Bank of Communications took the lead in cutting the three-year deposit interest rates in some regions, but not all branches were covered. Beijing and Shanghai have been adjusted, but Guangzhou, Shenzhen and other places have not changed. After the July LPR quote was lowered, the market expected that deposit interest rates would be lowered, but state-owned banks have not adjusted the deposit listing interest rates for the time being.
According to market reports, after the "rate cut" combination, Bank of Communications took the lead in lowering the three-year deposit interest rates in Beijing, Shanghai and other places. Does this mean that a new round of deposit interest rate cuts is officially starting?
However, after a survey by Caixin reporters, it was found that Bank of Communications did not cover all branches in this interest rate cut. At present, the three-year fixed deposit interest rate of Bank of Communications in Beijing and Shanghai has been lowered, but the pace and magnitude of the reduction are different. At present, the three-year fixed deposit interest rates of Bank of Communications in many places, including Guangzhou and Shenzhen, have not changed.
Recently, there have been market reports that state-owned banks are considering lowering the deposit listing interest rates. However, from the latest survey by Bank of Communications, state-owned banks have regional adjustments to deposit rates, but have not yet collectively lowered the deposit listing interest rates.
Bank of Communications adjusts the pace and magnitude regionally.
"After the LPR went down, our interest rates changed too." A client manager of Bank of Communications in Shanghai said that the bank also lowered the three-year fixed deposit interest rate on the same day of the rate cut on July 22nd. Currently, the interest rate for fixed deposits with a maturity of 3 years and a full amount of 200,000 yuan is 2.45%, and for fixed deposits with a maturity of less than 200,000 yuan and 3 years, the interest rate is 2.4%. Before the adjustment, the interest rate for fixed deposits with a maturity of 3 years and a full amount of 200,000 yuan was 2.5%.
At present, Bank of Communications' 1-year and 2-year fixed deposit interest rates in Shanghai remain unchanged at 1.95% and 2.15%, respectively.
A client manager of Bank of Communications in Beijing told Caixin reporter that the deposit interest rate was lowered by the bank's jurisdiction in Beijing after 5 pm yesterday. The three-year fixed deposit interest rate was reduced from 2.6% to 2.5%, and other terms have not been adjusted for the time being.
Several Bank of Communications personnel in Guangzhou and Shenzhen also stated that they have not received notices of a deposit interest rate cut, and do not exclude the possibility of a deposit interest rate cut in the near future.
A client manager of Bank of Communications in Shenzhen said that the current interest rates for 1-year, 2-year, and 3-year fixed deposits are 1.95%, 2.15%, and 2.6%, respectively. The interest rate for a 5-year fixed deposit is 2.0%, and only deposits with more than 1 million yuan have an interest rate of 2.65%. In comparison, the interest rate for a 5-year fixed deposit in Bank of Communications in Shanghai is 2.45%.
Dong Ximiao, chief researcher of Zhong Lian, told Caixin reporters that after the LPR fell this month, the pressure on banks to keep net interest margins basically stable has increased. In this case, reducing deposit interest rates and lowering liability costs have become a helpless but realistic choice for commercial banks. It is expected that a new round of deposit interest rate cuts will be ushered in, but the extent and steps of different banks' cuts are not completely consistent.
"Currently, some banks are under significant pressure on net interest margins, coupled with an imbalanced deposit market structure, and market rates remain low. Banks are fully utilizing the market-oriented adjustment mechanism for deposit interest rates, proactively reducing deposit liability costs, and expanding room for the real economy to benefit," said Zhou Maohua, a macro researcher at the Financial Markets Department of China Everbright Bank in an interview with Caixin reporters. Of course, the magnitude of the reduction varies among different regional branches, and the influencing factors include net interest margin, operational condition, supply and demand of the deposit market, and safeguarding the normal competitive order of the deposit market.
Industry insiders: It cannot yet be confirmed as the starting point for a new round of deposit interest rate cuts.
Some analysts told Caixin reporters that based on the current magnitude and radiation range of Bank of Communications' rate cut, it cannot yet be confirmed whether this is the starting point for a new round of deposit interest rate cuts. It can only be said that "expectations for a new round of deposit interest rate cuts are heating up."
Since the establishment of the deposit interest rate market-oriented adjustment mechanism in 2013, commercial banks' deposit listing interest rates have been collectively cut four times. Although small and medium banks and state-owned banks have a certain time lag in their rhythms, the overall trend remains unchanged. In retrospect, the concentrated adjustment of deposit listing interest rates by state-owned banks is often regarded as the starting point for a new round of deposit interest rate cuts. The most recent deposit interest rate cut wave occurred in December last year. Agricultural Bank of China, Construction Bank, Bank of China, ICBC, Postal Savings Bank and other state-owned banks adjusted their deposit listing interest rates, leading other national joint-stock banks and small and medium banks to follow suit.
At present, the deposit listing interest rates of the six state-owned banks are still "paused", with the latest update time staying at December 22, 2023. The listing interest rate is the deposit interest rate announced by the bank on its official website. The actual execution rate may not be the same as the listing rate. The deposit listing interest rates of the five state-owned banks of China Construction Bank, Agricultural Bank of China, Bank of China, ICBC and Bank of Communications show that the interest rates for 3-month, 6-month, 1-year, 2-year, 3-year and 5-year fixed deposits are 1.15%, 1.35%, 1.45%, 1.65%, 1.95%, and 2.00%, respectively. The interest rates for 6-month and 1-year fixed deposits of Postal Savings Bank of China are 1.36% and 1.48%, respectively, and other fixed deposits are the same as those of the aforementioned banks.
Industry insiders' expectations for cuts remain unchanged; industry experts: expected in the near future.
After the net interest margin of commercial banks fell below 1.7% for the first time at the end of the fourth quarter last year, the net interest margin of banks in the first quarter of 2024 dropped to a historical low of 1.54%, a decrease of 15 basis points from the beginning of the year. Although this round of deposit interest rate listing is "paused", the market's expectations for a cut in deposit interest rates remain.
In the view of analysts, it is urgent to ease the pressure of narrowing net interest margin and reduce the cost of long-term deposit liability. Banks may take more measures, including lowering deposit rates, to further reduce funding costs.
"It is expected that a new round of listed deposit rate cuts may be expected in the near future." Dai Zhifeng, chief analyst of the banking industry at Zhongtai Securities, pointed out that according to the recent adjustments in LPR and deposit rates, after the central bank lowers LPR twice, the major banks will lower listed deposit rates twice. On the one hand, the liability side adapts to the asset side's downward adjustment, and on the other hand, it also opens up space for further downward adjustment of the asset end. Since 2024, LPR has been lowered twice, but the listed deposit rate of major banks has not yet been lowered since 2024. From the above rules, it is expected that listed deposit rate cuts may be expected in the near future.
After the latest LPR rate cut, Wang Yifeng, chief analyst of the financial industry at Everbright Securities, pointed out that it may lead to a new round of deposit rate cut cycle, thus driving the overall reduction of a broad range of loan and deposit interest rates. Lu Zhengwei, chief economist at the Industrial Bank, also believes that considering the stable net interest margin, it is still necessary to further lower deposit rates while optimizing LPR quotes.
Looking ahead, Wang Qing, chief macro analyst at Oriental Jin Cheng, also believes that the July LPR quote cut, according to the market-oriented adjustment mechanism of deposit rates, the deposit rates of banks need to be linked to the 1-year LPR quote and the 10-year government bond yield. This means that the deposit rates of banks will start a new round of comprehensive downward adjustment, which will help stabilize banks' net interest margin.
Editor/Lambor