2024-08-09
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Reporter of China Business Network: Li Yuwen Editor of China Business Network: Ma Ziqing
A new round of deposit rate cuts is still continuing. Following the footsteps of large banks, many small and medium-sized banks have recently lowered their deposit rates. The reporter noticed that compared with the previous rounds of deposit rate cuts, some small and medium-sized banks have significantly increased the adjustment of 3-year and 5-year fixed deposit rates, with the highest reduction reaching 80 basis points, far exceeding the reduction in deposit rates of large banks and joint-stock banks of various terms.
Judging from the previous rounds of deposit interest rate adjustments, due to factors such as attracting deposits, the interest rates of local small and medium-sized banks will generally be higher than those of national commercial banks after the interest rate cuts. However, after this substantial cut, the deposit interest rates of many small and medium-sized banks have also bid farewell to the "3" era.
Some interviewees said that the significant reduction in deposit interest rates of some small and medium-sized banks may increase their deposit pressure in the short term, but in the long run, small and medium-sized banks can attract and retain customers by providing more personalized services and products and strengthening cooperation with other financial institutions. In addition, with the development of financial technology, some small and medium-sized banks can also provide deposits and other financial services through digital channels to reduce their high dependence on traditional physical outlets.
This round of deposit rate cuts began on July 25 when the six major state-owned banks collectively announced adjustments to the RMB deposit rate. Judging from the pace of previous rounds of deposit rate cuts, the major banks took the lead, followed by joint-stock banks, city commercial banks, and rural commercial banks.
The pace of overall interest rate cuts in the industry has clearly accelerated. Less than a week after the major banks announced adjustments to their deposit rates, all 12 joint-stock banks have completed the reduction in their deposit rates.Bank of Jiangsu、Bank of Nanjing、Suzhou Bank、Bank of Beijing、Bank of Shanghai、Changsha Bank、Bank of ChongqingMany city commercial banks have also followed suit and adjusted their deposit rates. Overall, the reduction in deposit rates of these banks for different maturities ranged from 10BP to 30BP.
In addition, recently, many small and medium-sized banks such as rural commercial banks and village banks have followed suit in lowering deposit rates. The reporter noticed that some small and medium-sized banks have significantly increased the adjustment of 3-year and 5-year fixed deposit rates, with the highest reduction reaching 80 basis points, far exceeding the reduction in deposit rates of the aforementioned large banks and joint-stock banks. After this adjustment, the deposit rates of many banks have also bid farewell to the "3" era.
Specifically, Guangxi Shangsi Rural Commercial Bank will adjust its deposit interest rates from August 13, with the one-year, two-year, three-year and five-year full deposits adjusted to 1.7%, 1.8%, 2.4% and 2.4% respectively, down 30 BP, 65 BP, 75 BP and 80 BP respectively compared with the previous period; Guangxi Tianlin Rural Commercial Bank will adjust the interest rates of some RMB deposits from August 6, and the current one-year, two-year, three-year and five-year interest rates are 1.95%, 2.30%, 2.80% and 2.80% respectively, down 15 BP, 25 BP, 50 BP and 50 BP respectively; Xinyang Pingqiao Zhongyuan Rural Commercial Bank will adjust the interest rates of some RMB deposit products from August 5, with 1 year at 1.90%, 2 years at 2.10%, 3 years at 2.35% and 5 years at 2.40%, down 25 BP, 50 BP, 65 BP and 60 BP respectively.
Cao Zhe, chief investment officer of Avenir, told reporters that large banks and joint-stock banks are relatively more resilient to the pressure of deposit rate cuts due to their scale and network effects. For some local small and medium-sized banks, a significant interest rate cut may increase their deposit pressure in the short term.
In the long run, small and medium-sized banks can attract and retain customers by providing more personalized services and products and strengthening cooperation with other financial institutions. In addition, with the development of financial technology, some small and medium-sized banks can also provide deposits and other financial services through digital channels to reduce their high dependence on traditional physical outlets.
Since the establishment of the deposit interest rate market-oriented adjustment mechanism in April 2022, the deposit interest rate has been lowered five times, led by major banks, on September 15, 2022, June 8, 2023, September 1, 2023, December 22, 2023, and July 25, 2024. The motivation behind this is the increasingly prominent interest rate spread pressure in the banking industry.
According to data from the State Financial Supervision and Administration Bureau, in the first quarter of this year, the net interest margin of commercial banks fell by 15BP month-on-month to 1.54%, hitting a new historical low and further deviating from the warning level of 1.8%. In this context, the reduction in deposit rates will help banks reduce the cost of liabilities and ease the pressure on net interest margins.
It is worth mentioning that some experts believe that there is still room for further reduction in deposit rates, and it may be implemented again within the year. Wang Qing, chief macro analyst of Orient Securities, said, "Taking into account the economic and price trends in the future, we judge that there is still room for the policy interest rate (7-day reverse repurchase rate) to be lowered in the fourth quarter, which will then drive the LPR quotes of the two term varieties to follow up and adjust. In this way, it is possible that a new round of deposit rate cuts will be launched around the end of the year."
China Everbright BankZhou Maohua, a macro researcher at the Financial Markets Department, said that judging from the current pressure on banks' net interest margins, the imbalance in the deposit market structure, the need to guide the further decline in financing costs for the real economy, and the maintenance of low market interest rates, domestic deposit rates may still be lowered.
For depositors,Yu Fenghui, a special researcher at the China Financial Think Tank, said that they need to pay more attention to the diversified allocation of funds, such as considering buying government bonds, money funds or other wealth management products to balance returns and risks.
In addition, Qu Fang, an investment consultant at Wanlian Securities, also told reporters that customers with lower risk appetite are more interested in the safety of their principal, so they are not very sensitive to falling interest rates. For depositors who seek higher returns, banks can consider allocating wealth management products, bond funds or stock funds for them.
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