Author: Qi Ning

  Is there almost no difference between 3-year and 5-year interest rates on bank deposits?

5-Year Final Settlement Rate Might Not Have Been 3-Year High?

  Recently, a reporter from Yicai found that the interest rates of medium and long-term time deposits of many banks including China Construction Bank and China Merchants Bank have been "inverted", the yield of large-denominated certificates of deposit has continued to decline, and the interest rates of some bank products have been equal to the limited deposits in the same period. .

  Banks are adjusting their debt-side strategies, and interest rates on medium and long-term deposits are inverted.

  Industry insiders interviewed generally believe that banks have sufficient liquidity in the short term, and are facing the pressure of net interest margins caused by the long-term decline in loan interest rates. Coupled with the lack of effective credit demand, the motivation to absorb deposits, especially medium- and long-term and high-cost deposits, has been greatly weakened. .

  In fact, since the establishment of the deposit interest rate marketization mechanism in April this year, the banking industry has carried out a round of interest rate adjustment, and the focus of adjustment at that time was also on medium and long-term deposits with a maturity of more than 2 years.

Some bankers have analyzed that according to the downward trend of interest rates, the interest rate will only be lower after 5 years. Therefore, banks do not want customers to "lock in" a certain interest rate through deposits with a term of 3 years or more, increasing the cost of interest payment by banks.

  Zeng Gang, director of Shanghai Finance and Development Laboratory, believes that in the current environment, the main pressure on banks comes from net interest margin and credit risk. The former requires banks to further balance the cost of assets and liabilities. Recovery, the related pressure will improve in the second half of the year.

  However, Dong Ximiao, chief researcher of China Merchants Union Finance, believes that there are large differences between different banks. Although the current and future money supply is relatively abundant, it is still not ruled out that some banks will raise deposit interest rates to attract savings.

  The reporter noticed that in the context of the continuous decline in the interest rates of bank deposits and large-denomination certificates of deposit, bank account managers are more inclined to recommend medium- and long-term "capital-guaranteed" "bancassurance" products to customers. Such products can generally be "locked" for 3 years. 3.5% compounded interest rate.

According to the account manager of a large bank, although the yield of bancassurance products has fallen sharply compared with the previous 4% or more, the larger-denomination certificates of deposit are obviously "better".

However, some people in the insurance industry reminded that such products are not suitable for all depositors and need to be considered comprehensively.

  Deposit interest rates are upside down, and "principal-guaranteed" insurance products become a fragrant pastry?

  Recently, many savers have found that there is almost no difference between the three-year and five-year interest rates of bank deposits.

  Yicai reporters searched the mobile apps of several banks and found that the current 5-year fixed deposit interest rate has generally dropped below 3.65%, and the 3-year deposit interest rate is lower than 3.5%. above the 5-year interest rate level.

  Taking China Construction Bank as an example, the bank’s 3-year and 5-year fixed deposit interest rates are both 2.75%, but the 3-year fixed deposit can rise to 3.15% when it reaches 50,000 yuan, but the 5-year deposit interest rate does not rise. Obvious interest rate inversion.

  "This trend has gradually become apparent in the last one or two years, because interest rates may be cut in the future, and the final settlement interest rate such as the 5-year (deposit) may not be as high as 3 years, because the interest rate is likely to be lower after 3 years. "The customer manager of a major bank told reporters that the current bank prefers customers to choose short-term deposits to match the loan interest rate and control costs.

  In addition to large banks, joint-stock banks and city commercial banks/rural commercial banks also have similar phenomena.

For example, China Merchants Bank, the bank's 3-year and 5-year fixed deposit rates are both displayed at 2.75%, and Zhangjiagang Bank's two-term deposit rates are both 3.15%.

  Large-denomination certificates of deposit and ordinary time deposits, whose interest rates continue to decline, also have an "inverted" interest rate trend.

The Everbright Bank mobile app shows that the bank's 3-year large-denomination certificate of deposit (starting at 200,000 yuan) has an interest rate of 3.4%, which is basically the same as the highest interest rate for ordinary time deposits of the same period.

  In fact, in the context of regulatory restrictions on high interest rates and banks actively controlling costs, large-denomination certificates of deposit have cut interest rates while reducing the scale in the past two years.

The last large-scale adjustment of interest rates was in April and May of this year.

