JPMorgan released a report stating that the six major state-owned banks announced the reduction of deposit interest rates yesterday (25th), which was not unexpected based on earlier media reports.

The bank reiterated its positive view on China mainland banking, based on the decrease of net interest spread by 2 basis points due to the reduction of deposit interest rates and loan market quote rates (LPR), corresponding to a 2% increase in the bank's estimated profits next year. The rapid reduction of deposit interest rates also confirms the bank's view that regulatory institutions and banks are more focused on stabilizing net interest spread. The bank believes that future interest rate cuts will be symmetrical, and the reduction of deposit interest rates will accompany the reduction of LPR. The bank also pointed out that regulatory institutions are cracking down on bank's manipulative behavior of interest rates, and the reduction of deposit interest rates will be more effective in implementation than in the past.

The bank expects that China mainland banking will continue to outperform the overall market, and that the large state-owned banks will continue to outperform the joint-stock banks and regional banks, as only the large state-owned banks have announced interest rate cuts.