On October 14th, Jingyu Qianfeng Rural Bank, Suiping Zhongyuan Rural Bank, Hailun Huifeng Rural Bank, Qionghai Xingfu Rural Bank, and several other rural banks issued announcements adjusting their deposit interest rates.

According to an incomplete review by reporters, since the beginning of October, small and medium banks in provinces such as Shanxi, Hainan, Xinjiang, Jilin, Henan, Yunnan, and Heilongjiang have introduced the latest posted interest rates for RMB deposits, with some deposit rates being reduced.

In summary, there are three characteristics of the aforementioned adjustments: First, the one-year personal deposit interest rate has broken "2"; Second, the interest rates for long-term deposits have been further reduced to around 2.25%, and even the three-year and five-year deposit interest rates show a "reverse hanging" to further compress high deposit costs; Third, the adjustment range is relatively large, with some banks reducing long-term deposit interest rates by 100 basis points.

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This is another concentrated follow-up action by small and medium banks after the collective reduction of deposit interest rates by state-owned large banks and joint-stock banks since July this year, continuing the previous "large banks adjust first, followed by small and medium banks" rhythm, and also the tail end of the fifth round of deposit posting price reduction since 2022.

Follow-up deposit rate cuts several times a year

On October 14th, Jingyu Qianfeng Rural Bank in Jilin Province issued an announcement on adjusting deposit interest rates, reducing the regular deposit interest rates for savings of two years, three years, and five years by 20 basis points. Among them, the regular deposit interest rate for savings of two years was reduced from 2.45% to 2.25%; the savings for three years and five years were both reduced from the previous 2.8% to 2.6%.

It is worth noting that many banks have adjusted deposit interest rates several times this year. For example, the above adjustment is the fourth deposit rate reduction announcement issued by Jingyu Qianfeng Rural Bank this year.

Before February of this year, the bank's three-year and five-year deposit products still maintained an annual interest rate of more than 3%. In February this year, the bank first reduced the three-year deposit interest rate from 3.4% to 3.15%, and in June, it announced that the two-year deposit interest rate was reduced from 2.75% to 2.7%.

Subsequently, Jingyu Qianfeng Rural Bank issued another announcement in July, and again "universally reduced" the deposit interest rates for various terms. Among them, the five-year deposit interest rate broke "3", and the savings five-year regular deposit interest rate was reduced from 3.00% to 2.80%, and the public five-year regular deposit interest rate was reduced from 3.25% to 2.55%; the savings three-year regular deposit interest rate was reduced from 2.90% to 2.80%, and the public three-year regular deposit interest rate was reduced from 2.75% to 2.55%; the one-day notice deposit interest rate broke "1", reduced from 1.00% to 0.90%.

The rhythm and range of Jingyu Qianfeng Rural Bank's adjustment of deposit interest rates are a microcosm of the current adjustment of deposit interest rates by small and medium banks following national banks.It is worth mentioning that the reduction in deposit interest rates by small and medium-sized banks mainly targets long-term deposits such as three-year and five-year terms, even inverting the interest rates for short and long terms.

For instance, on October 14, Henan Suiping Zhongyuan Rural Bank adjusted its deposit interest rates, marking the third announcement related to deposit interest rate adjustments this year. Among them, the annual interest rate for five-year deposits has been reduced by 45 basis points this year, dropping from 2.65% to 2.2%.

Furthermore, Qionghai Xingfu Rural Bank in Hainan issued an announcement stating that from October 14, it would adjust the interest rates for deposits of various terms, reducing the execution interest rates for three-year and five-year fixed deposits from the original 3% to 2.5% and 2%, respectively, with a reduction of 50 basis points and 100 basis points, respectively.

Since the beginning of this year, Qionghai Xingfu Rural Bank has adjusted its deposit interest rates three times, mainly targeting long-term deposit products. In particular, at the end of January this year, the bank reduced the listed interest rate for five-year fixed deposits by 30 basis points from 3.4% to 3.1%. To date, within less than a year, the bank's five-year fixed deposit interest rate has not only broken the "3" threshold but also reduced by 110 basis points to the critical point of "2", which is lower than the interest rate of the three-year product for the next period.

According to the Securities Journalist from China, since October, Shanxi Hunyuan Rural Commercial Bank, Xinjiang Fukang Jinhui Rural Bank, Xinjiang Oasis National Rural Bank, Xinjiang Changji Rural Commercial Bank, Shanxi Fenyang Jiudu Rural Bank, Jilin Baishan Hunjiang Hengtai Rural Bank, Shanghai Qingpu Huijin Rural Bank, Heilongjiang Hailun Huifeng Rural Bank, and Yunnan Qujing Zhanyi Xingfu Rural Bank have all issued announcements to adjust the interest rates on RMB deposits.

In the past three months, small and medium-sized banks have followed suit.

