing activities.
Around the Spring Festival, Ms. Bian consulted a number of banks, but still did not find the deposit product she liked, and finally allocated a savings insurance product. In her opinion, although this product sacrifices some liquidity, the interest rate level is relatively ideal.
It is understood that initially, the bank's manual interest supplement was due to system errors, human errors or special policy adjustments, etc., resulting in the interest not being automatically calculated and recorded in accordance with the predetermined rules, and the bank would calculate, check and reissue the interest through manual intervention. However, with the increasingly fierce competition among banks, manual interest payment has gradually become one of the important means to complete the task of collecting deposits.
Li Qiang, who works as a wealth manager at a joint-stock bank, revealed that the bank's performance appraisal is under great pressure, and the bank may take out a part of the business expenses to subsidize the interest income of customers at the end of the month, quarter or year. The amount of the discount will fluctuate according to the size of the customer's deposit.
Li Qiang introduced that in the past, banks would organize some marketing activities, such as giving away interest rate hike coupons or daily necessities, etc., to give depositors additional deposit income in disguise. Some banks will also cooperate with shopping malls to give depositors corresponding mall points to redeem gifts. Some banks will choose to work with third-party intermediaries to invite depositors to join social groups, and then open a "white list" so that these customers can access hidden high-interest deposit products.
Manual interest replenishment breaks through the self-discipline upper limit of deposit interest rates, which will increase the cost of bank liabilities and lead to the intensification of disorderly competition among banks. Therefore, this kind of operation has attracted great attention from the regulatory authorities.
At the beginning of April this year, the self-discipline mechanism for market interest rate pricing issued the "Initiative", requiring banks to establish an effective management system for manual interest rate replenishment, including it in the scope of monitoring and management, and not to promise or pay customers in any form the supplementary interest rate that exceeds the upper limit of the deposit interest rate; Banks are required to immediately carry out self-inspections and complete rectification within the specified time.
In fact, in addition to manual interest payments, deposit products such as large-amount certificates of deposit, call deposits, and structured deposits, which guarantee the safety of the principal and take into account slightly higher returns, used to be the sweets in the minds of depositors, and they were also the "sharp weapons" for banks to attract deposits. Recently, the exit of these products is accelerating.
The Economic Observer noted that while the regulators stopped manual interest payments, the quota for large-denomination certificates of deposit, which focuses on "higher interest rates, higher security and flexible maturity options", has been tightened, and some banks have even directly suspended new quotas. Up to now, a number of banks, including China Merchants Bank and Minsheng Bank, have successively stopped selling three-year and five-year large-value certificate of deposit products, and have no plans for when such products will be listed. "It is no exaggeration to say that the amount of large-value certificates of deposit is more difficult to grab than the train tickets for the Spring Festival. Banks are paying less and less interest rates, and buying large certificates of deposit is not fast enough, and now I am counting on smart notice deposits and structured deposits. Unexpectedly, the bank recently issued a notice saying that the smart notice deposit will also be taken off the shelves. Ms. Bian said.
It is reported that Bank of Communications, Everbright Bank, Guangfa Bank, Bohai Bank, Bank of Xiamen and other banks have recently issued announcements to remove smart notice deposit products.
In Ms. Bian's view, smart notice deposits have both the convenience of demand deposit withdrawal and the income of fixed deposits, which meets the needs of depositors for income and liquidity. At the moment, only structured deposit products are still strong.
The so-called structured deposit is a special product between deposit and wealth management, which has both the security of deposits and the high yield of wealth management. Its essence is a financial product that invests most of the funds in fixed income products, and at the same time links a small part of the funds to financial indicators such as interest rates, exchange rates, and stock prices.
Li Qiang said that this design enables structured deposits to obtain relatively high returns while ensuring the safety of the principal. Generally speaking, if the expected rate of return on a structured deposit is between 1% and 2%, investors can basically get an intermediate rate of return. After the smart notice deposit was taken off the shelves, the number of depositors who came to the bank for consultation and purchase structured deposits increased a lot.
Behind the disappearance of high-interest deposit products
In the eyes of industry insiders, the successive withdrawal of bank high-interest deposit products is the result of the continued pressure on banks' net interest margins and liabilities.
According to the data disclosed by the State Administration of Financial Supervision and Administration a few days ago, at the end of the fourth quarter of 2023, the net interest margin of commercial banks fell below 1.7% to 1.69%. This level of net interest margin is below the "warning line" of 1.8% for the self-regulatory mechanism in the Implementation Measures for Qualified Prudential Assessment (2023 Revision).
