The 5-year fixed deposit has officially entered the "1" era.
Starting from July 25, state-owned banks such as ICBC, ABC, BOC and CCB will collectively adjust their RMB deposit rates. Among them, the largest rate cut is for fixed-term deposit accounts with a period of more than two years, which will be reduced by 20 basis points.
The website of ICBC shows that the latest RMB deposit rates will be implemented from July 25: the rates for three months, six months, one year, two years, three years, and five years fixed-term deposits are 1.05%, 1.25%, 1.35%, 1.45%, 1.75%, and 1.8%, respectively.
Compared with the deposit rates implemented since December 22, 2023, the deposit rates have been reduced by 10-20 basis points.
At the same time, ABC, BOC, CCB, and Bank of Communications have updated their latest deposit rates on their websites, which are consistent with the latest rates implemented by ICBC and will take effect from July 25.
Since last year, the RMB deposit rates of major banks have gone through four rate cuts. Taking ICBC as an example, compared with the deposit rates after the first adjustment last year (June 8, 2023), the latest deposit rates have been reduced by up to 70 basis points, and the RMB fixed-term deposit of five years has entered the "1" era.
On July 22, the People's Bank of China announced that it would adopt a fixed rate and quantity bidding for its 7-day reverse repo operations at a rate of 1.70%, down from 1.80%. In addition, the 1-year and 5-year and above LPR were lowered by 10 basis points, to 3.35% and 3.85%, respectively. The maximum interest rates of different types of SLF, which serve as the upper boundary of interest rate corridor, were also reduced by 10 basis points, to 2.55%, 2.70%, and 3.05% for overnight, 7-day and 1-month SLF, respectively.
The downward adjustment of LPR has opened up room for the downward adjustment of deposit rates. The decrease of LPR this month is partly due to the effect of rectifying irregular manual interest payment by regulatory authorities in the previous period, and the cost of bank funds has been reduced in advance. It is understood that after rectifying irregular manual interest payment, the bank's interest expenditure saved in the short term is close to the effect of reducing deposit rates once. Multiple national banks reflect that after rectifying irregular manual interest payment, their deposit interest rates, especially the interest rates of public deposits, have significantly decreased since April, and the net interest margin has slightly rebounded. Previously, some industry insiders pointed out that the efficiency of the market-oriented adjustment mechanism of deposit rates is still being released continuously. It is expected that banks will adjust the level of deposit rates reasonably according to changes in market interest rates, which is also conducive to the stability of net interest margin.
On May 31, the China Banking and Insurance Regulatory Commission released data on the main regulatory indicators of the banking and insurance industry in the first quarter of 2024. After the net interest margin of commercial banks was lower than 1.7% for the first time at the end of the fourth quarter of last year, reaching 1.69%, the net interest margin of commercial banks further decreased to 1.54% in the first quarter of this year. Among them, the net interest margins of large commercial banks, joint-stock commercial banks, city commercial banks, private banks, rural commercial banks, and foreign-invested banks are 1.47%, 1.62%, 1.45%, 4.32%, 1.72%, and 1.47%, respectively.
However, in terms of marginal changes, the downward trend of the net interest margin of commercial banks narrowed slightly in the first quarter of this year. The net interest margin level in the first quarter of this year (1.54%) has decreased by 15 basis points compared with the end of the fourth quarter of last year (1.69%), while the net interest margin level in the first quarter of 2023 (1.74%) has decreased by 17 basis points compared with the end of the fourth quarter of 2022 (1.91%).
Industry insiders predict that the reduction of deposit rates and the deposit constraints that break through the upper limit of interest rate self-discipline mechanism will help improve the cost of liabilities. The pressure of narrowing the net interest spread in the second quarter may be slightly eased. At the same time, the negative contribution rate of net interest income in the second half of the year is expected to narrow, which is conducive to the stabilization of interest income in the second half of the year.
Editor/ping