The deposit interest is low! There are also three things to pay attention to: collective action banks of state-owned large banks | deposits | interest

China's state-owned large banks have recently taken collective action, and your deposit interest is expected to decrease.

On the 8th, six major state-owned banks in China, including Industrial and Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, Bank of Communications, and Postal Savings Bank of China, collectively announced a reduction in the listing interest rate for RMB deposits. The medium and long-term deposit interest rates have become the main targets for various banks to lower in this round.

In addition to a decrease in deposit interest rates, a new round of deposit interest rate adjustments may also have an impact on three things.

01

Will deposits "move"?

Will residents withdraw their savings and "make money" in a different place as interest decreases?

The Chief Economist of CITIC Securities clearly believes that for depositors, the decrease in deposit interest rates may weaken their attractiveness, and the phenomenon of "deposit relocation" may strengthen. Individuals may transfer their deposit funds to activities such as consumer investment. Considering that depositors often have higher security requirements for funds that originally belonged to deposits, low-risk asset management products such as bank wealth management may attract incremental funds.

Clearly, it has been noted that while residential deposits ended in April with 13 consecutive months of year-on-year growth, the scale of wealth management has stopped falling and rebounded after half a year, and the scale of bond funds and hybrid funds has also increased compared to March, indicating that some depositors have turned their attention to these low-risk asset management products after "moving their deposits". At the same time, considering that depositors have a higher security demand for funds that originally belonged to deposits, this type of market represented by wealth management will continue to welcome incremental funds in the future.

"Considering that some wealth management products also allocate deposits and other products, a decrease in deposit product interest rates may also drive down the yield of wealth management products," Ming Ming reminded.

Wang Yifeng, Chief Analyst of the Financial Industry at Everbright Securities, stated that "further interest rate cuts" on deposits may change residents' currency storage behavior. If the interest rate of fixed deposits is further reduced, the deterministic impact will be that the actual interest payment rate of the financial system will decrease, and the flattening of the core debt curve yield may lead to a shift in the deposit movement towards short-term wealth management, promoting the increase of wealth management scale.

02

Will there be any changes in LPR?

There is a view in the market that the decrease in deposit interest rates may lead to a decrease in bank funding costs, which may open up a window for further reductions in LPR, thereby benefiting further reductions in financing costs for businesses and individuals.

Wang Yifeng believes that the further reduction in deposit interest rates may open up a window for the LPR quotation to be lowered. In his view, further interest rate cuts for deposits provide a buffer for the LPR quotation reduction, and it is not ruled out that MLF interest rate cuts will be initiated at an appropriate time in the third quarter.

The research team of CITIC Securities predicts that the MLF interest rate in June may be lowered by 5 to 10 basis points, and banks may also lower deposit rates again to boost the economy; If the MLF interest rate is adjusted as scheduled, the probability of LPR quotation will decrease accordingly, with a higher possibility of asymmetric reduction.

Wen Bin, Chief Economist of Minsheng Bank, believes that the important factor triggering interest rate cuts in the future is still the sustainability of the economy and financing recovery. If the slope of consumer recovery is lower than expected, the real estate chain continues to struggle to achieve a virtuous cycle, long-term investment momentum is weak, private investment continues to decline, and the recovery of credit in the residential sector is repeated, there may still be a possibility of a slight interest rate cut within the year.

"But the continued reduction of LPR will mainly depend on the performance of bank interest rate spreads." Wen Bin believes that in addition to relying on the reduction of policy interest rates, the most important thing is to match the improvement of the debt side to ensure that the net interest rate spread of banks is maintained at a relatively stable level. In the coming period, the probability of LPR remains unchanged, and the interest rates for newly issued general loans and corporate loans may remain stable at around 4.50% and 4%, with a moderate downward trend expected.

03

Will small and medium-sized banks follow up?

An important background for the current round of deposit interest rate cuts is the pressure on commercial banks to narrow their interest rate spreads.

According to data from Industrial Research, the net interest margin of commercial banks decreased by 19 basis points from 2.10% at the end of 2020 to 1.91% at the end of 2022. Some argue that the recent reduction in deposit listing rates by state-owned banks may once again drive small and medium-sized banks to gradually follow suit.

"The main purpose of lowering the deposit interest rate this time is to better serve the real economy and reduce the financing cost of the real economy." Zeng Gang, director of the Shanghai Finance and Development Laboratory, analyzed that deposits are an important source of funds for the banking industry, and the cost of funds directly restricts the level of loan side credit interest rates. At present, the narrowing of bank interest rate spreads poses significant challenges, especially for small and medium-sized banks. In this context, if deposit interest rates are not lowered, it will make it difficult to maintain a low interest rate environment on the loan side, affecting the ability of financial services to support the real economy.

Zeng Gang believed that after state-owned banks lowered deposit interest rates, different types of banks may follow suit, and this time the follow-up speed may be faster. Especially for some small and medium-sized banks with a relatively high proportion of medium and long-term deposits, the cost saving effect may be more obvious, which will have a positive significance for the stable operation of the entire banking industry, especially for the sustainable development of small and medium-sized banks.

Liang Si, a researcher at the Bank of China Research Institute, believes that currently, major banks have proactively lowered deposit interest rates in response to market changes, and other banks may also follow suit and adjust accordingly. After the decrease in deposit interest rates this time, it is expected to continue to bring demonstration effects, and small and medium-sized banks are likely to follow up with the reduction in deposit interest rates.