Recently, there have been reports indicating that China’s major state-owned banks are poised to lower deposit rates once again. This move is expected to alleviate the impact of adjustments in existing mortgage rates. Industry insiders anticipate that this reduction will be at least 20 basis points, with an announcement potentially coming as soon as this week.
Several smaller banks have already taken the lead in announcing cuts to their deposit rates. Since October, a number of these banks have significantly lowered their listed deposit rates, affecting various regions, including Guangdong, Hainan, Henan, Guizhou, and Yunnan, with reductions ranging from 10 to 50 basis points.
The six major state-owned banks recently issued a collective announcement regarding the adjustment of existing mortgage rates, stating that eligible mortgage rates will be adjusted to the Loan Prime Rate (LPR) minus 30 basis points. Many local banks are expected to follow suit. As these adjustments to existing mortgage rates come into effect, the net interest margin for the banking sector may face additional pressure.
According to a report from Hongxing News, some experts predict that the latest LPR may be lowered this month in line with the policy interest rates, suggesting that the next round of deposit rate cuts could occur around the same time.
Since the establishment of the market-based adjustment mechanism for deposit rates in April 2022, state-owned banks have carried out five rounds of reductions in their listed deposit rates, occurring in September 2022, June 2023, September 2023, December 2023, and July 2024. The pace of these reductions has notably accelerated recently; following the announcement of a deposit rate adjustment by the major state-owned banks on July 25, all 12 joint-stock banks completed their deposit rate cuts within a week.
