Certificates of deposit with large amounts that are hard to find

China Economic Weekly

2024-05-30 15:34Published on the official account of China Economic Weekly in Beijing

"China Economic Weekly" reporter Zhang Yan

In May, several more banks announced cuts in deposit rates.

Since September 2022, when major state-owned banks took the lead in lowering the listed deposit interest rate, the deposit interest rate has gone through several rounds of reduction. As more and more banks join the army of "interest rate cuts" on deposits, large-denomination certificates of deposit have begun to be "hard to find", and it is becoming more and more difficult to find large-denomination certificates of deposit with an annual interest rate of more than 3% in the market.

Recently, Minsheng Bank and China Merchants Bank announced that they would stop selling large-amount certificates of deposit products with a maturity of more than half a year, and high-interest savings tools such as manual interest supplements, call deposits, and medium and long-term large-amount certificates of deposit have also ushered in adjustments.

Deposit interest rates have fallen again and again, and the former "savings weapon" has been frequently removed from the shelves

At the beginning of May, Bank of Guilin announced the adjustment of the implementation interest rate of some deposit products, among which the annual interest rate of individual lump sum deposit and lump sum deposit 5-year deposit was adjusted to 2.8%, which is also the third time that Bank of Guilin has adjusted the interest rate of time deposit products this year. Coincidentally, following the adjustment of the deposit interest rate in January, Harbin Bank also adjusted the deposit interest rate again, with the interest rate on the 3-year lump sum deposit and withdrawal being lowered from 2.25% to 2.05%, and the interest rate on the 5-year lump sum deposit and withdrawal from 2.3% to 2.0%.

For Ms. Hu, who prefers low-risk investments, large certificates of deposit with considerable interest and good liquidity have always been favored by her. As she gets closer and closer to retirement, the interest on large certificates of deposit has been planned as her main source of income after retirement.

"Three years ago, the interest rate was still 3.85%. Earlier, the interest rate on large certificates of deposit had remained above 4%. At present, large certificates of deposit with interest rates of more than 2.5% are simply rare. Ms. Hu showed the reporter of China Economic Weekly two large-denomination certificates of deposit in China Construction Bank and Industrial and Commercial Bank of China. At the interest rate of 3.85% at that time, Ms. Hu's two certificates of deposit totaled 1.1 million yuan, and the interest alone will be 130,000 yuan after maturity this year.

According to Ms. Hu's description, she still has a few such certificates of deposit, and at the interest rate three years ago, her annual income from deposit interest is about 100,000 yuan. In addition, as a "high-quality customer" of the bank, she can also receive some small gifts from the bank every year, mostly daily necessities such as rice and flour oil, toilet paper, laundry detergent and small household appliances.

"In the past, before the deposit was due, the bank's account manager called me to sell it, but now there are a lot fewer calls." Ms. Hu told the reporter of China Economic Weekly, "Don't think about the big state-owned banks, even if they are city commercial banks, it is difficult to grab products with slightly more attractive interest rates." I'm also not familiar with other investment channels, and I can expect much less interest income in the foreseeable future. ”

Over the past year, the listed deposit rate has undergone a number of cuts. Just ended in May, a number of small and medium-sized banks "officially announced" that they would cut their deposit interest rates. Judging from the latest adjustment of the interest rate of listed deposits, the interest rates of 3-year and 5-year time deposits of some banks have been flat or even "inverted".

At the same time as the interest rate of listed deposits was adjusted, the quota of large-denomination certificates of deposit favored by Ms. Hu was also tightened, and some banks even directly suspended the new quota.

It is worth mentioning that as the transition period approaches, "quasi-demand" deposits such as smart notice deposits and agreement deposits, which are known as "savings weapons", will also be removed from the shelves. On May 14, Bank of China announced that according to relevant policy changes, the bank will stop the original personal intelligent notice deposit product on May 15, as well as the follow-up services of automatic transfer and agreed rollover of the original call deposit; On May 10, Bank of Communications announced that it would terminate the Shuangli deposit (ordinary version/super enjoyment version) business on May 15, 2024. At the same time, China Everbright Bank, China Guangfa Bank, Bank of Xiamen, Bohai Bank, etc. have also announced the removal of smart notice deposits.

