The People’s Bank of China authorized the National Interbank Funding Center to announce that the loan market quotation rate (LPR) on May 22 was: 1-year LPR was 3.65%, and LPR for more than 5 years was 4.3%, both unchanged from the previous month. This is the 9th consecutive month that LPR has remained unchanged since it declined in August 2022.
Talking about the reasons for the unchanged LPR this month, Dong Ximiao, the chief researcher of China Merchants Union, said that on May 15, the central bank launched a 125 billion yuan medium-term lending facility (MLF) operation, and the winning bid rate was 2.75%. If the winning bid interest rate remains unchanged, the possibility of LPR adjustment is small.
Wen Bin, chief economist of China Minsheng Bank, said that since the beginning of the year, the MLF policy interest rate has remained unchanged, loan pricing has deviated from LPR by a large amount, and bank net interest margins are still under pressure. There is no room for a corresponding reduction in LPR quotations.
LPR stands still, but the actual loan interest rate continues to decline. According to data released by the central bank, the weighted average interest rate of newly issued corporate loans in March was 3.96%, of which the newly issued inclusive small and micro enterprise loan interest rate was 4.42%, which was at a historical low. In addition, according to the data monitored by the Shell Research Institute, the average interest rate of the first mainstream home loan in Keike Baicheng was 4.0% in May, a slight decrease of 1 basis point from the previous month; the average interest rate of the second mainstream home loan was 4.91%, which was the same as the previous month. In May, the interest rates of the first two sets of mainstream mortgages fell by 91 basis points and 41 basis points respectively compared with the same period last year.
Looking ahead, Wen Bin said that compared with the requirements of the monetary policy implementation report for the fourth quarter of last year to “promote the reduction of corporate financing and personal consumption credit costs”, the recently released monetary policy implementation report for the first quarter of 2023 proposed for the first time “to maintain a reasonable and moderate interest rate level.” “, and continued the statement in the first-quarter monetary policy meeting that “promotes a steady decline in the comprehensive financing costs of enterprises and personal consumption credit costs”, indicating that the central bank has both the overall consideration of promoting the continued downward trend of loan interest rates and keeping interest rates at a reasonable level The internal driving force at the level, the necessity for the current loan interest rate to further decline is very low, and the space is greatly narrowed.
He also said that the subsequent reduction of LPR will mainly depend on the performance of bank interest margins. In addition to relying on the reduction of policy interest rates, the most important thing is to match the improvement of the liability side to ensure that the bank’s net interest margin remains at a relatively stable level. For a period of time to come, the high probability of LPR will remain unchanged, but it is still the direction of policy guidance to accurately support the needs of the real estate industry through differentiated methods, and to increase physical support and weak links.
Wang Qing, the chief macroeconomic analyst of Dongfang Jincheng, believes that the current economy has entered the process of recovery, but the foundation is still not solid. In the short term, it is necessary to continue to keep the credit cost of market players at a low level and create a favorable monetary and financial environment for economic recovery. He believes that although the current bank net interest margin is low and the LPR remained stable in May, it is unlikely that the financing cost of the real economy will rebound sharply in the second quarter due to economic recovery.
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