Large Chinese banks cut deposit rates for the third time this year
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Today, December 22, the six leading Chinese state-owned banks reduced deposit rates offered to depositors. This is the third coordinated action of large banks since the beginning of the year. Prior to this, rates were cut in June and September. Rates were reduced by Industrial & Commercial Bank of China, China Construction Bank, Agricultural Bank of China, Bank of China, Bank of Communications, China Merchants Bank.
Interest rates on deposits for a period of three months to a year were reduced by 0.1%, on two-year deposits – by 0.2%, on three- and five-year deposits – by 0.25%. As experts note, banks are reducing deposit rates to compensate for the negative impact of other factors on profits. Chinese banks’ net interest margins – the amount received from interest on loans minus the amount paid as interest on deposits – fell to a record low of 1.73% in September.
“The reduction in deposit rates should help ease pressure on net interest margins and paves the way for the People’s Bank of China to cut lending rates in January, which have remained unchanged for four months,” said Lu Ting, an economist at Nomura.
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