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Seven large Chinese commercial banks on Thursday lowered the interest rates on yuan deposits for the first time since 2015, a move that could ease the pressure on their margins after recent lending rate cuts to revive the economy..
The rates on three-year term deposits cut by 15 basis points, the rates on term deposits of other tenors cut by 10 basis points, while rates on current deposits cut by 5 basis points, according to information on the websites of the banks.
The banks include Commercial and Industrial Bank of China, Agricultural Bank of China, China Construction Bank, Bank of China, China Communications Bank and Postal Savings Bank of China and China Merchants Bank.
The official Securities Times earlier reported that some of China’s big state-owned commercial banks would cut personal deposit rates from Thursday.
The move comes after China cut its benchmark lending rates last month, with the one-year loan prime rate (LPR) lowered by 5 basis points to 3.65% and the five-year LPR slashed by a bigger margin of 15 basis points to 4.30%.
The reduction on deposits rates will help stabilise banks’ profitability and support capitalisation, said Nicholas Zhu, a banking analyst at Moody’s. “Banks have lowered yields on corporate and mortgage loans in response to the authorities’ call for lower funding costs for the corporate sector and homebuyers,” said Zhu.
The cut will likely make room for further cuts to the LPR, wrote Nomura economists in a note.