Following China Merchants Bank and Ping An Bank, on July 29, 10 joint-stock banks, including China CITIC Bank, China Everbright Bank, Minsheng Bank, Shanghai Pudong Development Bank, Industrial Bank, Huaxia Bank, Guangfa Bank, Zheshang Bank, Bohai Bank and Hengfeng Bank, lowered their deposit interest rates. Among them, the annual interest rate of Zheshang Bank, Bohai Bank and Hengfeng Bank was reduced from 2.30% to 2.10%, and the annual interest rate of the other 7 banks was reduced from 2.05% to 1.85%, all of which were reduced by 20BP.
China CITIC Bank
China Everbright Bank
Minsheng Bank
Shanghai Pudong Development Bank
Industrial Bank
Hua Xia Bank
China Guangfa Bank
Zheshang Bank
Bohai Bank
Hengfeng Bank
Behind the successive cuts in deposit rates by banks is the declining interest rate spreads. According to data disclosed by the State Administration of Financial Regulation, as of the end of 2023, the net interest margin of commercial banks fell below the 1.7% threshold for the first time, falling to a record low of 1.69%, breaking through the warning limit of 1.8% net interest margin. In the first quarter of this year, the net interest margin of domestic commercial banks fell to a record low of 1.54%, a decrease of 0.15 percentage points from the end of the previous year and a decrease of 0.2 percentage points from 1.74% in the same period last year.
The research report of Industrial Research pointed out that with the reduction of the mainland's attention to the financial aggregate index and the slowdown of the growth rate of deposits, the growth rate of the bank scale will also enter a new level, and the strategy of "making up the price with volume" may be unsustainable. At the same time, in the era of low interest rates and low interest rate spreads, if you rely too much on investment transactions, once there is a misjudgment of market interest rates, it may have a serious negative impact on the profitability and even survival of banks. It can be seen that stabilizing interest rate spreads is still a key task for mainland banks.
Generally speaking, the reduction of deposit interest rates will be carried out in batches in the order of large state-owned banks, joint-stock banks, and small and medium-sized banks.
Lou Feipeng, a researcher at the Postal Savings Bank of China, said that considering the low net interest margin of banks, joint-stock banks and city commercial banks will definitely follow up when large state-owned banks reduce deposit interest rates, and the speed of follow-up may be relatively fast.
Zhou Maohua, a macro researcher at the financial market department of Everbright Bank, believes that there is still a possibility that the domestic deposit interest rate will be lowered.
According to the analysis of Lin Jinlu of Dongxing Securities, according to the static calculation of the deposit term structure of state-owned banks at the end of 2023, the weighted decline in the listed interest rate of this round of deposits is about 10 basis points. On the asset side, the interest rate on newly issued corporate loans, the interest rate on newly issued personal housing loans, and the yield on 10-year treasury bonds fell by 10 basis points, 48 basis points, and 38 basis points respectively at the same stage. It can be seen that the decline in deposit interest rates is still significantly smaller than that on the asset side, and from the perspective of protecting bank interest margins, maintaining banks' reasonable profits and the stability of the financial system, there is still room for subsequent deposit pricing to be lowered.
CITIC Securities Chief Economist Ming Ming expects that in the third quarter of this year, the market is likely to usher in a new round of adjustment of deposit interest rates. In his view, in the context of financial support entities, lending rates have fallen significantly, but banks' debt costs have remained relatively rigid, and interest margins have continued to compress, increasing operating pressure. At the same time, there is a clear trend of fixed-term deposits, and long-term deposits and some special deposit products are overpriced.
Source | Financial Times, 21st Century Business Herald
Edit | Wang Shu