As shown in the semi-annual reports of existing joint-stock banks and large state-owned banks, despite the obvious trend of deposit regularization and the background of expanding deposit size, the debt cost of many banks has actually been reduced.
Caijing Society, August 29th (Reporter Guo Zishuo) After the state-owned major banks took the lead in lowering interest rates in July 2024, various small and medium-sized banks are still quickly lowering the listed interest rates on existing deposits. However, the positive effects brought about by the interest rate reduction measures in the first half of the year or even earlier are now reflected in the mid-term performance reports of major banks.
Caijing Society reporters found that the semi-annual reports of existing joint-stock banks and large state-owned banks show that despite the clear trend of deposit regularization and the background of expanding deposit size, the debt costs of many banks have actually been reduced.
Is the trend of deposit regularization difficult to reverse? What clever strategies do banks have in the second half of the year to break the "curse" of rigid debt costs? Recently, many bank executives have emphasized these points at earnings conferences. Adjusting the asset-liability structure, strengthening debt cost control, and absorbing low-cost deposits will be the focus and deployment direction for all commercial banks in the second half of the year.
Some banks have proposed actively expanding the sources of deposits to solidify the deposit base, while others have suggested directing deposits to intermediate businesses to retain liquid funds.
Interest expenses on deposits have decreased for many nationwide banks.
In the first half of the year, the deposit sizes of many banks continued to steadily expand. Upon closer examination, the scale of interest expenses on deposits absorbed by various banks has shown differentiation, with some joint-stock banks and large state-owned banks reducing deposit interest costs, leading to a contraction in interest expenses on deposits absorbed year-on-year. Among them, China CITIC Bank Corporation's deposit interest expenses saw a year-on-year decrease of 7.18%.
In the first half of the year, Ping An Bank's average daily balance increased by 0.142 billion yuan to 3.4138 trillion yuan. Despite the expansion of deposit size, the interest expenses on deposits actually decreased by 0.47% year-on-year to 37.017 billion yuan. In the first half of the year, the bank's average interest payout rate for deposits was 2.18%, a decrease of 2 basis points from the same period last year. Among them, the annualized average cost rate for corporate deposits was 2.12%, and for personal deposits it was 2.29%, both down by 2 basis points year-on-year.
The Bank of Communications, the first state-owned major bank to disclose its semi-annual report, is the same. According to the Bank of Communications' semi-annual report, customer deposit interest expenses were 91.706 billion yuan, a decrease of 4.061 billion yuan, a decrease of 4.24% compared to the same period last year. Among them, the annualized average cost rate of corporate deposits is 2.18%, and the annualized average cost rate of personal deposits is 2.26%, both lower than the same period last year by 14 basis points. In response to this, the Bank of Communications stated that the decrease in customer deposit interest expenses was mainly due to a 14 basis points decrease in the annualized average cost rate of customer deposits.
In addition, Shanghai Pudong Development Bank calculated the interest expenses on company deposits and retail deposits on a group basis, which decreased by 8.27% year-on-year to 48.725 billion yuan. Shanghai Pudong Development Bank's group customer deposit average cost rate is 2.06%, a decrease of 0.13 percentage points compared to the same period last year. Shanghai Pudong Development Bank stated that the interest rate on RMB general deposits decreased by 17 basis points year-on-year, with the interest rate on corporate deposits at 1.86% and the interest rate on retail deposits at 2.11%, a decrease of 21 basis points and 9 basis points, respectively.
China CITIC Bank's average cost rate decreased by 0.16 percentage points, coupled with a decrease of 3.746 billion yuan in the average balance of customer deposits, leading to a 7.18% year-on-year decrease in deposit interest expenses to 53.283 billion yuan. In the first half of the year, the average cost rate of personal deposits at the bank remained the same, while the average cost rate of corporate deposits decreased by 0.22 percentage points to 1.87%.
The management of liability costs in the second half of the year is still a key focus for all banks.
Continuing to reduce liability costs will be the key focus for commercial banks in the second half of the year, and the major component of liabilities, 'deposits', is of utmost importance.
Zhou Wanfu, the Vice President of Bank of Communications, pointed out that overall, the average cost rates of customer deposits, bond issuances, interbank placements, and interbank borrowing all decreased compared to the previous quarter.
On the liability side, Bank of Communications is taking multiple measures to reduce liability costs. Regarding deposit management, Zhou Wanfu also provided detailed explanations in three aspects. Firstly, strengthen the refined management of deposit pricing, and let each business unit manage the pricing of deposits within the scope of self-discipline and compliance. The effects of multiple rate cuts in deposit rates have also been continuously reflected. Secondly, vigorously reduce high-cost deposits and strengthen the control of high-cost deposits such as structured deposits, long-term fixed deposits, large-scale certificates of deposit, and agreement deposits, and reasonably control their total amount, term, and pricing. Thirdly, actively expand low-cost liabilities, improve the level of payment and settlement comprehensive services, promote the growth of low-cost deposits, and flexibly expand low-cost deposit products based on market interest rate trends.
Ping An Bank pointed out that on one hand, the bank actively expands the source of deposits, consolidates the deposit base, implements the reform of the deposit interest rate pricing mechanism, and plays the role of deposits as a stabilizing 'ballast' for business operations. On the other hand, it will continue to implement the strategy of controlling high-cost long-term liabilities, alleviate the impact of deposit regularity, actively seize market opportunities, guide the adjustment of liability duration, supplement interbank funds based on liquidity needs, and optimize liability costs.
Zhang Hua, President of Qilu Bank, also mentioned at the 2024 interim earnings conference on August 29 that the bank will strengthen control of debt costs and encourage the absorption of low-cost deposits through internal and external pricing policies and assessments. It will also control the proportion of long-term and high-priced businesses, while coordinating deposits, market funds, and low-cost PBOC rediscounts to reduce overall debt costs.
There are also commercial banks taking a different approach, aiming to redirect deposits to the intermediary business and retain liquid funds. According to the semi-annual report of Bank of Nanjing, it promotes the transformation and development of liability business, expands retail customers through various channels, enhances the asset allocation and deep service operation capability of retail customer deposit products, encourages the retention of current funds, reduces deposit interest expenses, and achieves balanced development of individual deposit scale, structure, and returns.