On May 20, the People's Bank of China authorized the National Interbank Lending Center to announce that the loan market prime rate (LPR) on May 20, 2024 will be 3.45% for 1-year LPR and 3.95% for LPR over 5 years. Both quotations were unchanged from the previous month.
Since the sharp 25 basis point reduction in the LPR for more than 5 years in February this year, the LPR has maintained this quotation for three consecutive months. In the opinion of analysts, the MLF interest rate has not changed, the net interest margin of banks continues to be under pressure, the prevention of capital idling, and the boost of the property market policy have all constituted the influencing factors for the LPR to remain unchanged this month. Looking ahead, the conditions for the implementation of policy interest rate cuts are also gradually accumulating, and deposit interest rate cuts will open up some downside space for subsequent LPR quotations.
Air defense rotation and improve efficiency
Previously, in order to maintain reasonable and sufficient liquidity in the banking system, the People's Bank of China launched a 2 billion yuan open market reverse repurchase operation and a 125 billion yuan MLF operation on May 15, with the winning interest rates of 1.8% and 2.5% respectively, both of which were the same as before.
On the one hand, the MLF interest rate remained unchanged in May, and the pricing basis of LPR quotations remained unchanged. "The LPR is added on the basis of the one-year MLF interest rate, and the MLF interest rate has not changed this month, and the LPR is not moving, which is in line with expectations." Dong Ximiao, chief researcher of Zhaolian, explained.
Image source: People's Bank of China
On the other hand, lending rates continued to decline, and banks' net interest margins continued to be under pressure, which affected the room for LPR quotations to be lowered. Since the beginning of the year, behaviors such as "manual interest supplementation" and high-interest interest solicitation have disrupted market order, the interest rate center of loans and long-term bonds has dropped significantly, and competition in the deposit market has intensified. In the first quarter of 2024, the weighted average net interest margin of major listed banks was 1.57%, narrowing by 13bp year-on-year.
Since April, the regulator's suspension of "manual interest supplementation" and high-interest savings has played a role in improving the cost of bank liabilities. However, according to Wen Bin, chief economist of China Minsheng Bank, this process is relatively slow, and it may take until the end of the second quarter to have more obvious results. During this period, loan interest rates are still falling, especially the downward pressure on the residential side is still large, and the net interest margin of banks continues to be under pressure.
According to the data, in April, the weighted average interest rate of new loans issued by enterprises was 3.76%, basically the same as the end of last month and 23 basis points lower than the same period last year; The interest rate on new loans for individual housing was 3.7%, 2 basis points lower than the previous month and 48 basis points lower than the same period last year, both at historical lows. Against this backdrop, the room for banks to further reduce the LPR is also shrinking significantly.
In addition, Wen Bin pointed out that the current part of the credit interest rate has been low, and the LPR quotation remains unchanged, which also aims to alleviate the idling arbitrage behavior caused by the rapid decline of loan interest rates and improve the efficiency of capital operation. With the acceleration of economic restructuring, transformation and upgrading on the mainland, the economy has become lighter, and the demand for credit has weakened compared with previous years. However, under the scale complex of some financial institutions, credit supply exceeds the effective financing demand of the real economy, which in turn promotes the continuous decline of loan interest rates.
As Zou Lan, director of the Monetary Policy Department of the People's Bank of China, said at the press conference of the State Council Information Office on April 18, some enterprises use the money raised from low-cost loans to buy financial management, deposit time or re-lend to other enterprises. Therefore, the LPR quotation remains unchanged, precisely for the sake of anti-rotation and efficiency.
The room for the reduction of housing loan interest rates has been further opened
LPR with a term of more than 5 years is related to the interest rate of residential housing loans, and a number of favorable policies have been introduced in the field of personal housing loans recently.
After the LPR with a maturity of more than 5 years was sharply reduced by 25 basis points in February, on May 17, the People's Bank of China (PBoC) launched a series of policy "combinations", including the cancellation of the lower limit of the personal housing loan interest rate policy at the national level to realize the marketization of housing loan interest rates; The interest rate of housing provident fund loans of various maturities will be lowered by 0.25 percentage points, and the minimum down payment ratio of individual housing loans will be lowered at the national level, and the lower limit of down payment for first and second houses will be lowered from the previous 20% and 30% to 15% and 25% respectively.
In addition, the People's Bank of China also announced the establishment of a 300 billion yuan affordable housing re-loan with an interest rate of 1.75% to help local governments promote the work of "collection and storage - destocking". At the same time, we should further give full play to the role of the coordination mechanism for urban real estate financing, and the "white list" should be fully advanced and loaned, so as to promote the work of ensuring the delivery of buildings.
Wen Bin said that the collective release of blockbuster policies in the real estate industry, and the further opening of room for the reduction of housing loan interest rates, will help stabilize real estate from both sides of supply and demand, boost confidence and demand, and also make it less urgent and necessary to take care of real estate by reducing LPR again.
On the contrary, the cancellation of the lower limit of the mortgage interest rate also shows that the People's Bank of China attaches great importance to and actively supports the housing loan policy. "This also shows that the mortgage side is more encouraged to reduce costs, and it will also help to further promote the reduction of mortgage interest rates." Yan Yuejin, research director of the E-House Research Institute, commented.
Dong Ximiao also pointed out that a series of property market policies stabilize residents' confidence and expectations, improve residents' willingness and ability to consume housing, support the real estate market from the demand side, and promote the steady and healthy development of the real estate market, which is also a reflection of the flexible, moderate, accurate and powerful monetary policy.
The conditions for the implementation of policy interest rate cuts are gradually accumulating
Although this month's interest rate cut failed, in the opinion of analysts, combined with internal and external factors, the implementation conditions for policy interest rate cuts are gradually accumulating, and deposit interest rate cuts have opened up a certain downside space for subsequent LPR quotations.
In Wen Bin's view, since April, the bank side has implicitly implemented deposit interest rate cuts by suspending the "manual interest supplement", stopping the sale of smart notice deposits, and some banks suspending the sale of long-term certificates of deposit under quota restrictions, etc., to alleviate the pressure on the liability side caused by the continued high cost of corporate deposits and the regularization of deposits, and open up a certain downside space for subsequent LPR quotations.
At the press conference of the State Council Information Office held on March 21, the People's Bank of China (PBoC) said that "the decline in deposit costs and the shift in monetary policy of major economies are conducive to broadening the autonomy of interest rate policy operations." Looking ahead, Wen Bin pointed out that the Fed's expectation of interest rate cuts has increased, and the pressure to stabilize the exchange rate has been reduced compared with the previous period; Under the constraint of super-self-disciplined deposits, there is a strong certainty that the deposit cost will be significantly reduced during the year. In this context, if the recovery of prices and the recovery of endogenous financing demand are still not optimistic, it is necessary to further reduce the actual financing cost, thereby increasing the probability of reducing the policy rate and LPR quotations.
Dong Ximiao said that judging from the financial data in April, the lack of effective financing demand of the residential sector is a prominent problem. In the next step, the real estate financial policy should be further optimized to stabilize residents' housing consumption expectations; At the same time, we will continue to implement policies such as tax exemption and exemption for new energy vehicles and "trade-in" for consumer goods, and vigorously boost residents' willingness and ability to consume.
Beijing Business Daily reporter Yue Pinyu Dong Hanxuan