China’s biggest state-owned banks are considering lowering deposit rates for at least the third time in a year, according to people familiar with the matter, as they ramp up efforts to boost the economy and protect margins.
(Bloomberg) — China’s biggest state-owned banks are considering lowering deposit rates for at least the third time in a year, according to people familiar with the matter, as they ramp up efforts to boost the economy and protect margins.
Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and other lenders may cut rates on local currency deposits across key tenors by between 5 and 20 basis points, said the people, asking not to be identified discussing a private matter. Regulators have signed off on the plan, the people added. The cut may come as soon as Friday, one of the people said.
The move, following similar rate reductions in June and last September, would be the latest piecemeal step rolled out by Beijing as authorities try to spur consumer spending, drive more funds into the stock market and alleviate pressure on lenders.
China’s state-owned banks are attempting to protect their profit margins while at the same time heeding government directives to shore up support to the world’s second-largest economy. The People’s Bank of China, the nation’s central bank, called for the maintenance of “reasonable” interest margins for banks in its most recent monetary policy report.
The central bank this month lowered the rate on its one-year loans by the steepest amount in three years. But even with that interest rate cut — the second this year — Beijing has refrained from unleashing massive stimulus implemented in past downturns.
The PBOC didn’t immediately respond to a request seeking comment. Representatives of ICBC and CCB declined to comment.
Earlier this month, Chinese banks kept a key interest rate that guides mortgages on hold and made a smaller-than-expected cut to another rate, seen as a move to protect interest margins. Lowering deposit rates may give banks more room to provide better terms on corporate and home loans.
Deposit rate cuts could also encourage households to shift away from bank deposits toward other investments and consumption. Chinese households increased the share of their income that they save during the pandemic, and shifted their financial assets toward bank deposits, hitting the performance of funds that buy stocks and bonds on behalf of households.
The measures come as China’s real estate sector is unraveling and risks are spreading to the country’s $60 trillion financial system. China’s existing policies have failed to sustain a rebound in the property market as price declines extend across the nation. Country Garden Holdings Co. — a developer that was once a pillar of the industry — is on the verge of default, suggesting no company is too big to fail.
Economists see China’s gross domestic product expanding 5.1% in 2023 from the prior year, according to the median estimate in the latest Bloomberg survey. That’s down from an earlier expectation of 5.2% and brings projections closer to the government’s target of about 5% — a number widely seen as conservative when it was set in March.
Top officials also this week vowed to strengthen policy support and speed up government spending. Finance Minister Liu Kun and Zheng Shanjie, chairman of the National Development and Reform Commission, made the pledges in reports to the country’s legislature on Monday, according to the official Xinhua News Agency.
Growth momentum isn’t strong, the foundation for sustainable recovery isn’t solid, and the environment is “full of uncertainties,” Zheng said in the report, according to Xinhua. The remarks were largely a repeat of Beijing’s policy stance.
–With assistance from Emma Dong and Tom Hancock.
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