Many banks officially announced: interest rate cut!

As June approaches, small and medium-sized banks are facing a new round of "interest rate cuts".

It is reported that many small and medium-sized banks in various places, such as Lanzhou Rural Commercial Bank, Gansu Bank, and Guangdong Chenghai Rural Commercial Bank, have adjusted their deposit interest rates. Among them, many banks have adjusted the interest rates of short-term deposit products in addition to the 3-year and 5-year medium- and long-term deposits. The general deposit interest rate reduction range is between 10bp and 40bp.

On June 4, Lanzhou Rural Commercial Bank lowered its three-year time deposit rate from 2.7% to 2.6%. On June 3, Gansu Bank also lowered its three-year time deposit rate from 3.0% to 2.6%. In other words, the deposit rate fell by as much as 40bp.

At the end of May, Guangdong Chenghai Rural Commercial Bank also issued an announcement stating that the bank will adjust the RMB deposit interest rate from June 1. Among them, the specific implementation rates of the bank's 1-year, 2-year, 3-year, and 5-year fixed deposits are 1.7%, 1.9%, 2.2%, and 2.2%, respectively, which are 8bp, 10bp, 20bp, and 25bp lower than the previous deposit rates of the corresponding terms.

At the same time, Guangxi Pingle Rural Cooperative Bank also stated that the bank will adjust the listed interest rates of RMB deposits from June 1. After the adjustment, the specific implementation rates for 1-year, 2-year, 3-year and 5-year fixed deposits will be 1.9%, 2.3%, 2.8% and 2.8% respectively, which are 20bp, 0bp, 20bp and 30bp lower than the previous deposit rates respectively.

Overall, since June, small and medium-sized banks in Guangxi, Guangdong, Gansu, Henan, Hubei, Guizhou and other places have adjusted their deposit interest rates. From the perspective of the types of deposits adjusted, the reduction of medium- and long-term deposit interest rates is still the "main battlefield", with the largest reduction in interest rates. At the same time, many banks have also reduced short-term deposit interest rates.

Zhou Maohua, a researcher at the Macroeconomics Group of the Financial Markets Department of China Everbright Bank, believes that the current round of deposit rate cuts by some small and medium-sized banks is a continuation of the third round of cuts last year. "Some small and medium-sized banks have made full use of the deposit rate marketization adjustment mechanism based on the deposit market and their own operating conditions, reasonably reduced liability costs, improved operations, and expanded space for further concessions to the real economy."

It is reported that the market experienced three rounds of deposit rate cuts last year, in June, September and December. At the same time, the adjustment rhythm of deposit rates mainly showed that state-owned banks took the lead, followed by joint-stock banks, and finally small and medium-sized banks followed in an orderly manner.

Recently, the issue of narrowing bank net interest margin remains a concern of the market, especially as it has been nearly half a year since the last round of deposit rate cuts. As banks' net interest margins continue to decline, the market generally believes that it is still necessary to continue to strengthen deposit rate cuts.

According to data disclosed by the State Financial Supervision and Administration, as of the end of 2023, the net interest margin of commercial banks fell below the 1.7% mark for the first time, falling to a historical low of 1.69%, falling below the warning line of 1.8% for the net interest margin.

In the first quarter of this year, the net interest margin of banks continued to narrow. As of the end of the first quarter of 2024, the net interest margin of commercial banks was 1.54%, a decrease of 0.15 percentage points from the end of last year and a decrease of 0.2 percentage points from 1.74% in the same period last year.

Zhou Maohua believes that at present, the banking financial system is facing pressure on net interest margin. Further reducing the loan costs of the real economy and boosting the financing demand of the real economy will require monetary policy support and active liability cost management by banking and financial institutions.

In the industry’s view, the impact of many factors, especially financial institutions’ concessions to the real economy, LPR re-pricing, adjustment of existing housing loan interest rates, loan replacement, etc., will continue this year, and banks’ net interest margins still have room to narrow. In addition, the recent cancellation of the interest rate floor for commercial personal housing loans for first and second homes at the national level will also put pressure on banks to narrow their net interest margins.

Zhou Maohua pointed out that at present, there is a certain imbalance in the deposit market, the pressure on banks' net interest margin is high, the market interest rate remains low, and there is still room for a certain reduction in bank deposit interest rates. "From the perspective of reducing the comprehensive financing cost of the real economy and stimulating effective demand, banks have the motivation to start a new round of deposit interest rate cuts."