(Bloomberg) — China’s largest state-owned lender on Friday slashed deposit rates for the second time this year, in a bid to hasten a return to record-low interest margins amid declining profitability.
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Major banks 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, based on the level shown in the deposit account. each app.
Bloomberg News reported on Tuesday that Chinese banks could cut interest rates on 300 trillion yuan ($42.1 trillion) of deposits as soon as this week as government stimulus further squeezes profits. . The last time financial institutions lowered interest rates was in July.
Last month, China announced its biggest package yet to shore up its struggling economy, lowering interest rates and lowering borrowing costs for its $5.3 trillion outstanding mortgages. The People’s Bank of China also cut the interest rate charged on one-year policy loans by the largest amount ever, and Governor Ban Gongsheng said deposit rates would also be cut accordingly.
Chinese banks embarked on their first wide-ranging deposit rate cut cycle since 2015 in late 2022 as authorities encouraged them to expand lending. They cut deposit rates three more times last year.
Despite the cuts, the industry’s net interest margin has declined, reaching an all-time low of 1.54% at the end of June, well below the 1.8% threshold required to maintain reasonable profitability. are.
Total banking sector profits grew by just 0.4% in the first half of this year, the slowest pace since 2020.
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