2023-06-03 09:27:14

Its falling again! What signals will multiple bank

[P] . Recently, several small and medium-sized banks in Hubei, Henan, Guangdong and other regions have lowered their deposit interest rates, which has attracted widespread market attention.

How should we view the recent reduction in deposit interest rates of multiple small and medium-sized banks? Does the current decrease in deposit interest rates for small and medium-sized banks herald the beginning of a new round of national deposit "interest rate cuts"? Will it push for a reduction in loan interest rates in April?

Multiple small and medium-sized banks have lowered deposit interest rates

Recently, Henan Rural Credit Cooperative announced the adjustment of RMB deposit interest rates.

The announcement states that starting from April 8th, the listed interest rates for one-year, two-year, and three-year lump-sum deposits and withdrawals will be lowered to 1.9%, 2.4%, and 2.85% respectively, while the listed interest rates for other periods will remain unchanged.

It's falling again! What signals will multiple banks release when their deposit interest rates are lowered? (Image source: Henan Rural Credit Cooperative)

On April 10th, Henan Guangshan Rural Commercial Bank announced that according to the arrangement of Henan Rural Credit Cooperative, it has decided to lower and restore the listed interest rates for one-year, two-year, and three-year lump sum deposits to 1.9%, 2.4%, and 2.85% respectively starting from April 8th, while the listed interest rates for other periods remain unchanged.

On April 8th, Henan Huaibin Agricultural and Commercial Bank announced that according to the Henan Rural Credit Card arrangement, the listed interest rates for one-year, two-year, and three-year lump sum deposits and withdrawals will be lowered and restored to 1.9%, 2.4%, and 2.85%, while the listed interest rates for other periods will remain unchanged.

It's falling again! What signals will multiple banks release when their deposit interest rates are lowered? (Image source: Huaibin Rural Commercial Bank)

According to the China Times, staff of the Henan Rural Credit System told reporters that some banks have issued announcements to adjust deposit interest rates, but banks that have not issued separate announcements have also implemented the latest RMB deposit interest rates.

In addition, banks such as Hubei Wuxue Rural Commercial Bank, Hubei Huangmei Rural Commercial Bank, and Hubei Luotian Rural Commercial Bank in Hubei Province have recently announced a reduction in deposit interest rates starting from April 8th.

It's falling again! What signals will multiple banks release when their deposit interest rates are lowered?

It's falling again! What signals will multiple banks release when their deposit interest rates are lowered? (Image source: Wuxue, Huangmei Rural Commercial Bank)

On April 11, the Associated Press said that Guangdong Nanyue Bank said that since April 4, the interest rate of demand deposit has been lowered from 0.385% to 0.3%, and the interest rate of lump sum deposit and withdrawal has also been lowered by 0.02 to 0.15 percentage points.

This is the first time the bank has adjusted its deposit interest rate since November 4, 2017.

It's falling again! What signals will multiple banks release when their deposit interest rates are lowered? (Image source: Guangdong Nanyue Bank)

Guangzhou Bank also adjusted the fixed deposit interest rate on April 1st, with a 0.05 percentage point reduction in the interest rates for both 3-year and 5-year (over 50000 yuan) products.

On April 1st, Guangdong Chenghai Rural Commercial Bank lowered the one-year, two-year, three-year, and five-year lump sum deposit and withdrawal rates by 0.05 to 0.15 percentage points.

How to view small and medium-sized banks lowering deposit interest rates?

In response to the current round of deposit interest rate cuts for small and medium-sized banks, several banking professionals pointed out in an interview with Shanghai Securities News that this reduction is not a new national deposit interest rate cut, but rather a follow-up "supplementary reduction" by small and medium-sized banks to the national bank deposit interest rate cut in September last year.

It's falling again! What signals will multiple banks release when their deposit interest rates are lowered? (Image source: China Times)

In fact, bank deposit rates experienced two waves of cuts last year. The first time was in late April 2022, when China Construction Bank, Industrial and Commercial Bank of China, Bank of China, and Agricultural Bank of China generally lowered the upper limit of interest rates for two-year and three-year regular deposits by 10 basis points, followed by other small and medium-sized banks.

The second time was from August to September 2022, when several major banks (Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank) once again lowered their deposit interest rates, driving other banks to follow up and adjust.

In response, the central bank stated in its monetary policy execution report for the third quarter of 2022 that this is a proactive action by banks to adjust deposit interest rates based on changes in market interest rates, reflecting an important step forward in the market-oriented reform of deposit interest rates.

