On July 29, China CITIC Bank, China Everbright Bank, Industrial Bank, Shanghai Pudong Development Bank, Minsheng Bank, Huaxia Bank, Zheshang Bank, Guangfa Bank, Bohai Bank and Hengfeng Bank adjusted the interest rate of RMB savings deposits. Together with China Merchants Bank and Ping An Bank, which have adjusted their interest rates on July 26, all 12 national joint-stock banks have completed the current round of deposit interest rate reductions.
A number of joint-stock banks lowered the three-month, half-year, and one-year lump sum deposit products by 10BP to 1.10%, 1.35%, and 1.55% respectively. The two-year, three-year, and five-year lump sum deposit and withdrawal interest rates were all lowered by 20BP, to 1.60%, 1.8%, and 1.85% respectively, and individual banks fluctuated slightly.
Previously, on July 25, Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, Bank of Communications and Postal Savings Bank updated the RMB deposit interest rate, of which the demand deposit was reduced by 0.05 percentage points, the interest rate of notice, agreement and time deposit of one year or less was reduced by 0.1 percentage point, and the interest rate of time deposit of two years and above was reduced by 0.2 percentage points.
After the adjustment, among the fixed deposits, the three-month, six-month and one-year lump sum deposit and withdrawal rates of Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank, Bank of China and Bank of Communications all decreased by 10 basis points to 1.05%, 1.25% and 1.35% respectively. The listed interest rates for two-year, three-year and five-year lump sum deposits and withdrawals decreased by 20 basis points to 1.45%, 1.75% and 1.8% respectively.
So far, the six major state-owned banks and national joint-stock banks have completed the first round of RMB deposit interest rate cuts this year.
With the practical operation of the market-oriented adjustment mechanism of deposit interest rates and the continuous decline of deposit interest rates, the deposit interest rates of various commercial banks have also formed a ladder gap. Generally speaking, the deposit interest rate of urban commercial banks is relatively higher than that of the six major state-owned banks and joint-stock banks; Among the 12 joint-stock banks, the deposit interest rates of Zheshang Bank, Bohai Bank and Hengfeng Bank are higher than others.
According to the current quotation of city commercial banks, five-year deposits can still see a maximum annual interest rate of 3%, which is 120 basis points higher than the six major state-owned banks and most joint-stock banks, and the interest rate spread is 1.67 times.
Deposit Listing Rate Reduction Can Hedge LPR Reduction //
This round of deposit rate cuts is the fifth round of concentrated deposit rate cuts by major banks since the establishment of the market-based adjustment mechanism for deposit interest rates in April 2022. The previous four rounds of downward revisions were in September 2022 and June, September and December 2023.
In this rate cut, major state-owned banks and 12 joint-stock banks have both lowered the demand deposit rate by 5 basis points to 0.15%, which is the first time that the demand deposit rate has been adjusted since June 8, 2023.
Guosheng Securities' banking/non-bank finance team pointed out that unlike time deposits, which need to be repriced after the maturity of existing deposits, the reduction of demand deposit interest rates is conducive to slowing down the downward trend of bank interest margins and improving the sustainability of financial services for the real economy.
At the same time, compared with the three-month, half-year, and one-year lump sum deposit interest rate reduction of 0.1 percentage points, the long-term interest rate of the interest rate cut is larger, and the two-year, three-year, and five-year time deposit reduction is generally 0.2 percentage points, of which Ping An Bank will reduce the two-year fixed deposit interest rate by 0.3%.
IB Research pointed out that after this reduction, the inversion between the listed interest rate of deposits of 2 years and above and the interest rate of treasury bonds of the same maturity has been corrected. At the same time, the interest rate of long-term time deposits has been lowered even more, which will help alleviate the pressure on debt costs caused by the regularization and long-term term of deposits.
Combined with the impact of the reduction in the loan prime rate (LPR) on July 22, a number of institutions pointed out that the current round of deposit interest rate reduction can fully hedge the drag of the LPR cut on banks' interest margins and revenues.
