Bank 3-year and 5-year deposit rates generally dropped below 3% -

How to see the deposit interest rate adjustment?

Banks cut interest rates again, do they continue to save or choose new financial management projects? Recently, many depositors have been weighing repeatedly.

In May, Zheshang Bank, Bohai Bank and Hengfeng Bank successively announced the reduction of interest rates for demand deposits and time deposit products. In April, small and medium-sized banks in Shandong, Henan, Hubei, Shaanxi and other places lowered the listing interest rate of RMB deposits. According to the statistics of market institutions, at present, the maximum annual interest rate of time deposits of large state-owned commercial banks and joint-stock banks is generally lower than 5%.

How to view the reduction of deposit interest rate? Will there be a "big move" of resident deposits as a result? What does this mean for the wealth management market?

Multiple factors contributed to lower interest rates

Deposit rates tend to move in the same direction as loan rates.

4.85%、4.80%、4.75%、4.65%、4.60%、4.45%、4.30%...... Since August 2019, the market quotation rate (LPR) for loans over 8 years has gradually declined. On May 5 this year, the People's Bank of China authorized the National Interbank Lending Center to announce the latest LPR, which was 5.22% for 1-year LPR and 3.65% for LPR over 5 years, maintaining a low level for nine consecutive months.

During the same period, deposit rates also entered a downward channel. According to the deposit information released by several large state-owned commercial banks such as the Industrial and Commercial Bank of China, from 2019 to early 2022, the annual interest rate of 1-year time deposits (whole deposit and whole withdrawal) is generally 1.75%, 3.2% for 75-year and 5.2% for 75-year. Today, 1-year time deposits are listed at around 1.65% p.a., 3-year at 2.60% and 5-year at 2.65%. In contrast, the annual interest rates of these three types of deposit products have decreased by 0.1, 0.15 and 0.1 percentage points respectively.

Taking China Construction Bank as an example, the listed annual interest rate of a 3-year time deposit (lump sum deposit) is 2.60%, and if the amount of a single deposit reaches 2,2 yuan, the annualized interest rate can rise to 77.3%; If the amount of a single deposit reaches $2,87, the APR can be raised to 2020.4%. Not only that, the annual interest rate of the bank's large-sum certificates of deposit has also been reduced from 125.3% in 1 to the current 3.<>%. From the perspective of other banks, the interest rate of time deposits is generally lower than <>%, although there are certain floating preferences, but only for large deposit certificates, newly registered customers, personal pension accounts and other situations.

The increase in demand for resident deposits is also an important reason for the reduction in the interest rate of time deposits.

People's Bank of China data shows that since last year, China's broad money supply (M2) and RMB deposits have continued to grow rapidly. The People's Bank of China Monetary Policy Analysis Group pointed out that with the continuous rationalization and improvement of China's market-oriented interest rate system and interest rate transmission mechanism, the interest rate differential between financial management and deposits after breaking the rigid payment also tends to narrow, and the return of wealth management funds of enterprises and residents is on-balance sheet deposits. At the same time, after the smooth transition of epidemic prevention and control, there is still a time lag in the recovery of production and circulation transmission and consumer demand in the real economy, and the economic cycle lag friction has not disappeared, which has also led to a decrease in the speed of money circulation, and an increase in the currency holdings and preventive savings deposits of market entities.

Wen Bin, chief economist of China Minsheng Bank, said in an interview with this reporter that in recent years, affected by the regularization of bank deposits and the pressure of inter-bank deposit competition, the cost of bank liabilities is relatively rigid. In contrast, measures to reduce corporate financing costs have kept banks' asset-side yields under pressure. At this time, regulating innovative deposit products with the characteristics of interest calculation by files, implementing "pressure and price control" for structured deposits, strengthening the control of Internet deposits, standardizing the agreement deposit business, and guiding banks to lower the upper limit of interest rates on some time deposits, etc., are conducive to banks achieving a balance between "promoting profits, stabilizing operation and preventing risks".

"At present, in the process of economic repair, the endogenous financing demand of the entity needs to be further boosted, and the bank loan interest rate will also adhere to steady decline to continue to increase support for the real economy." In the context of the overall decline in broad-spectrum interest rates, deposit rates will also fall appropriately. Wen Bin said.

Savers are actively adapting to change

In the interview, the reporter found that whether it is demand deposits, time deposits, or call deposits, the reduction of interest rates has attracted much attention from savers.

A significant number of depositors still value the safety and convenience of time deposits.

Ou Minxian, who works for a foreign company in Shanghai, invests 1/3 of his savings in time deposits. In her view, the purpose of buying time deposits is to prepare for emergencies, and the decline in the interest rate of time deposit products will not have much impact on her decision-making. "This part of the money, safety and convenience is the most important, and it doesn't matter much if the interest is higher or lower." Ou Minxian said.

"I have relatively short working hours, I don't have much savings, and I save money in the bank mainly to cultivate my good habit of calculating carefully in life." Gu Xinyi, who works on the Internet in Beijing, said that at present, he will have a current period and a regular existence, mainly in the current period. "The loss of one or two thousand yuan of interest can be exchanged for tens of thousands of yuan of liquid funds that can be used at any time." Now that the 3-year fixed and 5-year fixed interest rates are lower, the advantages of flexible access to demand deposits are more prominent. Gu Xinyi said.