On April 10th, Liu Yu, Chief Fixed Income Analyst of Guangfa Securities, stated in a research report that in the process of small and medium-sized banks following up with big banks to lower deposit rates, some small and medium-sized banks also raised deposit rates in stages to attract deposits before the Spring Festival in 2023.

Recently, some small and medium-sized banks have lowered their deposit interest rates again, and some of them may have adjusted the interest rates raised for the purpose of attracting deposits back to their original levels.

Guoxin Securities also pointed out in its research report that rural commercial banks mainly attract deposits in the first quarter, and some rural commercial banks have raised their deposit interest rates before and after the Spring Festival. Rural commercial banks have achieved good results in opening up their deposits.

Considering the current asset shortage and downward pressure on loan interest rates, some small and medium-sized banks have chosen to lower their deposit rates in line with expectations.

On April 10th, Wang Qing, Chief Macro Analyst of Dongfang Jincheng, stated in an interview with a reporter from China Times that according to the latest financial data, the year-on-year growth rate of residents' savings deposits at the end of February reached 18.3%, a new high in nearly a decade.

This indicates that the current propensity of residents to save is still relatively strong, and the balance of supply and demand in the deposit market also provides space for some banks to moderately lower their deposit interest rates. Is it entering a new round of deposit "interest rate reduction" cycle?

Since the beginning of 2023, several small and medium-sized banks, including Hengfeng Bank, Urumqi Bank, Guangdong Nan'ao Rural Commercial Bank, and Wudalianchi Rural Commercial Bank, have lowered their deposit listing rates.

It's falling again! What signals will multiple banks release when their deposit interest rates are lowered? (Image source: Network)

Recently, several small and medium-sized banks have announced a reduction in the listing interest rates for one-year, two-year, and three-year fixed deposits. Does this herald the beginning of a new round of national bank deposit cuts?

In response, Liu Yu pointed out in the research report that some rural commercial banks have recently lowered their deposit interest rates, which may still be following the September 2022 deposit interest rate reduction of major banks, rather than entering a new cycle of interest rate cuts. The new round of deposit interest rate cuts often involves large banks adjusting first, rather than small and medium-sized banks adjusting first.

According to a research report released by Guoxin Securities, this represents the spontaneous behavior of banks in the deposit market after changes in supply and demand, and does not mean that bank deposits will enter a new cycle of "interest rate cuts".

Analysts from China International Capital Corporation also stated that the recent deposit interest rate cuts by small and medium-sized banks in some regions may only be due to the impact of the previous deposit self-discipline pricing cuts, rather than a nationwide new round of deposit "interest rate cuts".

According to the deposit self-discipline pricing adjustment mechanism, a nationwide reduction in deposit interest rates may require a reduction in bond interest rates or LPR benchmark interest rates as a reference factor, so the conditions for a comprehensive reduction in deposit interest rates may not be available at the moment.

However, the Chief Economist of CITIC Securities clearly believes that there is a possibility of a reduction in the current deposit interest rate.

From the perspective of demand, a decrease in deposit interest rates can alleviate interest rate differential pressure, avoid idle funds, and stimulate residents' consumption.

Specifically, firstly, in the context of financial support for the real economy, loan interest rates have significantly declined, banks' debt costs remain relatively rigid, and interest rate spreads continue to compress, increasing operational pressure;

Secondly, lower loan interest rates and higher deposit interest rates objectively provide space for idle funds, and the phenomenon of "leakage" urgently needs to be addressed and eliminated;

Thirdly, lowering deposit interest rates can reduce residents' or businesses' willingness to save, which helps stimulate consumption and investment.

From a feasibility perspective, in 2022, the residential sector accumulated a large amount of excess savings, and the supply of funds at the debt end of banks was sufficient. The marginal pressure to attract deposits declined, and a reduction in deposit interest rates provided feasible support.

Is it driving the downward trend of loan interest rates?

CITIC Securities believes that if the deposit interest rate is lowered, it is not ruled out that there may be an asymmetric reduction in LPR in the future, or a targeted reduction in loan interest rates through structural policy tools to support specific industries or people's needs.

It's falling again! What signals will multiple banks release when their deposit interest rates are lowered? (Image source: National Interbank Funding Center)

However, the institution also stated that although there is currently room for a drop in LPR, the urgency of lowering LPR is temporarily not high based on the credit allocation situation and the pace of economic recovery in the first quarter.

Wang Qing, Chief Macro Analyst of Dongfang Jincheng, pointed out that the implementation of the reserve requirement reduction in March and the recent reduction of deposit interest rates by some banks are accumulating momentum for the potential reduction of LPR quotes over 5 years.

It's falling again! What signals will multiple banks release when their deposit interest rates are lowered?