See also intensive reduction of deposit interest rates, village and town banks "small steps and fast walks" to prevent customer loss

Author: Wang Fangran

In June, the tide of subsidy in deposit interest rates of small and medium-sized banks continued, this time further extending the scope to village banks.

Recently, many village and town banks in Sichuan, Jilin, Inner Mongolia, Shandong and other places "officially announced" that they would reduce the interest rates of some term time deposits from June, and most of the decline was 6BP~5BP.

It is worth noting that this is already the third round of "interest rate cuts" in bank fixed deposit rates this year. During April~June, banks intensively announced interest rate cuts at the beginning of each month, and in early April, many small and medium-sized banks in Henan, Guangdong and Hubei lowered time deposit interest rates to launch the "first shot" of bank deposit interest rate cuts during the year; In early May, Zheshang Bank, Hengfeng Bank, and Bohai Bank intensively announced deposit interest rate cuts, and the fixed deposit and listing interest rates of state-owned banks and joint-stock banks basically bid farewell to the "4" era.

Some insiders pointed out that although there have been many rounds of bank interest rate cuts this year, the current bank net interest margin is still under pressure, and there is still room for further reduction of deposit interest rates in the future.

A number of village and town banks cut deposit interest rates

On June 6, Kashgar Rural Commercial Bank issued an announcement that since June 3, the listing interest rates of personal deposits (whole deposits) will be adjusted as follows: the one-year deposit interest rates of 6,6 yuan, 5,10 yuan and 20,1 yuan are 95.2%, 05.2% and 15.5% respectively, which is 20BP lower than before; The three-year deposit interest rate of 3,15 yuan is 24.<>%, which is reduced by <>BP.

In contrast, the interest rate of Yibin Xingyi Village Bank has been lowered even more. From June 6, the interest rates of Yibin Xingyi Village and Town Bank will be adjusted to 1.2%, 15.2%, 7.3% and 3.3%, respectively by 7BP, 10BP, 15BP and 20BP compared with the previous period.

According to incomplete statistics from the first financial reporter, in the past week, nearly 10 banks such as Inner Mongolia Wuhai Bank, Shenzhen Luohu Lanhai Village Bank, Mongolian Commercial Bank, Dujiangyan Jindu Village and Town Bank, and Tonglu Hengfeng Village and Town Bank also issued intensive interest rate adjustment announcements.

The reporter noted that most of the current round of interest rate adjustments are concentrated in medium- and long-term time deposits with a maturity of three years or more, and the interest rates of the above-mentioned banks' 5-year fixed deposit products have basically dropped to less than 4% after this reduction. For example, Shenzhen Luohu Blue Ocean Village Bank and Dujiangyan Jindu Village Bank had deposit interest rates of 4% five years ago, and this time they were reduced by 10BP to 3.9%.

However, after the reduction, the deposit interest rate of the above-mentioned village and town banks still has certain advantages over the leading banks. Taking ICBC as an example, the three-year and five-year interest rates of the bank's time deposits (lump sum withdrawal) were 2.2% and 6.2% respectively. At present, the deposit interest rate of village and town banks is still above 65% five years ago.

It is worth mentioning that some of these banks have recently experienced several downgrades. Take Liaocheng Shanghai Rural Commercial Village Bank as an example, the bank has made three consecutive interest rate adjustments in two months. On April 2, the bank lowered the agreed deposit rate from 3.4% to 21.1%, and the 9-day call deposit rate from 1.5% to 7.2%; On May 1, the interest rate of the agreed deposit was again lowered to 1.6%, and the interest rate of 5-day and 11-day call deposits was lowered to 1% and 35.1% respectively. On May 7, the bank lowered the three-year and five-year interest rates of the whole deposit by 1BP to 1.55% respectively.

Jinan Rural Commercial Bank also continuously adjusted the deposit interest rate in just three months. The bank lowered the deposit interest rate once on March 3, and on May 3, on this basis, it lowered the one-year, two-year and five-year interest rates of the whole deposit listed private interest rate by 3BP, and lowered the two-year fixed deposit interest rate by 5 BP.

Some insiders pointed out that some banks choose to adjust deposit interest rates many times or related to the bank's own business strategy, small and medium-sized banks themselves are relatively difficult to collect deposits, a short period of sharp reduction of interest rates may lead to accelerated outflow of customers, multiple small reductions are relatively safe, can dynamically observe the changes of depositors, to prevent a large outflow of deposits.

The next stage is to reduce the focus or long-term deposit rates

In fact, there are multiple factors behind the recent trend of banks cutting interest rates. On the one hand, the Implementation Measures for Qualified Prudential Assessment (4 Revision) issued by the self-regulatory mechanism for market interest rate pricing in April clarifies that if the quarterly average monthly adjustment of the interest rate of time deposits and large certificates of deposit of each key maturity of a bank is lower than the agreed adjustment range compared with the monthly average in the second quarter of the previous year, points will be deducted on the basis of the "pricing behavior" score (2023 points in total).

On the other hand, commercial bank net interest margins have contracted to historically low levels. Among them, according to the data of the State Financial Regulatory Administration, in the first quarter of 2023, the net interest margin of large banks, joint-stock banks, urban commercial banks and rural commercial banks decreased by 2022BP, 21BP, 16BP and 4BP to 25.1%, 69.1%, 83.1% and 63.1% respectively compared with 85. Recently, some regional village and town banks have lowered the deposit listing interest rate, which will help further ease the pressure on debt costs.

Is there room for the deposit rate to be lowered next? Many institutions believe that the focus of the next stage of deposit interest rate reduction may be on the long-term deposit rate.

Recently, the regularization of deposits has further intensified, and the proportion of long-term deposits has increased. As of the end of April, time deposits accounted for 4.53% of domestic deposits, up 2.2 percentage points from the beginning of the year. Among them, resident time deposits accounted for 1.71% and 2.67% of enterprise deposits respectively, an increase of 8.3 and 1.1 percentage points over the beginning of the year.

"The level of long-end interest rates on core deposits is significantly higher than the market interest rate, and the need for adjustment under the background of deposit regularization has increased." Wang Yifeng, chief analyst of the financial industry of Everbright Securities, cited small and medium-sized banks such as stock banks as an example, saying that the current upper limits of two-year and three-year time deposit interest rates are 2.75% and 3.4% respectively, and the five-year fixed deposit interest rate can be higher. This interest rate level is much higher than the level of 2.19% and 2.26% of the yield of government bonds of the same maturity, and it is also significantly higher than the 2.3% and 2.65% of the listed interest rate of the same maturity.

Ni Jun, chief analyst of the banking industry of GF Securities, also pointed out that after the deposit listing rate was successively lowered by joint-stock banks and city commercial banks in April~May, it is expected that the term deposits of large state-owned banks will also have some room for optimization.