On July 25th, the state-owned six largest banks, including ICBC and Agricultural Bank of China, collectively announced a reduction in deposit interest rates. All types of deposits, including current deposits, term deposits, agreed deposits, and notice deposits, are covered by the adjustment, with the reduction ranging from 5 to 20 basis points.

Compared with the previous few rounds, the State-owned large banks have slightly weakened their deposit interest rate reduction this time, but the coverage is wider, including the inclusion of current deposit interest rates in the reduction range. Industry experts believe that the previous current deposit interest rate was not adjusted, and accumulated a certain adjustment momentum. It may also be related to the recent trend of deposit maturity slowing down. Banks hope to affect the market through more comprehensive adjustments.

For the new round of deposit interest rate cuts announced by the state-owned large banks, the industry generally believes that it will help stabilize the bank's interest margin, but it may also promote a larger scale of deposits moving to wealth management products, which should be aware of the higher difficulty of attracting deposits. Looking ahead, experts believe that other joint-stock banks and small and medium-sized banks are likely to follow the deposit interest rate adjustments, and the future domestic deposit rate may still be lowered according to the current net interest rate pressure, imbalanced deposit market structure, and policy rate trend.

The trend of deposit maturity slowing down, current deposit rates included in the reduction range.

Overall, the adjustment of interest rates of the six major state-owned banks covers all types of deposits, including current deposits, term deposits, agreed deposits, and notice deposits, with a range of reduction of 5 to 20 basis points. Compared with the previous two adjustments, the reduction in interest rates this time is slightly weaker, but the coverage is more comprehensive.

In the adjustment in December 2023, the state-owned large banks did not reduce the listed interest rate for current deposits, while the reduction ranged from 10 to 25 basis points. In the September 2023 adjustment, the state-owned large banks only reduced the interest rate of fixed deposits for one to five years, with the same reduction range.

Dong Xiancheng, chief macro analyst of Orient Securities, told Cailian News that compared with the previous two adjustments, the range of interest rate adjustments of large state-owned banks this time is wider, including the inclusion of current deposit interest rates in the reduction range. On the one hand, this is due to the fact that the current deposit interest rate was not adjusted in the previous two rounds of deposit interest rate cuts, and there has been a certain momentum for adjustment. It may also be related to the recent slowing trend of deposit maturity.

The latest data shows that in June, household demand deposits accounted for 27.5%, up for two consecutive months; non-financial corporate demand deposits accounted for 28.8%, also up 0.5 percentage points from the previous month.

Wang Yifeng, chief financial industry analyst at Everbright Securities, pointed out that the adjustment of interest rates of state-owned large banks should consider market environment, operational stability and other factors. Compared with the previous round, the range of interest rate adjustments of state-owned banks in this round is wider, especially the adjustment of current deposit interest rates. "Although the magnitude is small, the proportion of current deposits in deposits is relatively large, so the adjustment of current deposits still has a certain impact."

At the same time, in the opinion of Ming Ming, chief economist at CITIC Securities, the wider coverage of interest rate adjustments this time shows that banks hope to affect the market through more comprehensive adjustments, rather than merely targeting certain types of deposits. The limited magnitude may be to avoid a significant outflow of deposits and is also related to the after-effects of the cessation of manual replenishment of interest rates on bank deposits.

With the collective reduction in deposit interest rates of the six major state-owned banks, the industry generally believes that the new round of deposit interest rate cuts has officially started, and other joint-stock banks and small and medium-sized banks are likely to follow up. Lowering deposit interest rates will also help stabilize the bank's net interest margin.

According to Ming Ming's analysis, on the one hand, the reduction of deposit interest rates is conducive to banks reducing the cost of the liability side, easing the pressure on net interest margins, and improving profitability; on the other hand, the reduction of deposit interest rates can create space for the reduction of loan interest rates, further reducing the financing costs of the real economy and supporting enterprise financing.

"We believe that this round of deposit interest rate cuts will help stabilize the bank's net interest margin," Wang Qing said. "Since the" 5.17 "real estate policy, the interest rate for new housing loans in various places has generally been reduced by about 0.3 to 0.4 percentage points. In the second quarter, corporate loan interest rates have also declined, but affected by the impact of the cessation of manual replenishment of interest rates, we predict that the decline in the net interest margin of banks in the second quarter will be significantly narrowed. This round of bank deposit interest rate reductions means that although the LPR quotations for the two periods of July have been lowered comprehensively, enterprise and resident loan interest rates are expected to follow suit, but the bank's net interest margin is expected to remain basically stable in the third quarter.