In order to enhance the ability of banks to support the real economy, after the establishment of the market-based adjustment mechanism for deposit interest rates, 6 major state-owned banks and most joint-stock banks took the lead in lowering the interest rates of time deposits of more than one year and large-denomination certificates of deposit at the end of April, and the adjustment range was wide. around 10 basis points.

  Among them, the interest rate of China Merchants Bank's large-denomination certificates of deposit was significantly reduced to 2.9%.

Before the reform of the deposit interest rate quotation mechanism in June 2021, there were still many banks that implemented a 3.55% annual interest rate on large-denomination certificates of deposit, which have now disappeared.

  In the first quarter monetary policy implementation report, the central bank mentioned that in the next stage, it will deepen the reform of interest rate liberalization, strengthen the supervision of deposit interest rates, and focus on stabilizing the cost of bank liabilities.

In May, a number of small and medium-sized banks followed up to adjust the interest rates of time deposits and large-denomination certificates of deposit, and the rate of reduction was mostly around 10 basis points.

  However, it is the norm for most banks to "emergency" in the limit of 3-year large-denomination certificates of deposit.

Previously, the first financial reporter learned that most banks' large-denomination certificates of deposit need to be reserved, customized or regularly scheduled to "grab" quotas through account managers, especially in the context of falling deposit interest rates and increasing fluctuations in the net value of wealth management products. Large-denomination certificates of deposit with interest rates above 3% have become "luxury".

  Nowadays, the attractiveness of various deposits has generally declined, and the market volatility has increased after the transformation of wealth management net worth. Is there a better alternative?

The reporter learned that, whether it is a large bank, a joint-stock bank or a city commercial bank, the customer managers generally increase the recommendation of the "capital guaranteed" bancassurance products that were vigorously promoted in the early stage.

  The reporter compared the insurance products recommended by a number of account managers and found that these products are mostly 3-year/5-year annual payment-type incremental whole life insurance/pension annuity insurance, and the compound interest is calculated at a rate of return higher than the bank deposit interest rate. , can be withdrawn at maturity, or you can choose to continue to withdraw as you use it or receive it for life with fixed payment, and the same interest rate is always "locked" during the period.

Previously, the "principal preservation" interest rate could reach a maximum of 4.9%. With the decline in interest rates, most of them have now dropped to 3.5%.

However, some insurance practitioners have reminded that such products are not "universal" and should still be comprehensively selected according to individual needs.

  Under the pressure of interest margins, banks reduce debt costs in multiple dimensions

  Behind the "inversion" of deposit interest rates, the pressure on bank interest margins remains unabated.

In particular, on May 20, the LPR (loan market quoted interest rate) with a maturity of more than 5 years was cut by 15 basis points, which further squeezed the bank's interest margin space.

  According to the main regulatory indicators for the first quarter of 2022 announced by the China Banking and Insurance Regulatory Commission, the net interest margin of commercial banks in the first quarter was 1.97%, down 0.11 percentage points from 2.08% in the whole of 2021.

  Zeng Gang believes that the current banks are mainly facing three major pressures, namely, the narrowing of net interest margin, credit risk and capital replenishment pressure. The most difficult one is the pressure of net interest margin, and deposits are passive liabilities. The adjustment of long-term deposit interest rates tends to lag relative to the asset side.

  In this context, various banks have taken action, and structural adjustment and interest rate reduction are the main directions.

Taking Jiangyin Bank as an example, the bank’s deposit interest rate in the first quarter was 2.12%, a decrease of 12BP from 2021, and the growth rate of deposits also slowed down.

In this regard, Jiangyin Bank said in a recent institutional survey that the bank took the initiative to strengthen the management of its liability structure this year, and guided branches to gradually reduce the proportion of deposits with high interest-bearing costs through performance appraisal, thereby promoting the reduction of deposit interest rates.

"In the first quarter of our bank's incremental deposits, the proportion of high-interest-paying deposits dropped significantly, and at the same time, the scale of structured deposits was restricted." Jiangyin Bank said that the bank is increasing its visits to enterprises and paying close attention to enterprises. Settlement funds and funds collected from payment for goods were collected to further increase the proportion of low-cost corporate deposits.

  With regulatory guidance and the establishment of a market-based mechanism for deposit interest rate pricing, banks have more possibilities to control costs.

