On December 22, a number of major state-owned banks simultaneously lowered their deposit ratesOn December 25, a number of joint-stock banks followed up to reduce deposit rates. This means that China's commercial banks have started the third round of deposit "interest rate cuts" this year, and the first two rounds occurred in June and September respectively.
The author believes that this round of deposit "interest rate cuts" has many things in common with the previous two rounds on the one hand, such as continuously alleviating the downward pressure on banks' net interest margins and improving their ability to serve the real economy and resist risksOn the other hand, it is different from the previous two rounds of far-reaching significance. Specifically, the "interest rate cut" of this round of deposits contains four profound meanings.
First of all, the timing choice has deep meaning. The "interest rate cut" on deposits at the end of 2023 is more conducive to reducing the cost of debt for banks in 2024. From the perspective of increment, the beginning of the year is often the peak period for banks to "get off to a good start" to collect deposits, and some brokerage institutions estimate that the proportion of new deposits in the first and second quarters of many banks in the first and second quarters of the annual new deposits can reach 40% and 30%. In fact, in order to increase the efforts to attract deposits in 2024, some small and medium-sized banks have recently raised deposit rates against the trend. Therefore, the significance of lowering the deposit interest rate at this time is self-evident for commercial banks to reduce the cost of liabilities. From the perspective of stock, in recent years, a large number of fixed deposits have matured in the first half of each year, and the "interest rate cut" on deposits at the end of the year will also help reduce the pressure on the repricing of deposits in the coming year.
Secondly, the expansion of the varieties of the reduction has profound significance. Compared with the previous round of deposit reduction, the scope of deposit types in this round of "interest rate reduction" has been extended to 3-month time deposits, semi-annual time deposits, agreement deposits and call deposits. For a long time, agreement deposits and call deposits have been the varieties with higher cost rates in corporate and individual demand deposit accounts, and the "interest rate cut" of agreement deposits is expected to lead to a decrease in the cost rate of corporate demand deposits. In addition, since the second half of this year, due to the downward trend of deposit interest rates, depositors prefer fixed and long-term deposits in order to lock in high interest rates in advance, which has pushed up the cost of bank deposits.
Moreover, it is meaningful to alleviate the pressure on the asset side. Since September 25 this year, major state-owned banks and other commercial banks have taken the initiative to reduce the interest rates on existing housing loans. The Monetary Policy Department of the People's Bank of China issued a document on November 6 saying that the work of reducing the interest rate of existing housing loans has been basically completed, reducing the interest expenses of borrowers by 160 billion yuan to 170 billion yuan per year. However, for banks, the reduction of interest rates on existing mortgages will put pressure on the asset side. In addition, since the fourth quarter of this year, the decline in housing purchase interest rates has also put pressure on the asset side of banks. The deposit "interest rate cut" can not only alleviate the pressure on the asset side of banks to a certain extent, but also open up space for the LPR to continue to decline in the future.
Finally, there is a deep sense of promoting consumption and investment. On the one hand, the "interest rate cut" on deposits will change the asset allocation preferences of enterprises and residents to a certain extent, which will help boost consumption, expand domestic demand, and improve the confidence and economic expectations of market playersOn the other hand, the "interest rate cut" of deposits has objectively promoted the "deposit relocation", which will help a part of the funds pursuing higher returns to flow to the equity market and provide more incremental funds for the A** market.
In short, compared with the previous two rounds of deposit "interest rate cuts", this round is more timely, more extensive and more effective, which will not only help protect the level of net interest margin and profitability of banks, but also help open up monetary policy space, help consumption and investment, and enhance the momentum of real economic development. (Su Xianggao).
Editor-in-charge: Tao Jiyan |Review: Li Zhen |Supervisor: Wan Junwei.