According to the Wise News APP, China's mainland banking stocks continued to fall in early trading. As of the time of publication, CM Bank (03968) fell 4.2% to HKD 31.95; Minsheng Bank (01988) fell 3.94% to HKD 2.68; Bank of Communications (03328) fell 2.93% to HKD 5.64; China Construction Bank Corporation (00939) fell 2% to HKD 5.39.

The People's Bank of China announced a rate cut, with LPR for 1-year and above 5-year tenors both down 10 basis points. Lyon published a report saying that it expected the People's Bank of China to take more action, such as optimizing interest rate transmission through LPR and deposit pricing. After the United States took interest rate cuts, the bank believed that the People's Bank of China had greater room for rate cuts, which could lead to a decline in net interest margin. Lyon believes that the lower LPR will pose a challenge to net interest margin in the second half of this year and next year. However, in the long run, better transmission means that bank asset yields and liability costs are more matched, making it more effective for banks to manage net interest margins.

CICC Securities pointed out that this LPR cut is expected to have an actual impact of within 6bp on the bank's interest margin. Since the beginning of this year, bank asset pricing still faces downward pressure, but liability costs have continued to improve, especially with the suspension of manual interest rate adjustments in April, resulting in significant improvements in deposit costs. Marginally offsetting the downward pressure on interest margin, it also reserves space for this LPR cut. Looking forward, bank interest margins are still in a continuous narrowing trend. From the perspective of protecting bank interest margins and operational stability, after this LPR cut, there is no rule out the possibility of continuing to lower deposit interest rates.