On June 6, a number of large state-owned banks officially announced that they would adjust the interest rate on RMB deposits. Among them, some major banks adjusted the listing interest rate of RMB deposits, the listing rate of demand deposits was reduced by 8 basis points to 5.0% compared with the previous period, and the listing rates of 2-month, 3-month and 6-year listed products remained unchanged at 1.1%, 25.1% and 45.1% respectively, the 65-year listing rate was reduced by 2 basis points to 10.2%, and the 05-year and 3-year listing rates were all reduced by 5 basis points to 15.2% and 45.2% respectively. In addition, the listing interest rate of fractional deposit lump sum, whole deposit receipt, and principal deposit and interest withdrawal products remains unchanged, and the listing interest rate of call deposit remains unchanged.
This is the second time that major national banks have lowered the listed interest rates of some maturity deposits according to changes in market interest rates and deposit supply and demand after September 2022.
The first financial reporter interviewed industry experts and learned that banks flexibly adjust deposit interest rates according to changes in market supply and demand, taking into account their own operating conditions, indicating that the role of the deposit interest rate market-oriented adjustment mechanism continues to play effectively.
Ensure the stability of bank liabilities
The higher cost of liabilities in the banking system is the direct cause of the reduction in deposit rates.
Since the beginning of 2023, affected by the weakening of economic recovery, residents' consumption and enterprise investment willingness are low, the demand for currency transactions is still weak, and both enterprise and resident deposits continue to show obvious regularization characteristics.
Wang Yifeng, chief analyst of the financial industry of Everbright Securities, told reporters that the current interest rate of time deposits with a maturity of 2 years and above is systematically higher than the market interest rate. However, in recent times, the overall market interest rate has dropped significantly, depositors tend to choose longer term time deposits to lock in high interest rates, promote the regularization and long-term of deposits, push up the cost of debt in the banking system, and then superimpose the continuous decline in loan interest rates, and the interest rate spread of the banking industry continues to narrow.
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 resident deposits and enterprise time deposits accounted for 8.3% and 1.1% respectively, an increase of 9.<> and <>.<> percentage points respectively from the beginning of the year.
Data show that in the first quarter of this year, the net interest margin of commercial banks narrowed by 17BP to 1.74% (a new low since data became available). Among them, large state-owned banks narrowed by 20BP to 1.69%, joint-stock banks by 16BP to 1.83%, urban commercial banks by 4BP to 1.63%, rural commercial banks by 25BP to 1.85%, while private banks and foreign-funded banks expanded by 17.1BP and 8.5BP to 4.11% and 1.66% respectively.
Wang Yifeng believes that under this circumstance, banks should reduce deposit interest rates according to changes in market conditions, which is conducive to maintaining the order of market competition, ensuring the stability of bank liabilities, and maintaining a reasonable interest rate spread.
Wen Bin, chief economist of Minsheng Bank, said that the bank's reduction of deposit interest rates according to changes in market conditions is conducive to maintaining market competition order, achieving sustained and steady operation, and enhancing the ability and sustainability of supporting the real economy.
Provide room for loan interest rates to fall
Since 2020, China's loan interest rates have continued to decline. In March 2023, the weighted average interest rate on corporate loans was 3.3%, down 95.2019 percentage points from December 12. Under the pressure of narrowing bank net interest margins, the reduction of deposit interest rates is expected to provide space for loan interest rates to remain stable and fall.
Since last year, deposit rates have undergone several rounds of reductions.
In April 2022, the People's Bank of China guided the interest rate self-discipline mechanism to establish a market-oriented adjustment mechanism for deposit interest rates, guiding banks to reasonably adjust the level of deposit interest rates with reference to changes in market interest rates.
In September 2022, major banks further voluntarily lowered deposit rates in response to market changes, and other banks followed suit.
In April 2023, some small and medium-sized banks made up for the deposit rate reduction in September 4; In early May, in order to strengthen the level control of the short-end interest rate of deposit "demand-like", the upper limit of the point increase for treaty deposits and call deposits was lowered.
"After the national banks cut the deposit listing interest rate, it may once again drive small and medium-sized banks to gradually follow suit." Wen Bin told reporters.
Wang Yifeng stressed that due to the intensification of deposit regularization, the pressure on deposit costs has led to insufficient motivation for quotation banks to take the initiative to lower LPR quotations. The reduction of the deposit interest rate not only helps to reduce the cost of liabilities of commercial banks and stabilize the net interest margin, but also provides space for the decline of loan interest rates. Considering that the downward pressure on the economy has increased at this stage, the need to release the signal of "stable growth" by reducing the policy interest rate has increased, and it is not ruled out in the future that the financing cost of the real economy will be further reduced through the "MLF – LPR" adjustment mechanism.