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Editor of Every Economic Report: Du Yu

Recently, 18 state-owned banks and joint-stock banks have completed the adjustment of deposit interest rates.Bank of Jiangsu、Changsha Bank、Xiamen Bank, Hunan Bank, Guangxi Longsheng Rural Commercial Bank and many other small and medium-sized banks in various places followed suit and lowered their deposit interest rates, with the range of reduction ranging from 5 basis points to 25 basis points.

On July 29, Jiangsu Bank announced the latest deposit interest rate table. China Securities Journal noted that the bank's deposit interest rate was reduced by 10 basis points to 20 basis points, and the three-month, six-month, and one-year fixed deposit interest rates were all reduced by 10 basis points to 1.1%, 1.35%, and 1.45%, respectively. The two-year, three-year, and five-year fixed deposit interest rates were all reduced by 20 basis points to 1.65%, 1.95%, and 1.95%, respectively.

After the adjustment, the interest rate of demand deposits of Jiangsu Bank is the same as that of state-owned banks and joint-stock banks. The interest rates of fixed deposits of various periods are slightly higher than those of state-owned banks and most joint-stock banks, but the interest rates of one-year, two-year and three-year fixed deposits are lower than those of joint-stock banks.China Zheshang Bank, Bohai Bank, and Hengfeng Bank.

Hunan Bank announced thatThe bank has lowered its deposit interest rates since August 1. After the adjustment, the three-month, six-month, one-year, two-year, three-year and five-year fixed deposit rates are 1.3%, 1.5%, 1.7%, 1.8%, 2.15% and 2.15% respectively, all higher than the fixed deposit rates of state-owned banks and joint-stock banks during the same period.

also,Guangxi Longsheng Rural Commercial Bank announced, the listed interest rates of some deposit products will be adjusted from August 1. Among them, the interest rate of demand deposits will be reduced by 5 basis points, from 0.15% to 0.1%. The interest rates of six-month, one-year and two-year fixed deposits will be reduced from 1.75%, 2.15% and 2.55% to 1.55%, 1.9% and 2.3% respectively.

After some city commercial banks recently lowered their deposit rates, they still maintain a certain advantage in terms of interest rates.

Xiamen Bank announced that, the bank will adjust the listed interest rates of some deposit products from August 3, with a decrease of 5 basis points to 20 basis points. Among them, demand deposits will be reduced from 0.25% to 0.2%. The interest rates of six-month and one-year fixed deposits will be reduced by 10 basis points, to 1.5% and 1.7% respectively. The interest rates of two-year, three-year and five-year fixed deposits will be reduced by 20 basis points, to 2.0%, 2.3% and 2.3% respectively.

According to China.com,Industry experts said that the current net interest margin of banks is at a low level. Although rectifying the manual interest payment of banks will help reduce the cost of bank funds and play a positive role in stabilizing the net interest margin of banks, as the LPR is lowered, the net interest margin of banks is still under downward pressure, and it is necessary to reduce the cost of liabilities to stabilize the net interest margin. This is the main reason why banks lowered deposit rates.It is expected that deposit interest rates will usher in a new round of cuts, and small and medium-sized banks will also follow suit, but the extent and steps of the cuts among different banks will not be exactly the same.

On July 22, 2024, the People's Bank of China issued an announcement showing that starting from today, the 7-day reverse repurchase rate in the open market will be adjusted from the previous 1.80% to 1.70%. On the same day, the 1-year and 5-year LPRs both dropped by 10 basis points to 3.35% and 3.85% respectively.

Dong Ximiao, chief researcher at China UnionPay, said that the two declines in the loan market benchmark rate (LPR) this year and the increased fee reductions and concessions by commercial banks to the real economy will inevitably put pressure on bank profits and net interest margins. At the end of the first quarter of 2024, the net interest margin of my country's commercial banks had fallen to a historical low of 1.54%.

"Although the financial management departments have rectified the illegal manual interest payment and some policy interest rates have been lowered, if profits and interest rate spreads continue to decline, banks will face great pressure to continue to reduce fees and profits and develop steadily. In this case, lowering deposit rates and reducing liability costs have become a helpless but realistic choice for commercial banks." Dong Ximiao further said.

According to Beijing Business Daily, analysts believe that in the first quarter of 2024, the net interest margin of banks will drop to 1.54%, a decrease of 15 basis points from the beginning of the year. Considering the pressure on the growth of operating income of the entire banking industry, it is urgent to reduce the cost of long-term deposit liabilities in order to alleviate the pressure of narrowing net interest margins. At present, the state-owned banks "take the lead", followed by joint-stock banks and local small and medium-sized banks, which has become the regular rhythm of deposit "interest rate cuts". In the next step, it has become an inevitable choice for banks to reduce liability costs by lowering deposit interest rates.

China Everbright BankZhou Maohua, a macro researcher at the Financial Markets Department, said that taking into account the current level of bank net interest margin, the LPR quoted interest rate will be lowered by a large margin in July, and the comprehensive deposit rate is expected to be reduced by 10 basis points. However, considering the structure of the deposit market, there are differences in the reduction of current and long-term deposit rates, and the interest rate reduction of long-term deposit products will be relatively larger.

Daily Economic News, China Securities Journal, China.com, Beijing Business Daily, public information

Daily Economic News