China’s major commercial banks cut deposit rates for the second time this year, easing pressure on lenders’ profits after authorities cut mortgage and lending rates as part of an economic stimulus package. There is a possibility that
Major financial institutions such as Industrial and Commercial Bank of China and China Construction Bank have cut interest rates on one-year, two-year, three-year and five-year term deposits by 25 basis points, according to their respective websites.
ICBC stock was down 0.5% in morning trading, and CCB stock was down 0.85%.
This follows a wide-ranging economic stimulus package announced by Chinese authorities last month, which included a series of easing measures such as lowering the benchmark interest rate and lowering reserve requirements to encourage banks to lend.
Prior to Friday’s report, People’s Bank of China Governor Ban Gongsheng said deposit rates would be cut by another 20 to 25 basis points.
The move is the latest step in a cycle of lower deposit rates that began at the end of 2022. Chinese financial institutions lowered deposit rates three times last year and again in July this year.
The country’s major state-owned banks are under pressure, with profit margins falling under the weight of weak credit demand, a weak economy and aggressive monetary easing. Official data showed the sector’s net interest margin was 1.54% at the end of the second quarter, the same level as the first quarter but down from 1.74% a year earlier.
The People’s Bank of China has indicated its intention to pursue easing measures. Local media reported on Friday that Pan said he would cut the seven-day reverse repo rate by 20 basis points.
Local media quoted the central bank governor as saying that the loan prime rate to be announced on Monday is also expected to fall by 20-25 basis points.
Email Tracy Qu at tracy.qu@wsj.com.
