A new wave of ＂interest rate cuts＂ was launched, this time by city rural commercial banks and rural banks, with a reduction rate as high as 65 basis points.
China Business Daily (Reporter Wang Tongxu)A new wave of "interest rate cuts" by commercial banks started, and this time, city rural commercial banks and village banks "carried the banner".
Recently, a number of small and medium-sized banks intensively announced the adjustment of deposit listing interest rates, lowering the listing interest rates of 1-year, 3-year and 5-year deposits. Among them, the adjustment of medium and long-term time deposits is relatively large, and the listing interest rate of 5-year deposits is lowered by 65 basis points at the highest.
"This adjustment is mainly a follow-up to the interest rate adjustment actions of state-owned banks at the end of last year, and it also reflects the pressure faced by small and medium-sized banks and the low net interest margin of the banking industry. Lowering the deposit interest rate will help ease the pressure on banks’ interest margin, and also stabilize the net interest margin to enhance the sustainability of supporting the real economy. " Bai Wenxi, chief economist of IPG China, told China Business Daily.
At the rural inclusive finance comprehensive service point of Guilin Bank in Shangzheng Village, Tanluo Town, Xixiangtang District, Nanning, the bank staff are activating the social security card for farmers. (Image courtesy of CNSPHOTO)
The downward adjustment is as high as 65 basis points.
According to the reporter’s incomplete statistics, up to now, 10 small and medium-sized banks, including Guilin Bank, Yushu Rural Commercial Bank, Lingui Rural Commercial Bank, Huadian Rural Commercial Bank, Guangxi Fengshan Rural Commercial Bank, Jiaohe Rural Commercial Bank, Lingchuan Shentong Village Bank, Fusui Shentong Village Bank, Qinnan National Village Bank of Qinzhou City and Nanning Xingning Changjiang Village Bank, have lowered their deposit listing interest rates, and the adjustment time is generally from February 21, 2024.
Generally speaking, the adjustment mainly involves demand deposits, time deposits, certificates of deposit and other deposit products, and the adjustment of medium and long-term time deposits is even greater.
Among them, two rural banks, Lingchuan Shentong Village Bank and Fusui Shentong Village Bank, made the same adjustment to the listing interest rate of lump-sum deposits, and the five-year interest rate was adjusted from 3.85% to 3.2%, with a downward adjustment of 65 basis points; The 2-year interest rate was adjusted from 2.75% to 2.55%, down by 20 basis points; The one-year interest rate remains unchanged at 2.15%.
Guilin Bank also adjusted the 5-year deposit rate to 3.2%. It is worth noting that this is the second time that the bank lowered the listing interest rate of deposit products during the year. On January 21st, the bank adjusted the five-year deposit interest rate from 3.9% to 3.35%. Together with this adjustment, the five-year deposit interest rate of the bank has dropped by 70 basis points since the beginning of the year.
For the reasons for this adjustment, a number of banks said in the announcement that it is to further promote the marketization of interest rates.
On the whole, the adjusted 3-year and 5-year time deposit rates of these small and medium-sized banks are still mostly above 3%, which is higher than that of state-owned banks.
"Lowering the deposit interest rate is to stabilize growth and adjust the structure." Yu Xi, co-founder of Communication Planet App, told reporters that in the current economic situation, lowering the deposit interest rate will help reduce the financing cost of the real economy, promote investment and consumption, and thus stimulate economic growth. At the same time, this is also part of the central bank’s prudent monetary policy, which supports the development of the real economy by adjusting the interest rate transmission mechanism, optimizing the allocation of resources.
Respond to the pressure of narrowing the net interest margin
On the evening of February 21st, the Table of Main Supervision Indicators of Commercial Banks in 2023 (Quarterly) issued by the State Financial Supervision Administration showed that by the end of 2023, the net interest margin of important indicators of commercial banks had fallen to 1.69%, which was below the 1.7% mark for the first time.
On February 22nd, CICC released a research report saying that the narrowing of net interest margin of commercial banks in 2023 was mainly due to the adjustment of existing mortgage interest rate, repricing of loans and the downward trend of new loan interest rate.
The "unprecedented" reduction of LPR by 25 basis points over five years will put the banking industry under pressure to further tighten the net interest margin.
Lou Feipeng, a researcher at China Postal Savings Bank, believes that this round of reduction of deposit interest rates by small and medium-sized banks will help reduce debt costs, hedge the pressure of further narrowing the net interest margin caused by the reduction of LPR for more than five years, and enhance the sustainability of banks’ support for the real economy.
However, it is worth noting that in the context of the general decline in bank deposit interest rates, some banks have raised deposit interest rates against the trend.
Recently, many banks, including Xinxiang Rural Commercial Bank, Suining Rural Commercial Bank and Huojia Rural Commercial Bank, announced that they would raise the deposit interest rate.
As for the reason for raising the deposit interest rate, Xinxiang Rural Commercial Bank said in the announcement that it is a means to give back to customers at a "good start".
Wu Zewei, a researcher at Xingtu Financial Research Institute, said in an interview that small and medium-sized banks are in a weak position in saving money, and the debt side is under pressure. In addition, in order to sprint, the deposit interest rate is raised to attract depositors’ deposits.
Zhang Xuefeng, a financial commentator, told reporters that the impact of bank interest rate cuts on the economy and financial system needs to be carefully evaluated. The interest rate cut may stimulate the demand for loans, but it will also pose a challenge to the profitability and stability of banks. Especially for small and medium-sized banks, interest rate cuts may further squeeze their profit margins and increase risks. Therefore, the regulatory authorities need to closely monitor the impact of interest rate cuts on bank risks and take necessary measures to ensure the stable operation of the financial system.
There is still room for lowering the deposit interest rate.
In order to alleviate the downward pressure on net interest margin, commercial banks have lowered deposit interest rates several times.
According to the research report of Guojin Securities, the reduction of deposit interest rate is expected to ease the pressure on banks’ net interest margin and enhance the enthusiasm of finance for supporting the real economy.
The report on the implementation of China’s monetary policy in the fourth quarter of 2023 issued by the central bank also proposes to continuously deepen the interest rate marketization reform, further improve the formation mechanism of quoted interest rate in the loan market, give play to the role of market-oriented adjustment mechanism of deposit interest rate, and promote the steady decline of comprehensive social financing costs.
Looking into the future, people in the industry generally believe that there is still room for the deposit interest rate to fall.
Bai Wenxi said that the central bank recently announced that the LPR for more than five years will be lowered by 25 basis points, which is expected to further guide banks to lower deposit interest rates and promote the orderly decline of LPR, thus reducing the financing cost of the real economy.
Dong Ximiao, chief researcher of Zhaolian, believes that the Central Economic Work Conference calls for "promoting the steady and declining cost of comprehensive social financing". Under this background, banks will still reduce costs on the capital side, and the deposit interest rate is more likely to fall. Small and medium-sized banks should abandon the "speed complex" and "scale complex" and rationally expand their deposit business according to their own assets and liabilities. They should not only maintain the appropriate growth of deposit business, but also keep the debt cost within a reasonable range.
"For depositors, when the deposit interest rate drops, the savings income decreases, which may reduce the willingness to save and increase the demand for consumption and investment. In the long run, this adjustment will help optimize the allocation of resources, improve the efficiency of capital use, and be conducive to the sustainable development of the economy. " Said by the sunrise.
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