Small and medium-sized banks join the ＂interest rate reduction＂ team, and individual five-year products will drop by 25 basis points. What will be the future trend？

After state-owned banks and some joint-stock banks lowered the interest rates of time deposits and certificates of deposit with a maturity of more than one year, a number of small and medium-sized banks have recently followed suit. On May 22nd, a reporter from beijing business today found that Bank of Ningbo, Suzhou Bank, Suzhou Rural Commercial Bank, Hangzhou Bank and Zhangjiagang Rural Commercial Bank made public statements one after another, and will adjust the deposit interest rate price according to market conditions. At present, some of the above-mentioned banks have taken actions to lower the interest rate of time deposits, and the interest rates of some banks’ deposit products from 3 to 5 years have been reduced by 10-25 basis points. In the opinion of analysts, the decline in deposit interest rate is conducive to reducing the cost of debt end and improving interest margin. It is expected that more small and medium-sized banks will reduce deposit interest rate in the future, but overall, the downward trend of interest rate is expected to be limited.

Many small and medium-sized banks cut deposit interest rates.

After the supervision encouraged small and medium-sized banks to lower the floating ceiling of deposit interest rates, many banks announced that they would make corresponding adjustments in light of market conditions. On May 22, beijing business today reporter found that Bank of Ningbo, Suzhou Bank, Suzhou Rural Commercial Bank, Hangzhou Bank and Zhangjiagang Rural Commercial Bank all mentioned that they would adjust the listing price and pricing strategy of deposits reasonably in line with the regulatory guidance and market conditions. Among them, Zhangjiagang Rural Commercial Bank clearly stated that "at present, interest rate pricing has been lowered for deposits with some maturities".

After the public statement, what is the deposit interest rate of various banks? According to a survey conducted by beijing business today on May 22nd, the interest rates of three-month to five-year fixed deposits of Suzhou Bank, Hangzhou Bank and Zhangjiagang Rural Commercial Bank have all changed.

"It just fell last week, and now it is generally lowered. The interest rate of each bank is similar." A staff member of Hangzhou Bank in Hangzhou told beijing business today that at present, the interest rates of ordinary time deposits of the bank for three months, six months, one year, two years, three years and five years are 1.4%, 1.65%, 1.95%, 2.45%, 3% and 3% respectively, which are down by 3 basis points, 4 basis points and 3% respectively compared with the previous interest rates.

The customer service staff of Suzhou Bank also revealed that the bank’s time deposit interest rate has been lowered recently. At present, the three-year and five-year ordinary time deposits are 3.15%, but the specific interest rate will fluctuate according to the outlets. According to an interview with a reporter from beijing business today, at present, the interest rates of three-year and five-year ordinary time deposits of Zhangjiagang Rural Commercial Bank are also 3.15%. The customer service staff of the bank said that the above interest rates were lowered on May 18th.

Talking about the reasons why a number of small and medium-sized banks have successively lowered deposit interest rates, Zhou Maohua, an analyst in the financial market department of China Everbright Bank, said that the central bank had previously introduced a "total+structure" policy tool, and the market liquidity was reasonable and abundant. The regulatory authorities also encouraged small and medium-sized banks to replenish capital through multiple channels, effectively alleviating the pressure on bank liabilities; At the same time, due to the complex environment facing the economy, the financing needs of entities such as investment and consumption are weak. On the one hand, the kinetic energy of banks to expand deposits and liabilities is slightly insufficient; On the other hand, since the beginning of the year, the deposits of residents and enterprises have increased significantly, and the "oversupply" in the deposit market has pushed some banks to lower their deposit interest rates; In addition, some small and medium-sized banks can reasonably reduce the cost of debt end, boost credit demand and effectively reduce the erosion of profits caused by the narrowing of interest margin by lowering the deposit interest rate; In addition, some banks reduce the deposit interest rate, which is beneficial to MPA assessment.

Reduce the cost of debt and improve the net interest margin

Small and medium-sized banks have lowered deposit interest rates, which is not unrelated to policy guidance. According to media reports, the market interest rate pricing self-discipline mechanism held a meeting to encourage small and medium-sized banks to lower the floating ceiling of deposit interest rates by about 10 basis points (BP); This requirement is not mandatory, but banks that make adjustments may be beneficial to their macro-prudential assessment (MPA).