Wang Qing pointed out that the downward adjustment of deposit interest rates is to stabilize the interest rate differential of banks. Compared with the interest rate differential before the policy effects of the "5.17" real estate regulation, the decline is not significant. However, the adjustment of interest rates should be adjusted within the scope of policy tolerance, and it is very likely that the net interest margin of banks will stabilize under policy constraints.

Looking ahead, many interviewees believe that after this round of deposit interest rate adjustments, the domestic deposit rate may still be further reduced according to factors such as the current net interest rate pressure, the imbalance of the deposit market structure, and the trend of policy rates.

"After the interest rate adjustment of large state-owned banks this time, other commercial banks will follow suit in reducing interest rates. Before the real estate industry stabilizes and rebounds, deposit interest rates may continue to trend downward." Considering the trend of the future economy and prices, Wang Qing believes that there is still room for policy rates (7-day reverse repurchase rate) to be lowered in the fourth quarter, which will lead to follow-up adjustments of LPR quotes for two term varieties. It seems likely that a new round of deposit interest rate cuts will be launched before the end of the year.

China Everbright Bank's macro research analyst Zhou Maohua also pointed out that based on the net interest margin of other banks, the level of deposit and financial market interest rates, it is expected that some banks will follow up in the future, expanding space for financial institutions to further benefit the real economy. At the same time, from the perspective of net interest margin pressure, imbalanced deposit market structure, and further reduction of financing costs for guiding the real economy, it is still possible to lower the domestic deposit interest rate.

"The interest spread in the second half of the year is expected to gradually stabilize, but we need to be aware of the increasing difficulty of deposit gathering." According to the latest data, the net interest margin of commercial banks in the first quarter of this year was 1.54%, down 0.15 percentage points from the previous quarter of last year, hitting a new low since historical records and further deviating from the warning line of 1.8%. Zhou Maohua said that the net interest margin is expected to gradually stabilize in the second half of the year, mainly because the domestic deposit interest rate is expected to further decline, the market interest rate remains low, and previous measures such as manual compensatory interest have effectively reduced bank debt costs. At the same time, the recovery of the domestic economy will drive the demand for entity financing, which is good for improving the net interest margin.

"The new round of deposit interest rate cuts may also further reveal problems such as "difficulties in deposit gathering" of banks." Wang Mingming told Caixin that reducing deposit interest rates may prompt some funds to shift from bank deposits to other investment channels, thereby stimulating consumption and investment. However, at the same time, it is also necessary to be wary of the increasing difficulty of deposit gathering. Wang Qing also said that this round of deposit interest rate cuts may push more deposits to move toward wealth management, but with the decline in deposit returns, it may also have a certain effect on promoting consumption in the short term."

"The new round of deposit interest rate cuts may start a new downward trend in bond interest rates." "At the same time, Tian Lehao, Chief Macroeconomic Analyst at Huaxi Securities, pointed out that the adjustment of deposit interest rates this time is also in line with market expectations. After the deposit interest rate cut is implemented, the push of bond market short-term sentiment is often weaker, possibly because of the weaker expectations for a new round of interest rate cuts. However, for residents and enterprises, they may further choose between deposit and wealth management products, or use fund redirection to enhance the allocation power of institutions, consolidating the bull market of bonds."

"The deposit market is still structurally imbalanced to some extent. In addition to reasonable re-pricing of deposit products to stabilize the net interest margin, it is also necessary to actively maintain the normal competition order in the deposit market, continue to regulate manual compensatory interest, avoid high-interest deposit gathering behavior, and promote banks to optimize their asset-liability structure."

"After the new round of deposit interest rate cuts, problems such as "difficulties in deposit gathering" of banks may also be further revealed."

"In Wang Mingming's view, reducing deposit interest rates may prompt some funds to shift from bank deposits to other investment channels, thereby stimulating consumption and investment. However, at the same time, it is also necessary to be wary of the increasing difficulty of deposit gathering. At the same time, Wang Qing also said that this round of deposit interest rate cuts may push more deposits to move toward wealth management, but with the decline in deposit returns, it may also have a certain effect on promoting consumption in the short term."

"After the new round of deposit interest rate cuts, it is also necessary to closely watch whether the evolution trend of deposit "detachment" will be further strengthened, thus strengthening the expectation of a new round of bond interest rate cuts." Wang Yifeng said.

"This round of deposit interest rate adjustments is also within market expectations. After the drop in interest rates, the deposit interest rate may further decline, and the market interest rate will remain low. In addition, depositors' rising cost of choosing between deposit and wealth management products could boost the bond market, helping the bull market of bonds continue." Tian Lemeng, Chief Macroeconomic Analyst at Huaxi Securities, said.