Interest spreads continue to be under pressure, and some small and medium-sized banks have lowered deposit interest rates.
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Recently, a number of small and medium-sized banks have announced reductions in the deposit interest rates for some products. Institutional analysts believe that commercial banks are expected to still face downward pressure on interest margins in 2024.
Changchun Rural Commercial Bank announced on February 22 that it will implement the adjusted deposit interest rate starting from 0:00 on that day. The reporter noticed that compared with the interest rate implemented by the bank from September 22, 2023, its current interest rate for urban and rural residents and corporate deposits has dropped from 0.25% to 0.20%; the interest rates for lump sum deposit and withdrawal products are three months, half a year, The corresponding interest rates for one, two, three and five years were adjusted from 1.80%, 2.0%, 2.20%, 2.40%, 2.90% and 2.90% to 1.45%, 1.55%, 1.75%, 1.95% and 2.45% respectively. , 2.45%, with the highest drop reaching 45 basis points.
In addition, the Bank of Guilin’s recent announcement on adjusting the execution interest rates of some deposit products shows that the bank will adjust the execution interest rate of unit lump sum five-year deposit products to 3.2% on February 21. Prior to this, the bank had adjusted the interest rates of some deposit products on January 21. Among them, the interest rate of the five-year unit deposit and withdrawal products was reduced from 3.90% to 3.35%. So far, the bank’s five-year deposit product interest rate has dropped by 70 basis points within one month.
Institutions believe that many small and medium-sized banks have recently lowered their listed deposit rates in response to the overall downward pressure on industry interest margins. The State Administration of Financial Supervision recently announced the main regulatory indicators of commercial banks in 2023. The net interest margin indicator of commercial banks dropped from 1.74% in the first quarter of that year to 1.69% in the fourth quarter.
In fact, since December 2023, several major state-owned banks have taken the lead in announcing reductions in the listed deposit interest rates. The interest rates for deposits with a maturity of one year and less will be reduced by 0.10%, the interest rates for deposits with a maturity of two years will be reduced by 0.20%, and the interest rates for three-year and five-year deposits will be reduced by 0.20%. The annual adjustment was adjusted down by 0.25%, and the bank subsequently followed up. Around New Year’s Day in 2024, small and medium-sized banks, mainly rural commercial banks, will also begin a new round of interest rate adjustments.
Huafu Securities analysis believes that under the influence of various factors such as the reduction of LPR on the asset side and the regularization of deposits on the liability side, interest rate spreads continue to decline and continue to hit record lows. As of the end of 2023, the interest spread of commercial banks was 1.69%, a decrease of 3 basis points from the previous month. The agency expects to still face downward pressure on interest rate spreads in 2024. First, the LPR cut in 2023 will bring unified repricing in early 2024, and the unexpected LPR cut in February will also cause the price of new loans to continue to fall. Second, the pace of localized debt continues, and existing high-priced government credit loans may be replaced by low-priced loans under policy guidance, which will have a certain impact on interest rate spreads.
Ping An Securities believes that from the bank’s perspective, the accelerated reduction in deposit interest rates in 2023 will help hedge against the negative impact of the decline in asset-side interest rates. At the beginning of 2024, the central bank will lower the required reserve ratio and reduce re-lending and re-discounts to support agriculture and small businesses. An interest rate of 0.25% will help banks reduce liability-side costs. Taken together, due to the different durations of deposits and loans, the negative impact of downward interest rates on short-term hedging assets will be limited, and bank interest margins may continue to be under pressure in subsequent quarters.
The Bank of Jiangsu said that from the overall situation of the industry, under the influence of factors such as the reduction of LPR interest rates and the reduction of existing mortgage loan interest rates, the return on assets may show a general trend of stabilization with decline. In addition, the cost of deposits is relatively rigid, and the net interest margin faces certain challenges. . The Bank of Chongqing said that due to the impact of the repricing of existing mortgages on the asset side and the reduction of LPR, it is expected that interest margins will still face certain pressure in 2024.
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