According to a survey conducted by beijing business today reporter, in addition to the above-mentioned banks that have announced that their deposit interest rates will be adjusted accordingly in light of market conditions, Qingdao Bank has recently lowered its time deposit interest rates. According to the customer service staff of the bank, at present, the three-year and five-year time deposits of the bank have been lowered by 10 basis points, which are 3.3% and 3.2% respectively.

What impact will lowering the deposit interest rate have on banks? Yu Baicheng, president of Zero One Research Institute, believes that for small and medium-sized banks, lowering the deposit interest rate will reduce the cost of the debt side and help improve the bank’s net interest margin. However, under the background of policy promotion and economic growth slowdown, the loan interest rate is also decreasing. On May 20th, the loan market quoted interest rate (LPR) dropped by 15 basis points in five years, so the overall interest margin of banks is still in a narrowing trend.

According to the statistics of flush iFinD, only four of the 42 listed banks in A-share market in 2021, including Ping An Bank, Jiangsu Bank, Zheshang Bank and Nanjing Bank, saw their net interest margins rebound, while Lanzhou Bank remained the same as last year, and the net interest margins of the other 37 banks all decreased by 1-36 basis points compared with the end of last year. In the first quarter of 2022, the trend of interest margin narrowing continued. The net interest margin of 31 banks declined compared with the same period of last year, and that of 33 banks declined compared with the end of last year.

"The downward adjustment of deposit interest rates will help ease the pressure on some small and medium-sized banks to reduce their debt costs and net interest margin." Zhou Maohua pointed out that by lowering the deposit interest rate, banks will help alleviate the debt cost and make reasonable profits for the real economy, promote the improvement of the financing needs of the real economy, accelerate the economic recovery, and the activity of currency creation will increase accordingly, thus promoting the expansion of bank assets and liabilities.

Interest rate decline is expected to be limited.

From the perspective of the industry as a whole, on May 10th, the central bank released a report on the implementation of China’s monetary policy in the first quarter of 2022, which showed that state-owned banks such as the Postal Savings Office after the establishment of diplomatic relations between workers, peasants and China and most joint-stock banks had lowered their interest rates on time deposits and certificates of deposit with maturities of over one year in late April, and some local legal entities also lowered their interest rates accordingly. According to the latest survey data, from April 25th to May 1st, the weighted average interest rate of new deposits in financial institutions nationwide was 2.37%, down 10 basis points from the previous week.

After the deposit interest rate is lowered, what impact will it have on customers who prefer time deposits? Yu Baicheng said that in view of the economic situation and the trend of epidemic prevention and control, citizens’ spending power and confidence have been affected, and financial markets such as stock market funds have suffered losses, so citizens will be more conservative in their financial choices and their willingness to deposit will increase. Therefore, in this context, a slight decrease in deposit interest rate will not change depositors’ deposit choices.

"Generally speaking, customers who prefer time deposits are stable customers and prefer capital preservation and stable income." Zhou Maohua also believes that in the current environment where the market demand for deposits is relatively strong, the impact of lowering the deposit interest rate on deposit preference customers is limited as a whole. He suggested that banks can launch other stable wealth management investment products to provide customers with multiple choices.

Regarding the trend of subsequent deposit interest rates, Zhou Maohua predicted that more small and medium-sized banks would lower deposit interest rates, reasonably lower loan interest rates, effectively reduce the financing cost of the real economy, and promote the credit demand of the real economy. He suggested that small and medium-sized banks should constantly improve their internal governance, focus on their main business, enhance their management and risk control capabilities, better serve small and micro enterprises, cultivate their core competitiveness, and improve their differentiated competitiveness.

"Since the beginning of this year, the downward trend of deposit and loan interest rates is the result of the superposition of factors such as monetary policy supporting steady economic growth and reducing the financing cost of the real economy. However, at present, overseas markets such as the United States have entered the interest rate hike cycle. In order to maintain the internal and external balance, more domestic monetary support tools will be adopted for areas that are greatly affected by the epidemic, and the downward rate of interest rates is expected to be limited. " Yu Baicheng analyzed.

Beijing business today reporter Meng Fanxia Li Haiyan