Why did the deposit interest rates of small and medium-sized banks decrease
2024-04-11
The reduction of deposit interest rates by small and medium-sized banks is not only to stabilize the net interest margin, but also to follow up on the previous reduction of deposit interest rates by state-owned and joint-stock banks. After the reduction of deposit interest rates, the advantage of small and medium-sized banks absorbing deposits through high interest rates is weakened, but it is beneficial for reducing their deposit interest expenses, stabilizing net interest margin, and thus stabilizing income and profits. As the deposit interest rates of small and medium-sized banks decrease, investors also need to balance the relationship between risk and return, and implement diversified and comprehensive asset allocation strategies. Recently, multiple small and medium-sized banks in Henan, Shaanxi, Shanxi, Yunnan, Guizhou, Guangdong and other regions have issued intensive announcements, announcing the reduction of fixed deposit interest rates and the adjustment of categories to cover short-term, medium and long-term fixed deposits. Regarding the background of the recent reduction in deposit interest rates by small and medium-sized banks, several industry insiders have analyzed that this is a continuation of last year's reduction in deposit interest rates by commercial banks. Since the end of 2023, the banking industry has been experiencing a new round of deposit interest rate cuts. This wave of "interest rate cuts" involves state-owned large banks, joint-stock banks, and many small and medium-sized banks, and has shown the characteristic of "cascading" cuts, with state-owned large banks taking the lead and small and medium-sized banks following in a cascade. However, the magnitude of the cuts by small and medium-sized banks is often greater than that of state-owned large banks. From the past situation, the practice of "cascading" deposit interest rate cuts is also a common practice in the domestic banking industry. This adjustment method can avoid severe fluctuations in the market due to interest rate adjustments in a short period of time, provide the market with sufficient adaptation and reaction time, and ensure the smooth operation of the market to the greatest extent possible. "The reduction of deposit interest rates by small and medium-sized banks is not only to stabilize the net interest margin, but also to follow up on the previous reduction of deposit interest rates by state-owned and joint-stock banks." Lou Feipeng, a researcher at China Postal Savings Bank, said that currently, the net interest margin of commercial banks is at a low level and there is still downward pressure. Deposits are an important source of debt for commercial banks, and deposit interest expenses are important interest expenses. Banks need to stabilize net interest margins and improve the sustainability of financial services by lowering deposit interest rates, which means lowering interest payment costs. Dong Ximiao, Chief Researcher of Zhaolian and part-time Researcher at the Financial Research Institute of Fudan University, analyzed from a macro perspective based on the annual report of banks. As of the end of 2023, the net interest margin of commercial banks in China has decreased to 1.69%. According to the recently released annual reports of listed banks, the net interest margin of listed banks has generally decreased, with the net interest margin of six large commercial banks decreasing by 16 basis points to 31 basis points. The main reason for the decrease in net interest margin is that banks have increased their ability to reduce fees to the real economy, and the loan market quoted rate (LPR) has repeatedly decreased. Although deposit interest rates have decreased multiple times, the decrease is lower than the decrease in loan interest rates, resulting in a decrease in interest rate spreads. This year, while promoting a steady decrease in the cost of comprehensive social financing, the net interest margin of banks may continue to decline. In this situation, lowering deposit interest rates and lowering debt costs have become common choices for commercial banks. However, different banks have different rhythms and magnitudes in adjusting deposit interest rates due to factors such as market competition, customer positioning, and debt structure. What impact will the reduction of deposit interest rates have on the operation of small and medium-sized banks? Lou Feipeng stated that small and medium-sized banks lack obvious advantages in absorbing deposits,
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