After the six major state-owned banks in China collectively announced the reduction of deposit listing interest rates, national joint-stock banks have also taken action to initiate a new round of deposit "interest rate cuts" in the banking industry. On July 26th, China Merchants Bank and Ping An Bank announced a reduction in deposit interest rates; On the 29th, 10 national joint-stock commercial banks including CITIC Bank, Industrial Bank, Shanghai Pudong Development Bank, Everbright Bank, Huaxia Bank, Minsheng Bank, Guangfa Bank, Bohai Bank, Zhejiang Merchants Bank, and Hengfeng Bank also adjusted their RMB deposit interest rates. According to statistics, as of the 29th, 18 national banks have implemented deposit "interest rate cuts". In this round, six major state-owned banks have lowered their deposit interest rates, and the five-year lump sum deposit and withdrawal annual interest rates have all been reduced from 2% to 1.8%, which means that the deposit interest rates of the six major banks have officially bid farewell to the "2" prefix. National joint-stock banks have followed suit with interest rate cuts, but there are still deposit products with interest rates above 2%. Specifically, the deposit interest rates of China Merchants Bank for each term are consistent with those of state-owned large banks such as ICBC, ABC, China Construction Bank, and ICBC. In addition, 11 joint-stock banks have a one-year fixed deposit listing interest rate of 1.55%, while the interest rates for other maturities vary. Among them, the listing interest rates for two-year fixed deposits are concentrated in the range of 1.55% to 1.7%, three-year fixed deposits are 1.8% to 2.1%, and five-year fixed deposits are 1.85% to 2.1%. From the overall pace of China's banking industry lowering deposit interest rates in the past, it is generally the case that state-owned large banks lower first, national joint-stock banks follow suit, and local small and medium-sized banks take subsequent actions. The round of small and medium-sized banks lowering deposit interest rates in April this year is a continuation of last year's state-owned large banks lowering deposit listing interest rates. At that time, many small and medium-sized banks in Shanxi, Shaanxi, Henan, Yunnan, Guizhou and other places announced intensively the reduction of fixed deposit interest rates, mainly rural commercial banks and village banks. The adjusted deposit products involve different maturities such as three months, six months, one year, two years, and three years, with interest rate reductions ranging from 5 basis points to 45 basis points. Zhou Maohua, a macro researcher at the Financial Market Department of Everbright Bank, believes that the intensive reduction of deposit interest rates by small and medium-sized banks such as rural commercial banks is related to two factors. Firstly, in recent years, the savings of Chinese residents have grown rapidly, far exceeding the trend level, and the overall performance of the deposit market is that supply exceeds demand; Secondly, in recent years, banks have continued to benefit the real economy, leading to increased net interest margin pressure for some banks and a significant increase in their initiative in managing debt costs. Reasonably reducing deposit interest rates can help some small and medium-sized banks alleviate the pressure of debt costs Zhou Maohua said. The interest difference between deposits and loans is the main source of income for Chinese banks. Since 2023, the banking industry has continued to benefit the real economy through various means such as lowering new loan interest rates, adjusting existing mortgage interest rates, and repricing loans, resulting in a narrowing of interest margin space. As of the end of 2023, the net interest margin of Chinese commercial banks has dropped to 1.69%, breaking below the 1.7% mark for the first time. In the first quarter of 2024, the net interest margin of banks narrowed to a historical low of 1.54%. Industry experts have stated that in recent years, the Chinese banking industry has provided significant support to the real economy, resulting in a noticeable decrease in loan interest rates. However, on the debt side, due to the obvious trend of deposits becoming fixed and long-term, the effect of lowering deposit interest rates needs to gradually manifest with the repricing of existing deposits. Some banks are affected by factors such as illegal manual interest payment and deposit collection, and the decrease in debt costs is significantly smaller than the decrease in asset returns. Authoritative sources revealed that in April, regulatory authorities carried out rectification measures against illegal manual interest payments, effectively reducing interest expenses and approaching the effect of lowering deposit interest rates once. Several national banks have reported that after the rectification of illegal manual interest payments, their deposit interest rates in June, especially for corporate deposits, have significantly decreased compared to April, and the net interest margin has rebounded. Authoritative sources say that this round of banks actively lowering deposit interest rates, coupled with a significant decrease in medium and long-term deposit interest rates, is conducive to further reducing interest expenses, alleviating the problem of long-term deposits, stabilizing bank debt costs, and enhancing the sustainability of financial services for the real economy. It is also conducive to improving the profitability of banks, increasing shareholder equity, and benefiting the corresponding stock valuation. (New Society)