Cailian Press, June 21 news (Reporter Si Tong Shi) Recently, the sustained reduction of deposit interest rates by small and medium-sized banks has attracted attention again, igniting market expectations for a new round of deposit interest rate cuts.

Cailian Press reporters noticed that even after multiple rounds of adjustment, some banks still offer deposit interest rates that can reach 3% or higher. In the view of experts, there are still high-interest rate deposit products above 3%, mainly due to differences in deposit liability costs and operational conditions among institutions, as well as reflecting the problem of 'deposit shortages' faced by some banks and the pressure of fund absorption.

Looking ahead, experts believe that the effect of the previous downward adjustment of deposit interest rates is still showing, and the net interest margin of the banking industry in the second quarter may have a phased rebound. However, under the trend of shrinking interest rate spreads and deposit regularity, the third quarter is likely to start a new round of deposit interest rate cuts. However, the space for further reduction of deposit interest rates may be narrowed compared to the first half of the year.

Small and medium-sized banks continue to 'supplement and reduce' interest rates, and deposit products with interest rates of more than 3% still exist.

Recently, many banks in Guangdong, Guangxi, Hainan and other places have made follow-up adjustments to deposit interest rates. Generally speaking, with the continued downward trend of interest rates, 'high-interest' deposit products are difficult to find in the market. However, Cailian Press reporters noticed that even after this adjustment, some banks still offer deposit interest rates that can reach 3% or higher.

"Our bank has decided to adjust the RMB deposit benchmark interest rate starting from June 24, 2024." Recently, the announcement of Wuxuan Rural Commercial Bank of Guangxi stated that after this adjustment, the benchmark interest rates of three-month to five-year deposits in the bank will be between 1.45% and 3.0%. Among them, the three-year interest rate will be lowered to 2.85% and the five-year interest rate will be adjusted to 3.0%, which is a decrease of 35BP and 20BP, respectively, compared to the current interest rate.

At the same time, Haikou United Rural Commercial Bank has also just made adjustments to its interest rates. According to its announcement, the fixed-term deposit interest rates of three months to five years in the bank are currently between 1.7% and 3.2%, of which the three-year and five-year interest rates are both above 3%, at 3.15% and 3.2%, respectively.

"Our bank's deposit interest rate was just reduced two days ago, but it is still relatively high in the market." A staff member of a branch of Haikou United Rural Commercial Bank told Cailian Press reporters that the bank's deposit interest rate was last adjusted on June 18. Prior to this, the three-year and five-year fixed deposit rates were 3.15% and 3.4%, respectively, and this adjustment lowered them by 5BP and 20BP, respectively, but they are still above 3% and can be started with only 50 yuan.

In addition, some city commercial banks such as Hainan Bank still maintain relatively high deposit interest rates. But unlike the low threshold of the above-mentioned banks, the 'high-interest' deposits of Hainan Bank have higher requirements for the initial deposit amount.

According to a staff member of a branch of Hainan Bank, the current featured deposit interest rate of the bank can reach 3% or more, and there are different interest rates for different initial deposit amounts and maturities. For example, for a deposit amount of more than 50,000 yuan, the three-year and five-year deposit interest rates are both 3.1%; for a deposit amount of more than 1 million yuan, the three-year interest rate is 3.3% and the five-year interest rate is 3.2%. In addition, the three-year large-denomination certificate of deposit interest rate of the bank is also 3.05%, with a minimum deposit amount of 200,000 yuan.

"The deposit interest rates of every bank are being adjusted. Deposits with interest rates of more than 3% are already very rare. The interest rates will continue to decline in the future. If you plan to buy, you must act quickly." The employee reminded.

The net interest margin may have a phased rebound in the second quarter, and the effect of interest rate cuts is still showing.

"Under the background of deposit interest rate declines, some banks' deposit interest rates continue to be higher than 3.0%, mainly reflecting differences in deposit liability costs and operational conditions among institutions." Zhou Maohua, a macro researcher in the financial market department of China Everbright Bank, believes that bank deposit interest rate cuts generally depend more on the supply and demand situation of the deposit market, the situation of each bank's assets and liabilities, net interest margin, and operation. Under market-oriented reform, the interest rates of various institutions exist within a certain range of differences, which is a normal phenomenon.

In the view of Ming Ming, chief economist of CITIC Securities, maintaining a relatively high level of interest rates above 3% also reflects the 'deposit shortage' facing some banks and the pressure of fund absorption. Some banks attract deposits by raising interest rates or maintain customers with higher interest rates to ensure the smooth development of other businesses.

It is generally believed in the industry that the rapid decline of net interest margin is the fundamental reason for the regulatory authority to push for deposit interest rate cuts. Data shows that by the end of 2023, the net interest margin of commercial banks had dropped below the 1.7% mark for the first time, reaching a historical low of 1.69%. The trend of narrowing interest rate spreads has continued since the beginning of this year, and the net interest margin further decreased to 1.54% at the end of the first quarter.

Meanwhile, after several rounds of large-scale reduction in recent years, bank deposit rates have reached a relatively low level. According to monitoring data from Rong360 Digital Technology Research Institute, in May of this year, the one-year average interest rate for bank deposit with a fixed term was 1.901%, the two-year average interest rate was 2.108%, the three-year average interest rate was 2.512%, and the five-year average interest rate was 2.461%. Compared with the previous month, the average interest rates for medium and long-term deposits have both declined.

In the opinion of Wen Bin, Chief Economist of Minsheng Bank, recent measures to stop behaviors such as "handmade interest subsidies" have gradually returned deposit rates that were originally inflated to a normal level, especially significantly lowering the cost of funds for public liabilities. Net interest margin in the banking industry may have a cyclical rebound in the second quarter. In addition, the effect of the previous downward trend in deposit interest rates is still ongoing, taking into account factors such as repricing after existing fixed-term deposit are due.

There may be a new round of deposit rate cuts in the third quarter, but the downward space will be limited.

However, as the net interest margin of banks continues to decline, the market generally believes that it is necessary to continue to strengthen the downward trend of deposit rates. According to Ming Ming’s analysis, considering the current situation, on the one hand, loan interest rates have significantly decreased, and the relative rigidity of bank liabilities has maintained net interest margin that continues to compress, which puts increased operational pressure on banks. On the other hand, the trend toward fixed-term deposit accounts has been steadily increasing, and some long-term deposit and certain special deposit products have relatively high prices.

In the opinion of Zhou Maohua, the continued benefits for the real economy expansion by banks creates a certain imbalance in the deposit market. The cost of liability for some banks has risen while the pressure on net interest margin remains high. Therefore, it is not ruled out that there may be a new round of reduction later. As the effects of macroeconomic policies continue to be released and the economy and prices steadily recover, the supply and demand of the deposit market will gradually return to normal. It is expected that the degree of deposit interest rate reduction this year will be lower than that of last year.

"In order to reduce financing costs and maintain the stability of bank net interest margin, deposit rates still need to be further reduced," Wen Bin further analyzed, predicting that the earliest time will be from mid-year to the third quarter, and the rate cuts for deposits will open up certain downward space for future LPR quotes. At the same time, considering the domestic and international economic situation, the conditions for implementing policy rate cuts are gradually being accumulated. The third quarter may become a window period for policy rate cuts.

At the same time, Ming Ming also told reporters from Caijing that a new round of deposit rate cuts is likely to be launched in the third quarter, but the downward space for deposit rate cuts depends on various factors, including bank funding costs, competition in the deposit market, regulatory policies, etc. However, considering that the deposit rates of some banks are already relatively low and that there is a significant phenomenon of deposit transfer, the space for further reduction may be narrower than that in the first half of the year.