CFIC Introduction
The major state-owned banks have once again joined hands to cut deposit rates. Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank, Bank of China, Bank of Communications, and Postal Savings Bank collectively lowered the interest rate on deposits, all of which lowered the interest rate on demand deposits by 5 basis points to 0.1%, and the interest rate on time deposits by 25 basis points. Among the joint-stock banks, China Merchants Bank took the lead in following up, and the deposit interest rates of each term were consistent with those of the major state-owned banks.
Original title: A new round of deposit interest rate cuts kicked off The six major banks collectively lowered deposit interest rates after three months, and the major state-owned banks once again joined hands to lower deposit interest rates. On October 18, Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank, Bank of China, Bank of Communications, and Postal Savings Bank collectively lowered the interest rate on deposits, all of which lowered the interest rate on demand deposits by 5 basis points to 0.1%, and the interest rate on time deposits by 25 basis points. Among the joint-stock banks, China Merchants Bank took the lead in following up, and the deposit interest rates of each term were consistent with those of the major state-owned banks. "The amplitude is increasing and the frequency is accelerating", is the industry's unanimous evaluation of the deposit interest rate cut. Industry insiders believe that the decline in deposit interest rates will help banks and financial institutions further reduce the comprehensive financing cost of the real economy and ease the burden of interest expenses on weak links and enterprises in key emerging areas. Specifically, the six major state-owned banks lowered their deposit rates by 5 basis points to 0.1%, 7-day call deposits by 25 basis points to 0.45%, agreement deposits by 40 basis points to 0.2%, and time deposits by 25 basis points. Except for the Postal Savings Bank, the interest rates on three-month, half-year, one-year, two-year, three-year and five-year deposits (lump sum deposits and withdrawals) of the other five major state-owned banks are 0.80%, 1.00%, 1.10%, 1.20%, 1.50% and 1.55% respectively. Due to the relatively high interest rates of some fixed deposits of the Postal Savings Bank, after the 25 basis points reduction, the listed interest rates of half-year and one-year deposits are slightly higher than those of the other five major banks, at 1.01% and 1.13% respectively, while the listed interest rates of deposits of other maturities are consistent with those of the other five major banks. China Merchants Bank and major state-owned banks have kept the same pace, and the deposit interest rates of all maturities are consistent with those of the five major banks of industry, agriculture, construction, and CCCC. "The fixed deposit interest rate was lowered by 25 basis points, which has increased significantly, mainly because the central bank has cut interest rates more than expected, and the market interest rate has remained low, creating favorable conditions for the bank to cut the deposit interest rate." Zhou Maohua, an analyst at the financial market department of Everbright Bank, believes that the collective reduction of the deposit interest rates of the six major banks and China Merchants Bank indicates that a new round of deposit interest rate cuts has begun, and small and medium-sized banks are expected to follow up in the future. A financial director of a joint-stock bank told reporters that the bank will soon follow up with its peers to reduce the deposit interest rate. It will help alleviate the pressure on banks' net interest margins, and the market has certain expectations for the reduction of deposit interest rates. Thanks to the decline in policy rates, there is room for deposit rate reductions, which are also expected to offset the impact of interest rate cuts on existing housing loans on net interest margins. "The main reason for the reduction of the deposit interest rate is that there is a structural imbalance in the deposit market, banks are generally facing net interest margin pressure, and the market interest rate center has moved downward." Zhou Maohua believes that the reasonable adjustment of deposit interest rates by banks will help alleviate the pressure on banks' overall debt costs and net interest margins, and enhance banks' profitability and operational soundness. For a period of time, residents' willingness to save has been relatively strong, which has also made the cost of bank liabilities remain high, and there is a strong need to expand and stabilize interest margins. According to the latest data from the State Administration of Financial Regulation, the net interest margin of commercial banks in the first half of this year was 1.54%, which has fallen to a historical low. Li Yifan, a researcher at the Bank of China Research Institute, told reporters that after three months, the bank adjusted the deposit interest rate again, to a certain extent, in response to the recent downward trend in policy interest rates, which can alleviate the pressure on the cost and interest margin of the bank's liabilities, consolidate the foundation for sustainable operation, and make room for the bank to further reduce the loan interest rate in the weak links, key and emerging areas of the real economy, demonstrating its responsibility to support the real economy. In the future, banks need to continue to actively optimize liability management, reasonably adjust the scale of high-cost time deposits, and take into account the sustainable development of serving the real economy and their own operations. Recently, the phenomenon of "deposit moving" has risen. A person from a major state-owned bank said that before the National Day, bank-securities transfers were more active, and the phenomenon of deposits flowing into the stock market was more obvious, but it has recently returned. It is expected that after this cut in deposit rates, the outflow of deposits from banks may accelerate. The decline in deposit rates will also lead to a further decline in lending rates. On the 18th, Pan Gongsheng, governor of the People's Bank of China, said at the 2024 Financial Street Forum annual meeting that on the morning of the 18th, commercial banks have announced a reduction in deposit rates, and it is expected that the loan market quotation rate (LPR) announced on the 21st will also fall by 0.2 to 0.25 percentage points. "We expect LPR quotations for the two maturities to follow the policy rate by 20 basis points on October 21." Wang Qing, chief macro analyst of Oriental Jincheng, believes that the interest rate on loans to enterprises and residents will be lowered more sharply in the future. According to the market-based adjustment mechanism of the deposit interest rate, the deposit rate is linked to the 1-year LPR quotation and the 10-year treasury bond yield. There is a deeper impact of the fall in deposit rates. Zhou Maohua said that through a reasonable reduction of deposit interest rates and the gradual recovery of financial market sentiment, the imbalance in the structure of the deposit market is expected to be alleviated, and then a certain consumption effect will be produced. At the same time, with the decline in deposit interest rates, banks and financial institutions can further reduce the comprehensive financing costs of the real economy, especially alleviate the burden of interest expenses on enterprises in weak links and key emerging areas, and promote investment and economic recovery.
Source of this article: Shanghai Securities News
Reporter: Ma Min
WeChat editor: Liu Sile
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