Tuesday, May 30, 2023
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Chinese Banks Cut Deposit Rates as Profits Squeeze

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BEIJING (Reuters) – Several small and mid-sized banks in China have lowered deposit rates, The move could help ease costs as loan growth comes under greater pressure amid rising economic risks.

Rural commercial banks and credit unions in Hubei and Henan provinces cut a series of deposit rates over the weekend, and some regional banks in the southern province of Guangdong last week. Banks have also cut interest rates, lenders’ statements show.

Henan Luoshan Rural Commercial Bank lowered the one-year deposit rate on Saturday basis points (bps) to 1.9%, after Basis point for 2-year deposits is 2.4% and determined by The three-year deposit base point is 2. %, according to a statement.

MOBILE Banks face mounting pressure to squeeze margins as China’s economy recovers from three years of draconian containment and a housing downturn . Household saving has surged, while demand for credit remains subdued.

China’s economy reopens after lifting zero-emissions COVID-19 policy in December, but business and domestic demand haven’t returned to pre-pandemic levels . Analysts warn that the recovery is not on solid ground.

“As financial institutions are encouraged to support the economy, lending rates have come down significantly,” Ming Ming, a fixed income analyst at CITIC Securities, said in research published on Monday. wrote in the newspaper.

“But banks’ debt costs are still relatively rigid, and net interest margins continue to shrink, which increases their operating pressure,” he said.

Nicholas Zhu, Moody’s Banking Analyst (NYSE: 85MCO

), said pricing changes at smaller banks typically follow moves by larger banks with a time lag. In September, China’s major banks cut deposit rates across the board for the first time since to ease margin pressure.

The People’s Bank of China (PBOC) stated on January 1, 2018 that some Chinese banks lowered deposit rates in April due to the guidance of the self-regulatory mechanism “normal behavior”. In response to a Reuters request for comment, this is a market-driven mechanism for pricing interest rates.

Lower deposit rates also help reduce bank profit margins The pressure is on at a time when investors are pinning their hopes on lower lending rates to prop up the economy bigger and bigger.

“The economy is still not reaching its potential,” Zhang Zhiwei said. “Fiscal and monetary policies have room to boost growth further.”

The odds of a rate cut are rising,” he said. 200



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