The maximum yield on retail deposits in yuan increased to 5% per annum

Some of the largest banks are increasing the yield on deposits in Chinese currency – the maximum rate in mass retail has reached 5%. However, banks attract the bulk of citizens’ funds in yuan—98.7%—not from mass clients, but from VIP depositors. Further increases in the yield on deposits in Chinese currency will be limited, experts warn.

On Monday, March 18, Alfa Bank increased rates on deposits in yuan, setting the maximum level of profitability for the mass segment – 5%. This is the highest level of rates on yuan deposits in the general line of banks, according to data from the financial marketplace Banki.ru.

Banks offer higher returns on deposits in Chinese currency only to premium clients: 5.1% – Alfa Bank, 5.05% – VTB. But it is VIP clients who provide most of the influx of yuan funds into deposits. “The volume of deposits of VTB clients in yuan today exceeds 13 billion yuan and is almost entirely formed by wealthy clients of the bank,” VTB noted. “They account for 98.7% of the total volume of funds on deposits in Chinese currency, and the average receipts of the product are 4.6 million yuan in Private Banking and 94.7 thousand yuan in the Privileges segment.”

The increase in yuan rates occurs in turns, however, against the backdrop of the Central Bank’s remaining high key rate (16%), banks have recently been focused on ruble liabilities (see Kommersant on February 14). However, in the second half of February, VTB, RSHB, and in March Tinkoff Bank (up to 3.5%) and Sberbank (up to 4.07%) increased rates in yuan.

“The increase in rates on deposits in yuan is due to customer demand for savings products in this currency and the bank’s needs for funds raised in yuan,” noted the Russian Agricultural Bank.

There are prerequisites for maintaining or even increasing the rate spread: the difference between the volumes of loans and deposits in yuan remains positive, but is rapidly decreasing. “The growth of lending in yuan in 2024 may be in a wide range (from 50% to 100%),” the Russian Agricultural Bank expects.

“We note the high interest of the corporate segment in lending in yuan. Large companies see obvious advantages of lending in Chinese currency due to lower interest rates,” Promsvyazbank said.

According to ACRA Managing Director Valery Pivnya, there is no shortage of yuan in volumes that would impede the normal course of active operations. “The increase in rates on deposits in yuan reflects the needs of banks in Chinese currency: for lending, as well as balancing active positions in dollars and euros when they are insufficient in liabilities,” says Anatoly Perfilyev, junior director for bank ratings at the Expert RA agency. “The population is increasingly considering deposits in yuan as a tool for diversifying savings, especially against the backdrop of rates exceeding rates on dollars and euros.”

Director of the Center for Business Education and Analytics of the Central University, expert partner at Yakov and Partners Ilya Ivaninsky believes that rates on deposits in yuan are unlikely to rise much higher than current values ​​in the near future. “Fluctuations are possible within one to one and a half percentage points,” he believes. “According to the Central Bank, in January the weighted average rate on loans in yuan was 7%.” If deposits in yuan are already reaching 5%, then this leaves very low margins for banks, he adds. Egor Lopatin, director of the group of financial institution ratings of the NKR agency, believes that a further moderate increase in rates can be expected, but it is unlikely that on average in the market they will be noticeably higher than the key rate of the Central Bank of China on loans for the year (3.45%). The yield on deposits in yuan has reached a plateau, further growth is possible in the range of no more than 0.5–1 percentage points until the end of 2024, MTS Bank concludes.

Ksenia Dementieva