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China’s large state-owned banks cut interest rates on personal deposits

SHANGHAI (Reuters) – Five of China’s largest banks are cutting interest rates on personal deposits from Thursday, according to information available on lenders’ mobile apps, a move that could ease pressure on profit margins after recent lending rate cuts to revive the economy.

The information showed that banks, including the Industrial and Commercial Bank of China (ICBC), the world’s largest bank by assets, cut the interest rate on three-year deposits by 15 basis points.

It cut interest rates on one-year and five-year deposits by 10 basis points.

The official Securities Times reported earlier that some state-owned commercial banks in China will cut interest rates on personal deposits from Thursday.

The move comes after China cut its benchmark lending rates last month, with the one-year loan prime rate lowered by 5 basis points to 3.65%, and the five-year policy rate reduced by a larger margin of 15 basis points to 4.30%. .

The world’s second-largest economy narrowly avoided a downturn in the second quarter with widespread COVID-19 lockdowns and a downturn in the real estate sector hitting consumer and business confidence hard.

Lowering deposit rates will help stabilize banks’ profitability and support capitalization, said Nicholas Chu, banking analyst at Moody’s (NYSE: NYSE).

“Banks have reduced corporate loan and real estate yields in response to the authorities’ call to lower financing costs for the corporate sector and home buyers,” Zhou said.

β€œReducing deposit costs will offset some of the pressure on the NIM (net interest margin) tightening.”

Last month, some major banks warned that they would face pressure on their profit margins in the second half of this year, as they respond to Beijing’s call to boost lending to the indebted real economy and property sector.

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Nomura economists wrote in a note that the cut is likely to make way for further cuts in the LPR.

Other banks that cut rates on personal deposits on Thursday included China Construction Bank (OTC:) Corp, Agricultural Bank of China (OTC:), Bank of Communications and Bank of China.

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