BEIJING, June 8 (Portal) – China’s biggest banks said on Thursday they have cut interest rates on yuan deposits, which could ease pressure on profit margins and lower borrowing costs, bringing some relief to the financial sector and consumers overall economy.
The Industrial and Commercial Bank of China Ltd (601398.SS), Agricultural Bank of China Ltd (601288.SS), Bank of China Ltd (601988.SS) and China Construction Bank Corp (601939.SS) have as of Thursday all lowered their interest rates. Websites of each bank shown.
The state-backed banks cut rates by 5 basis points on demand deposits and 15 basis points on three- and five-year time deposits.
This is the second cut of this kind in a year, after action was taken in September.
“The cuts in the deposit rate will drive savings in consumption and investment and ease pressure on banks’ net interest margins (NIM), opening the door for more monetary stimulus,” said Gary Ng, principal economist for Asia-Pacific at Natixis.
He expects the RRR to be cut by 50 basis points soon to support local government bond issuance. However, further interest rate cuts on loans will only come if economic data or financial risks deteriorate to levels that prevent China from meeting its 5 percent target, Ng said.
China cut the minimum interest rate in March but left its policy rate unchanged this year as widening yield differentials with the United States limited scope for significant monetary easing.
The net interest margins of the major state banks have narrowed as a result of pressure to lower the cost of borrowing for individuals and businesses to stimulate the economy and still subdued demand for credit.
China’s economy recovered faster than expected in the first quarter but lost momentum early in the second quarter as it struggled with slowing exports, a sluggish real estate market and a high unemployment rate.
A regulator overseen by the People’s Bank of China has urged lenders to also cut U.S. dollar deposit rates, four people with direct knowledge of the matter said Tuesday.
The benchmark CSI Banks Index (.CSI399986) was up 0.35% in Thursday morning trade.
Beijing newsroom reporting; Edited by Christopher Cushing and Sam Holmes
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