At present, the downward trend of net interest margin continues. According to the "2023 Review and Future Outlook of China's Listed Banks" released by Ernst & Young a few days ago, in the first quarter of this year, 24 A-share listed banks disclosed net interest margin data, of which 22 continued to decline.
Jiang Han, a senior researcher at Pangu Think Tank, said in an interview with the Economic Observer that net interest margin is one of the important indicators to measure the profitability and risk level of commercial banks, and its trend is affected by the macro environment, credit cycle, monetary policy, and the trend of the loan prime rate (LPR). At the same time, it also has a certain relationship with the asset-liability structure and customer structure of each bank. When net interest margins fall to historically low levels, it means that commercial banks need to manage risks more carefully in the course of operation to ensure sound operation and sustainable development.
In this case, Jiang Han believes that strengthening the cost control of the liability side and giving up high-interest deposits has become an inevitable choice for commercial banks. In addition, regulators have seen these so-called innovations lead banks to over-pursue short-term gains and neglect long-term soundness, thereby accumulating systemic risk. Therefore, the regulatory authorities have continuously strengthened the supervision of innovative deposit products such as smart notice deposits, and at the same time set a clear tone for the removal of smart call deposits.
Zhou Maohua, an analyst at the financial market department of Everbright Bank, believes that at present, some banks have removed smart notice deposits and adjusted large-amount certificates of deposit, which is conducive to reducing the cost of bank liabilities, especially for banks with a high proportion of liabilities in products such as large-amount certificates of deposit and smart notice deposits. However, deposit products such as certificates of deposit account for a relatively low proportion of the overall liabilities of commercial banks, which has limited effect on reducing the overall cost of bank liabilities. More importantly, the removal or adjustment of relevant products by banks will help maintain the normal competition order of the deposit market and reduce the impact of high-interest deposits.
How to keep guests?
Against the backdrop of tighter regulation and lower deposit rates, the size of bank deposits has declined.
According to April financial data recently released by the People's Bank of China, RMB deposits increased by 7.32 trillion yuan in the first four months of 2024. According to data previously released by the People's Bank of China, RMB deposits increased by 11.24 trillion yuan in the first quarter. This means that RMB deposits fell by 3.92 trillion yuan in April. Among them, enterprise deposits decreased by 1.87 trillion yuan in April, a year-on-year decrease of 1.73 trillion yuan, and residents' deposits decreased by 1.85 trillion yuan, a year-on-year decrease of 650 billion yuan.
The decline in deposits has put pressure on banks. Under the compliance situation, how to replace the previous means of collecting deposits to retain depositors has become one of the difficult problems faced by banks.
Li Qiang said that recently, the bank has launched a product similar to smart notice deposit for whitelisted customers, which is also a fixed current exchange, and you can enjoy a fixed interest rate after the expiration of idle money. At present, the customer response to the product has been good. Other banks should also take action in the future, after all, no one wants to lose customers who have settled down with great difficulty.
In this case, Jiang Han analyzed that if a large number of depositors are lost, banks are also prone to liquidity risks, that is, they cannot meet the withdrawal needs of customers in a timely manner. This pressure has left banks in a dilemma. On the one hand, banks' need to reduce risk has led them to continuously reduce "innovative" deposit products. On the other hand, too low revenue has led to the loss of users, and this choice of middle degree is extremely important.
As far as the bank itself is concerned, Zhou Maohua believes that it can increase the development of wealth management, retail and other businesses in line with market demand, steadily increase the proportion of asset-light and capital-light business, enhance customer stickiness, and also facilitate the precipitation of demand deposits and reduce the cost of comprehensive liabilities; Through the application of digital technology, we can improve the efficiency of operation and management and risk capabilities, reduce costs and increase efficiency.
As for how to retain customers in the future, Jiang Han suggested that the first is to strengthen a package of services, so that banks can not only be limited to traditional deposit and loan business, but also provide more comprehensive financial services, such as wealth management, investment consulting, insurance agency, etc. By providing customers with one-stop financial services, banks increase customer stickiness and make customers more inclined to conduct a variety of financial transactions in the bank.
The second is to innovate financial products under the premise of compliance. In the era of low interest rates, banks can attract customers by innovating financial products. For example, banks can develop some low-risk wealth management products, or launch some distinctive loan products to meet the different needs of customers. In addition, banks can also use technological means, such as artificial intelligence and big data, to improve the intelligence level of financial products and provide customers with more convenient and efficient services.
The third is to improve differentiated service capabilities. Banks can provide differentiated services according to the needs and risk appetite of different customers. For example, for high-net-worth clients, banks can provide more personalized wealth management services; For young customers, provide more convenient online financial services. By providing differentiated services, banks can meet the needs of different customers, increasing customer satisfaction and loyalty.
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