On July 25th, six state-owned banks including Industrial and commercial bank of china, Agricultural bank of china, Bank of china, China construction bank corporation, Bank of communications, and Postal savings bank of china collectively lowered the RMB deposit rate, with a range of 5 to 20 basis points. Experts believe that this adjustment is based on the previous year's LPR decline and the trend of market interest rates such as government bond yields, and the interest rate adjustment is conducive to stabilizing the cost of debt and promoting investment and consumption, but it is expected to have a limited impact on ordinary depositors. In terms of the product structure, the operating income of products with a size of 10-30 billion yuan is 401/1288/60 million yuan respectively.
On July 25th, amidst the strong expectation of a decline in deposit rates in the market, state-owned banks have finally started a new round of deposit rate cuts.
On July 25th, six state-owned banks including Industrial and commercial bank of china, Agricultural bank of china, Bank of china, China construction bank corporation, Bank of communications, and Postal savings bank of china successively released the latest RMB deposit rate table on their official websites, and announced that the latest interest rates will be effective from July 25th. Thus, a new round of deposit rate cuts by banks has officially begun.
In the view of authoritative experts, this time, major banks such as ICBC, ABC, BOC and CCB actively lowered their deposit rates, which was based on the previous year's LPR decline and market interest rate trends such as government bond yields and was a manifestation of more market-oriented deposit rates. This adjustment is conducive to stabilizing the cost of debt of banks, improving the sustainability of financial services for the real economy, and promoting investment and consumption by enterprises and residents.
State-owned banks have lowered their deposit rates for current and fixed deposits, with a range of 5 to 20 basis points.
Specifically, the scope and magnitude of the adjustments by the six state-owned banks are consistent and involve all types of deposits, such as demand, time, agreed, and notice deposits, with a reduction range of 5 to 20 basis points.
Regarding current deposits, the benchmark interest rate has been lowered from the previous 0.2% to 0.15%, a decrease of 5 basis points.
For time deposits, the interest rates for three-month, six-month, and one-year terms have been reduced to 1.05%, 1.25%, and 1.35%, respectively, a decrease of 10 basis points; while those for two-year, three-year, and five-year terms have been reduced to 1.45%, 1.75%, and 1.80%, respectively, a decrease of 20 basis points. The interest rates for zero-deposit and zero-withdrawal, deposit-receipt, and interest-bearing savings deposits have also been reduced by 10 basis points, with the rates for one year, three years, and five years being 1.15%, 1.35%, and 1.35%, respectively.
At the same time, the benchmark interest rate for agreed deposits has been lowered from the previous 0.7% to 0.6%, a decrease of 10 basis points; and the benchmark interest rate for notice deposits has been reduced by 10 basis points, with the rates for one-day and seven-day notice deposits being reduced to 0.15% and 0.7%, respectively.
In the view of industry insiders, this time, state-owned banks lowered their deposit rates in response to the previous LPR rate cut. It is understood that on Monday, July 22nd, the central bank announced a cut of 10 basis points in the one-year and five-year LPR rates, after which the market spread the news that state-owned banks were considering lowering the benchmark rates for deposits.
"Optimizing the adjustment of deposit rates is a manifestation of the effective implementation of market-oriented adjustment mechanism for deposit rates." As authoritative experts pointed out, major banks such as ICBC, ABC, BOC, and CCB actively lowered their deposit rates, which was based on the previous year's LPR decline and market interest rate trends such as government bond yields and was a manifestation of more market-oriented deposit rates.
It is understood that in April 2022, the People's Bank of China established a deposit rate market-oriented adjustment mechanism under the guidance of the rate self-discipline mechanism, urging banks to refer to changes in market interest rates and adjust deposit rates reasonably. As of 2023, major banks have proactively adjusted their deposit rates four times under the mechanism of market-oriented adjustment for deposit rates. Since June 2021, major banks have reduced their one-year and three-year deposit rates cumulatively by 0.5 and 1.7 percentage points respectively.
Expert: It is expected to stabilize the cost of debt and promote investment and consumption, with limited impact on ordinary depositors.
Regarding the new round of deposit rate adjustments by state-owned banks, the aforementioned expert believes that optimizing deposit rates is conducive to stabilizing the cost of debt of banks, improving the sustainability of financial services for the real economy, and promoting investment and consumption by enterprises and residents.
In fact, the net interest margin of banks in the first quarter of 2024 was 1.54%, already narrowed to the lowest level in history. Subsequently, in April, the regulatory authorities rectified the situation of irregular manual interest compensation, effectively reducing interest expenses and achieving an effect similar to lowering the deposit rates. According to several national banks, after the rectification of irregular manual interest compensation, their deposit interest rates in June, especially for corporate deposits, have significantly declined compared to April, and the net interest margin has risen somewhat.
The expert pointed out that in recent years, banks have provided significant support for the real economy, with obvious reductions in loan interest rates. However, on the liability side, due to the obvious trend of depositization and long-termization of deposits, the effect of deposit rate cuts needs to be gradually reflected in the repricing of stock deposits. Some banks have significantly smaller reductions in liability costs than in asset income due to overdrafts and irregular manual interest compensation. This time, bank's proactive adjustment of deposit rates including medium- and long-term deposit rates, will help further reduce interest expenses, relieve the problem of deposit long-termization, stabilize the cost of bank debt, improve the sustainability of financial services for the real economy, and enhance bank's profitability and shareholder equity, which is a bullish for corresponding stock valuations.
This time, the bank's proactive adjustment of deposit rates, particularly the large cuts in medium- and long-term deposit rates, will help reduce interest expenses, relieve the problem of deposit long-termization, stabilize the cost of bank debt, improve the sustainability of financial services for the real economy, and enhance bank's profitability and shareholder equity, which is a bullish for corresponding stock valuations.
At the same time, lowering deposit rates is conducive to further reducing the savings tendency of enterprises and residents, promoting enterprise investment and consumer spending, promoting the optimization of asset allocation, enhancing the motivation of capital flows to capital markets, helping the stock market to stabilize and rebound, increasing the vitality of the financial market, and consolidating the good trend of economic recovery.
However, in his opinion, it is expected that this adjustment will have limited impact on ordinary depositors. "Taking a deposit principal of 1 million yuan as an example, the annual interest on one-year fixed deposits will decrease by 100 yuan. Residents can also diversify their asset allocation through counter bonds, wealth management, funds and other means, and their overall asset income will not be greatly affected." He said.