The banking team of Everbright Securities calculated in the research report that the reduction of the listed deposit interest rate in this round can improve the interest payment debt cost of listed banks by 8.3bp and boost the interest margin by 7.5bp. Among them, the cumulative improvement rates of the interest-paying debt costs of state-owned banks and joint-stock banks were 8.9bp and 7.1bp respectively, and the corresponding interest margin improvements were 7.9bp and 6.5bp. In 2024, the current round of deposit interest rate cuts can improve the cost of interest-paying liabilities of listed banks by 3.9bp, improve the interest margin by 3.5bp, and boost the annual revenue growth rate by 1.75%. In terms of bank types, the interest rate spreads of state-owned banks and joint-stock banks can be improved by 3.6bp and 3.3bp respectively, corresponding to boosting the annual revenue growth rate by 1.9% and 1.4%.
The agency pointed out that combined with the impact of this month's LPR interest rate cut, this round of deposit interest rate reduction can fully hedge the drag of LPR reduction on bank interest margins and revenue. In terms of the impact of interest rate cuts on both ends of deposits and loans, it can improve the interest rate spread of listed banks by 2bp in 2024 and boost the annual revenue growth rate by 1.1%; Among them, the interest margin of state-owned banks improved by 2.1bp, and the revenue growth rate increased by about 1.3%.
Ming Ming, chief economist of CITIC Securities, believes that the deposit interest rate cut will help banks control the cost of liabilities and promote the further decline of broad-spectrum interest rates, including the interest rate of treasury bonds; At the same time, the phenomenon of "deposit moving" may be strengthened, and low-risk asset management products such as bank wealth management will usher in incremental funds and increase the allocation power of the bond market.
Investors should lower their expectations for investment returns //
At the same time that banks have adjusted their deposit interest rates, some netizens have posted on social platforms to ask, "Which bank has a higher interest rate?" In their replies, some netizens recommended large certificates of deposit from small and medium-sized banks, and some recommended the purchase of increased whole life insurance products or wealth management products.
In the first half of this year, China Merchants Bank and other banks reported that the sale of large-value certificates of deposit with a maturity of 3 years and above was suspended, and the issuance of large-value certificates of deposit products with a maturity of 6 months and above (including large-value certificates of deposit on sale) of Minsheng Bank was suspended. Some small and medium-sized banks are also short of large-value certificates of deposit, and even need to be "spikes" if they want to grab them.
It is reported that some insurance companies have officially stopped selling 3.0% incremental whole life insurance on June 30, and listed increased whole life insurance with a predetermined interest rate of 2.75% on July 1. According to a number of media reports, a number of insurance company executives reported that the next adjustment direction may be the upper limit of the predetermined interest rate of traditional insurance from the current 3% to 2.5%, the upper limit of the guaranteed interest rate of participating insurance from the current 2.5% to 2%, and the universal insurance may be adjusted from 2% to 1.75%.
"The current round of deposit interest rate reduction may promote a larger scale of deposits to 'move' to wealth management, and at the same time, with the decline in deposit income, it may also play a certain role in promoting consumption in the short term." Wang Qing, chief macro analyst of Oriental Jincheng, and Feng Lin, director of research and development department, believe.
Dong Ximiao, chief researcher of Zhaolian, said that in the context of the market-oriented reform of deposit interest rates, the central bank has established a market-oriented adjustment mechanism for deposit interest rates, and commercial banks can adjust deposit interest rates relatively flexibly. Different banks may have different business development positioning, asset-liability structure, marketing strategies, etc., and the pace and intensity of deposit interest rate adjustment may be different.
Dong Ximiao pointed out that in the case of the continuous decline in the yield of various asset management products and deposit interest rates, investors should adjust their investment mentality as soon as possible and reduce their expectations of investment returns. In general, investors should balance the relationship between risk and return to make a comprehensive asset allocation.
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