Since 2022, state-owned large banks and joint-stock banks have conducted five relatively concentrated adjustments to deposit挂牌 prices in September 2022, June and September and December 2023, and July 2024. After each large-scale adjustment, small and medium-sized banks have followed suit in the following months.

This round of adjustments originated on July 22, 2024, when the central bank reduced the one-year LPR by 10 basis points to 3.35%, and the five-year LPR by 10 basis points to 3.85%. To cope with the pressure of narrowing net interest margins, domestic national commercial banks made adjustments to their liabilities in the following days, collectively reducing deposit挂牌 interest rates.

Specifically, on July 25 of this year, the six major banks - ICBC, ABC, BOC, CCB, BOCOM, and Postal Savings Bank - simultaneously released the latest deposit挂牌 interest rates, reducing the interest rate for demand deposits by 5 basis points to 0.15%, the interest rate for one-year deposits (fixed deposit) by 10 basis points to 1.35%, and the interest rates for two-year, three-year, and five-year deposits (fixed deposit) by 20 basis points to 1.45%, 1.75%, and 1.80%, respectively. Subsequently, 12 joint-stock banks also followed suit in reducing the corresponding deposit interest rates, with the reduction幅度 being synchronized with the large banks: the interest rate for fixed deposits of less than one year was reduced by 10 basis points, and the interest rate for fixed deposits of more than one year was reduced by 20 basis points.

This is the fifth round of concentrated deposit rate cuts by domestic commercial banks since the establishment of the market-oriented deposit rate adjustment mechanism in April 2022. Among them, the interest rate for demand deposits was reduced by 5 basis points to 0.15%, marking the first adjustment of the demand deposit interest rate since mid-June last year. This time, the reduction in long-term interest rates for three-year and five-year fixed deposits was relatively large.It can be observed that, following the interest rate cuts by the aforementioned mainstream banks, in the past three months, a number of small and medium-sized banks have also followed suit. According to incomplete statistics by Securities China reporters, in August, small and medium-sized banks such as Jingmen Rural Commercial Bank, Hejin Rural Commercial Bank, Baoying Rural Commercial Bank, Huajian Rural Commercial Bank, Hubei Zaoyang Rural Commercial Bank, Guangxi Pingnan Guiyin Rural Town Bank, and Xinyang Pingqiao Zhongyuan Rural Town Bank also issued announcements related to the reduction of deposit interest rates. Entering September, Yunnan Shiping Beiyin Rural Town Bank, Dongxing National Rural Town Bank, Xinjiang Bank, Laishan Qifeng Rural Town Bank, and Xinyang Pearl River Rural Town Bank also followed the pace of reducing deposit interest rates, lowering the interest rates for some terms.

The future deposit interest rates may continue to usher in interest rate cuts. By analyzing the liability structure of commercial banks, it can be found that the deposits of many banks account for more than 70% of their interest-bearing liabilities. In recent years, with the cooling of the real estate market and the impact of the pandemic, individual and corporate customers have sought more financial security, reducing investments and increasing savings. Consequently, the "regularization" of commercial bank deposits has continued to rise, which has also brought about a continuous increase in liability costs.

The so-called deposit "regularization" refers to the increase in the conversion of demand deposits to fixed deposits by individuals or enterprises, with the proportion of fixed deposits rising and the proportion of demand deposits declining.

Western Securities' statistical data shows that the proportion of fixed deposits in listed banks continues to rise, with the trend of personal deposit regularization being particularly evident. Compared with the same period last year, at the end of June 2024, the proportion of personal fixed deposits and corporate fixed deposits increased by 2.7 percentage points and 0.4 percentage points, respectively, while the proportion of demand deposits has declined. Compared with the end of 2023, at the end of June 2024, the proportion of personal fixed deposits and corporate fixed deposits increased by 1.5 percentage points and 0.1 percentage points, respectively.

It can be seen that in the past two years, with the narrowing of interest rate spreads and the downward trend of LPR (Loan Prime Rate), how to reduce liability costs has been a high-frequency topic at banks' financial report performance briefings. Some banks have alleviated the pressure of deposit regularization on operating costs by actively adjusting the scale, structure, and pricing of deposits.

Due to the high proportion of long-term deposits in some banks, under the influence of the downward trend in loan pricing, there is still room for further reduction in deposit interest rates to alleviate the continuous pressure on net interest margins.

Recently, the six major state-owned banks, namely Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, and Postal Savings Bank of China, as well as 12 joint-stock banks, collectively issued announcements regarding the batch adjustment of existing housing loan interest rates. Following the release of relevant details by the aforementioned national banks, hundreds of local banks have followed suit, issuing batch announcements to reduce the existing housing loan interest rates. Most will adjust the LPR addition amount higher than "30bp" to "30bp" in batches before the end of October.

Many market views believe that the linkage between deposit and loan interest rates has been strengthened, and a new round of interest rate cuts may continue to arrive, with the deposit costs of commercial banks expected to further decline.