There are also many depositors who actively seek to diversify their financial channels.

Recently, Hunan resident Zhang Tian has paid more attention to various financial literacies. All the while, she has saved part of her savings in the form of time deposits. "In the past, the interest rate of time deposits did not change much, but now the degree of interest rate marketization is high, and the difference in income of time deposit products bought at different points is not small. I am ready to increase my knowledge in this area and strive to select some cost-effective wealth management products to replace deposits. Zhang Tian said.

For Yuan Bowen, who lives in Tianjin, time deposits were once the most important way to manage money. Time deposit rates have fallen one after another, making him admit that "the pressure is a bit high". "In previous years, large banks had large certificates of deposit with annual interest rates above 3.5%, and I invested most of my savings into them. Now, not only the interest rate of time deposits has decreased, but also the interest rate of large certificates of deposit, which has indeed increased the difficulty of my financial management. Yuan Bowen said that for stocks, bonds, funds and other channels, he has also begun to strengthen learning to enrich financial management channels.

People's Bank of China data showed that RMB deposits fell by 4.4609 billion yuan in April, of which household deposits fell by 1.2 trillion yuan, turning negative year-on-year for the first time since February 2022. According to analysis, the decline in household deposits has factors that increase their willingness to consume, and the return of residents' deposits is also one of the reasons.

Wu Wenfeng, professor of the Department of Finance of Antai College of Economics and Management of Shanghai Jiao Tong University, told this reporter that the most important business of banks is deposit and loan business, and the interest difference between deposits and loans directly affects the profitability and risk prevention ability of banks. In the context of continuously reducing the financing costs of real enterprises, the interest rate of medium and long-term deposits has declined, and the "spread" between them and short-term deposits has been narrowing, which is conducive to balancing the debt term structure of banks, increasing the enthusiasm of bank loans and encouraging household consumption.

Banks continue to improve their service capabilities

How can banks cope with pressure at both ends of the spectrum? At present, major banks are actively adapting to customer needs to provide differentiated financial management options. For example, for customers with low risk appetite, continue to insist on strengthening deposit allocation; For customers with high risk appetite, it is recommended that customers use deposits, wealth management, funds and insurance products for balanced allocation.

The reporter learned from Industrial Bank that the bank lowered the deposit listing rate twice on July 2021, 7 and September 20, 2022. Among them, the interest rate of 9-year time deposits was reduced by 21 basis points and the interest rate of 3-year time deposits was reduced by 55 basis points, which was significantly greater than that of other maturity products. "Although the interest rate of medium- and long-term time deposits has been lowered with the market, the scale of long-term time deposits of our bank has maintained steady growth." The person in charge of the relevant business of Industrial Bank said that with the popularization of financial knowledge, the majority of depositors are more receptive to the fluctuation of deposit interest, and the reaction of depositors to the reduction of deposit interest rates is generally stable.

The person in charge said that IB has always maintained a positive interactive relationship with customers. On the one hand, the bank mobilizes the professional teams of each branch to explain and guide the downward trend of market interest rates; On the other hand, banks also actively guide depositors to comprehensively consider the three investment factors of risk, return and liquidity, enrich investment varieties and improve the return of customer asset portfolio.

Experts believe that in response to the decline in deposit interest rates, it is the key for commercial banks to improve their comprehensive service capabilities. "For example, in addition to helping customers realize savings appreciation, commercial banks should also improve their professional service capabilities such as tax consulting, legal advice, and long-term financial planning, so as to attract customers with better services." For another example, commercial banks can strengthen digital construction and use digital means to serve more high-quality private enterprise loan customers. Wu Wenfeng said.

"At present, the overall loan increment and growth rate of our bank are in the forefront of joint-stock banks, and the balance of green loans, specialized and special new enterprise loans, technology-based small and medium-sized enterprise loans, as well as the increase in public inclusive loans, and the increase in agriculture-related loans are also in the forefront of joint-stock banks." The person in charge of the relevant business of IB said that in the future, IB will effectively control the cost of liabilities through the optimization of deposit structure and refined pricing management, so as to lay a solid foundation for continuously reducing the financing cost of real enterprises and better serving the high-quality development of the economy and society.

Dong Ximiao, chief researcher of CMF Finance, said that the deposit interest rate is already at a low level. With the macroeconomic recovery and rising financing demand, there is relatively limited room for further decline in deposit rates in 2023. For residents, it is necessary to pay attention to balancing the relationship between risk and return. If you pursue stable returns, in addition to deposits, you can appropriately allocate cash management wealth management products, monetary funds, savings bonds, etc. "Small and medium-sized banks are difficult and costly to absorb liabilities, and should continue to strengthen the guidance and supervision of financial institutions through the self-discipline mechanism of market interest rate pricing, maintain a good competition order in the deposit market, promote banks to rationally absorb deposits and reduce the cost of liabilities." Dong Ximiao told this reporter. (People's Daily Overseas Edition reporter Wang Junling)