In April this year, the central bank guided the interest rate self-discipline mechanism to establish a market-oriented adjustment mechanism for deposit interest rates. The member banks of the self-discipline mechanism can refer to the bond market interest rate represented by the 10-year treasury bond yield and the loan market interest rate represented by the 1-year LPR. Reasonably adjust the deposit interest rate level.

  Zhangjiagang Bank made it clear during institutional research that since this year, in order to reduce costs and increase efficiency, it has reduced the scale of large deposits and structured deposits, and adjusted the listed interest rates and assessment mechanisms for some deposit products. The results have gradually emerged.

  Qilu Bank also stated that the regulatory authorities have recently introduced a series of policies to promote the reduction of the cost of commercial banks' liabilities. The bank lowered the pricing of some deposits in the first quarter, and continued to increase the marketing of low-cost deposits and the use of central bank funds to guide the optimization of the liability structure. The cost of deposits has declined.

  In addition, the intensive re-lending facility launched by the central bank will also facilitate banks to control costs on the liability side.

Qilu Bank said that with the introduction of re-lending support policies such as scientific and technological innovation loans by the Jinan Branch of the Central Bank, the bank has effectively reduced the financing costs of enterprises by efficiently using the central bank's capital support, while also helping to reduce the bank's liability-side cost ratio.

  "Although there is downward pressure on (net interest margin) this year, as banks make a series of adjustments under the guidance of supervision, it is expected that the downward pressure in the second half of the year will weaken and then gradually improve." Zeng Gang believes that the net interest margin of the banking industry Interest spreads are expected to bottom out by the middle of this year, but banks are still advised to increase their diversified debt channels and moderately increase active debt if necessary.

  Insufficient credit demand, when will the asset shortage ease?

  In addition to the pressure on the net interest margin, the "inactive" bank reserve acquisition is also related to the macroeconomic downturn caused by the epidemic.

  From the perspective of financial data, although social financing and credit improved significantly in May compared with April, the main demand is still short-term, and the recovery of medium and long-term loan demand from enterprises and residents is less than expected, and the phenomenon of idling of funds under the background of loose money is obvious.

In the same period, residents' willingness to save has not diminished. In May 2022, RMB deposits increased by 3.04 trillion yuan, an increase of 475 billion yuan year-on-year.

In the first five months, resident deposits increased by 7.86 trillion yuan, a year-on-year increase of 50.6%, and the increase also exceeded the first year of the epidemic (resident deposits increased by 6.15 trillion yuan in the first five months of 2020).

  "The economy is going down, and the state encourages consumption and investment. Deposit interest rates are definitely getting lower and lower, and banks are not short of money now." A banker told reporters that under the background of sufficient liquidity, banks' motivation to attract reserves has weakened, and the current macro environment There is also a need to boost consumption and investment through low interest rates.

  In order to solve the problem of idling funds, banks have also tried their best to reduce losses.

For example, the Bank of Qingdao said during institutional research that in the second quarter of this year, while the debt side obtained diversified low-cost funds through re-lending and re-discounting, the asset side will continue to increase loans and moderately increase local government bonds and credit bonds. allocation to improve the efficiency of capital use.

  Regarding the recovery of credit demand in the future, Dong Ximiao believes that with the gradual stimulation of effective demand, the data in June will improve significantly.

From the perspective of balanced income, Luo Yamei, an analyst at Western Securities, believes that banks under greater pressure can seek opportunities from inclusive finance and personal loans.

The data shows that the weighted average interest rate of newly issued inclusive small and micro enterprise loans by banks in the first quarter of this year was 4.40%, a year-on-year decrease of 22BP, but still slightly higher than that of general corporate loans.

Although the sinking market has higher yields, it also faces greater pressure on expenses. In the future, "high growth + high pricing" consumer loans may become an important development direction.

  With the gradual recovery of credit demand, bank deposit rates are also expected to rebound slightly, and some bank deposit rates have rebounded recently.

"(The interest rate rebound) includes both the factors of the recovery of loan demand and the staged factors of the node (impulse) at the end of the month. The situation of different banks is different." Dong Ximiao believes that considering the downward pressure on the economy in the short term, the probability of monetary policy remaining loose is relatively high. Therefore, even if the demand on the asset side recovers, the impact on the internal liquidity of the bank will be small. The overall liquidity of the bank will remain ample in the future, and the overall impact on the deposit business will not be too great, but different banks will have different liabilities. Strategy.