The five-year fixed deposit interest rate of banks has entered the era of "1"
2024-07-26
The six major state-owned banks jointly cut interest rates on deposits, with a reduction range of 5-20 basis points. This is the second collective reduction of deposit interest rates by the six major banks since December 2023. Analysts believe that this round of deposit interest rate cuts is to alleviate the pressure of bank interest rate differentials, and it is expected that other banks will also follow suit in the future. There is still room for deposit interest rate cuts. On July 25th, the six major banks, namely Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank, China Communications Construction Bank, and Postal Savings Bank of China, collectively lowered their deposit listing interest rates by 5-20 basis points. Among them, the listing interest rates for current deposits of five banks, namely Industrial, Agricultural, China Construction, and Communications, have been lowered by 5 basis points to 0.15%. The listing interest rates for 3-month, six-month, and 1-year lump sum deposits have all been lowered by 10 basis points to 1.05%, 1.25%, and 1.35%, respectively; The listing interest rates for 2-year, 3-year, and 5-year lump sum deposits have all been lowered by 20 basis points to 1.45%, 1.75%, and 1.8%. After the adjustment of the listing interest rates for six-month and one-year lump sum deposits and withdrawals by Postal Savings Bank of China, they are 1.26% and 1.38% respectively, while the interest rates for other terms remain the same as those of the other five banks. If 100000 yuan is deposited and withdrawn over a 5-year period, according to the listing interest rate, the interest will decrease from 10000 yuan to 9000 yuan, a reduction of approximately 1000 yuan. Prior to the synchronous reduction of deposit listing interest rates, major state-owned banks had already taken the lead in action. According to a previous survey by the reporter of Beijing Business Daily, on July 23, the executive interest rate of three-year fixed deposits in some areas of the Bank of Communications was lowered from 2.6% to 2.5%. At that time, the other five major state-owned banks had not yet adjusted. The market generally believes that this round of deposit "interest rate cuts" is closely related to the decrease in LPR (Loan Market Quotation Rate). On July 22nd, the People's Bank of China implemented a combination of interest rate cuts and announced that, effective immediately, the open market 7-day reverse repo operation interest rate would be adjusted from the previous 1.80% to 1.70%; At the same time, the 1-year and 5-year LPR will be lowered by 10 basis points to 3.35% and 3.85%, respectively. With the downward trend of LPR quotes, market expectations for a reduction in deposit interest rates have once again risen. The deposit rate cut by major banks this time is very fast, less than a week after the LPR rate cut. From a mechanism perspective, the market-based interest rate pricing mechanism for deposits has been streamlined Xue Hongyan, vice president of Xingtu Financial Research Institute, said that according to the market-oriented adjustment mechanism of deposit interest rate, the bank deposit interest rate is linked to the 1-year LPR quotation and the 10-year treasury bond yield. Linking the deposit interest rate to the LPR can better stabilize the bank interest margin. From a psychological perspective, major banks immediately lowered their deposit interest rates, and this was an asymmetric rate cut. The reduction in 2-year and above deposit interest rates was greater than the LPR rate cut, indicating that banks are still facing pressure to continue narrowing their net interest margin. Regarding the impact of the reduction in deposit interest rates, the Chief Economist of CITIC Securities clearly pointed out that the reduction in deposit interest rates will help banks reduce their debt side costs, alleviate net interest margin pressure, and improve profitability; But we need to be vigilant about the increasing difficulty of collecting reserves in the future. Lowering deposit interest rates can create space for lowering loan interest rates, further reducing the financing costs of the real economy, supporting corporate financing, and may also encourage some funds to shift from bank deposits to other investment channels, thereby stimulating consumption and investment. He further stated that the coverage of this interest rate adjustment is broader, indicating that banks hope to influence the market through a more comprehensive adjustment, rather than just targeting certain specific types of deposits. The consideration of the downward adjustment may be to avoid a significant loss of deposits, and to some extent, it is also related to the lingering impact on bank deposits after the previous "manual interest rate supplement" was suspended. Other banks will follow suit. In recent years, the listing interest rate of bank deposits has undergone multiple rounds of adjustments, with three reductions in 2023 alone. State owned banks are leading the way, joint-stock banks are quickly following suit, and local banks are gradually following suit, becoming a routine rhythm for deposit "interest rate cuts". Prior to this round of deposit interest rate cuts, the latest round of cuts began on December 22, 2023. At that time, five state-owned banks including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, and Bank of Communications, as well as the joint-stock bank China Merchants Bank, collectively took action to lower the deposit listing interest rate. After adjustment, the listing interest rate for 3-year fixed deposits decreased from 2.2% to 1.95%, and for 5-year deposits decreased from 2.25% to 2%. One day later, Postal Savings Bank also lowered the deposit listing interest rate. Afterwards, most joint-stock banks followed suit with adjustments, including 11 banks including Industrial Bank, Shanghai Pudong Development Bank, CITIC Bank, Everbright Bank, Huaxia Bank, Minsheng Bank, Guangfa Bank, Ping An Bank, Bohai Bank, Hengfeng Bank, and Zhejiang Merchants Bank, which lowered their deposit listing rates by about 10 to 25 basis points. Afterwards, local small and medium-sized banks also followed suit and lowered their prices in 2024. In the eyes of analysts, lowering deposit interest rates is an inevitable choice for banks to stabilize interest spreads. According to data from the State Administration of Financial Supervision and Administration, after the net interest margin of commercial banks fell below 1.7% for the first time at the end of the fourth quarter of last year, reaching 1.69%, the net interest margin of commercial banks further decreased to 1.54% in the first quarter of this year. Dong Ximiao, Chief Researcher of the China Merchants Association, pointed out that the repeated decline in LPR and the banks' increased reduction of fees and benefits to the real economy have inevitably put pressure on the profits and net interest margins of commercial banks. Although the financial management department has rectified illegal manual interest payments and lowered some policy interest rates in the early stage, if profits and interest spreads continue to decline, and banks continue to reduce fees and benefits, there will be greater pressure for stable development. In this situation, lowering deposit interest rates and reducing debt costs have become a helpless but realistic choice for commercial banks. Next, banks may take more measures, including lowering deposit interest rates and optimizing deposit structures, to continue reducing capital costs, striving to maintain basic stability in interest rates, maintaining a steady development trend, and maintaining the strength of serving the real economy. Is there still room for a reduction in deposit interest rates after this round of interest rate cuts? Xue Hongyan believes that the pressure of interest rate differentials is a dilemma for the entire industry, and it is expected that other banks will soon follow suit by lowering deposit interest rates. From the pace of interest rate cuts, in order to better stabilize growth and leverage the supportive role of monetary policy, it is expected that there will be further interest rate cuts within the year after this rate cut, and correspondingly, deposit interest rates will continue to be lowered. For depositors, if they decide to only buy deposits, it is best to lock in deposit products that still have interest rate advantages as early as possible before interest rate cuts are fully implemented; For long-term planning, we should learn to diversify asset allocation and obtain better returns in a low interest rate environment. Mingming stated that other banks are likely to follow suit one after another, and the degree of marketization of deposit interest rates will further increase. The reduction of deposit interest rates may prompt some residents to shift their funds from bank deposits to other investment channels, and low-risk products such as wealth management bonds may receive incremental funds
Edit：NingChangRun Responsible editor：LiaoXin
Source：Beijing Business Daily
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