In fact, as early as May 2023, the regulatory authorities adjusted the upper limit of the interest rate on bank agreement deposits and call deposits. Among them, large state-owned banks implement the benchmark interest rate plus 10 basis points, and other financial institutions implement the benchmark interest rate plus 20 basis points. At the same time, the call deposit that does not require customer operation and intelligent automatic rollover is suspended, and a one-year implementation transition period is given.

Dong Ximiao, chief researcher of Zhaolian, told the reporter of China Economic Weekly that a series of measures such as the recent removal of smart notice deposits, the reduction of agreed deposit interest rates, and the successive suspension of sales of large-amount certificates of deposit are in line with the policy guidance of reducing deposit interest rates, which is conducive to continuously reducing the cost of bank liabilities and making the real economy more sustainable for banks.

High-interest products are hard to find, and the scale of new deposits has decreased

The gradual withdrawal of high-interest deposit products from banks is the result of continued pressure on banks' net interest margins and liabilities.

According to 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).

Over the past year, interest rate spreads have continued to narrow, which has become one of the operating pressures faced by banks. According to the "2023 Review and Future Outlook of China's Listed Banks" recently released by Ernst & Young, the net interest margin of 58 listed banks has declined for four consecutive years, and the net interest margin in 2023 will be 1.69%. In the first quarter of this year, 22 of the 24 listed banks that have disclosed net interest margin data continued to narrow.

At the 2023 results conference of major banks, the term net interest margin was frequently mentioned.

Take Minsheng Bank as an example. According to the annual report, as of the end of last year, the net interest margin of Minsheng Bank was 1.46%, a year-on-year decrease of 0.14 percentage points. The annual report explained that the decline in net interest margin was mainly due to the decline in asset-side pricing, and the rigidity of debt costs. Li Bin, vice president and secretary of the board of directors of Minsheng Bank, said at the results conference that the net interest margin of the whole industry is expected to continue its downward trend in 2024.

As one of the important indicators to measure the profitability and risk level of commercial banks, the narrowing of net interest margin means that the pressure on bank profitability increases. Under such circumstances, strengthening the cost control of the liability side and giving up high-interest deposits has become an inevitable choice for commercial banks.

At the Bank of China's 2023 results conference, Zhang Yi, deputy governor of the Bank of China, said that in 2024, the Bank of China will increase the pressure on high-cost deposits, including agreement deposits, structured deposits and large-amount certificates of deposit with a maturity of more than 3 years.

Judging from the signals released by the regulators, in the future, banks will be further guided to reduce the cost of debt and strengthen the cost control of the debt side. The "Report on the Implementation of China's Monetary Policy for the First Quarter of 2024" released by the central bank on May 10 specifically mentioned that it is necessary to "implement the market-oriented adjustment mechanism of deposit interest rates, prevent high-interest rate deposits, maintain the order of market competition, and strive to stabilize the cost of bank liabilities".

Against the backdrop of the continuous reduction in deposit rates, the size of bank deposits has also 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. Previously released data showed that RMB deposits increased by 11.24 trillion yuan in the first quarter. Compared with the two, it means that RMB deposits decreased by 3.92 trillion yuan in April.

"What I regret the most now is that when I saved money in 2021, I still felt that the interest rate of more than 3% was low, and I had the illusion that I could go back in case it could rise, so I only saved for 3 years, and I should have saved for 5 years." Ms. Hu told reporters that the bank's account manager recently recommended several wealth management products to her, and she is still in a wait-and-see mode.

In her spare time, Ms. Hu will log in to the bank app at any time to check the transfer area of large-value certificates of deposit to see if she can find a transfer order with an annualized interest rate of more than 3%. She told reporters that compared with "bells and whistles" wealth management products, she still believes in bank deposits more.

(This article was published in the 10th issue of China Economic Weekly in 2024)

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