Home » Many private banks followed suit and lowered their deposit interest rates and net interest margins but still maintained their relative advantages_China Economic Net – National Economic Portal

Many private banks followed suit and lowered their deposit interest rates and net interest margins but still maintained their relative advantages_China Economic Net – National Economic Portal

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Private Banks Lower Deposit Interest Rates, Maintaining Competitive Edge

Reporter Peng Yan

In a recent trend, many private banks have adjusted their deposit interest rates, lowering them to stay competitive in the market. Unlike large state-owned banks and joint-stock banks, the one-year to five-year time deposit interest rates at private banks are generally below 3%. However, many private banks have managed to maintain their relative advantages by keeping their three-year and five-year time deposit interest rates higher than 3%.

Xue Hongyan, deputy director of Xingtu Financial Research Institute, pointed out that the reduction in deposit interest rates by private banks is a response to the “interest rate cuts” led by major state-owned banks at the beginning of the year. This move comes as the entire industry faces pressure to narrow net interest margins, with national banks paving the way for smaller banks to follow suit.

Some private banks have reduced their deposit interest rates by 30 basis points. For example, Zhongbang Bank recently updated its RMB deposit interest rate table, lowering the rates for 2-year, 3-year, and 5-year time deposits to 2.1%, 2.65%, and 2.7% respectively. Similarly, Jinxing Bank implemented new deposit rates in February, with the rates for 2-year, 3-year, and 5-year time deposits set at 2.85%, 3.39%, and 3.6% respectively.

Despite the adjustments, private banks still maintain an interest rate advantage compared to most large state-owned and joint-stock banks. While major state-owned banks lowered their listed deposit interest rates in December 2023, private banks like Huatong Bank and Fumin Bank offer higher interest rates for certain deposit products, exceeding 3%.

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With the pressure to narrow net interest margins looming over the banking industry, private banks are focusing on actively managing their liabilities. The net interest margin of private banks significantly outperformed other types of banks in 2023. However, experts predict that there will still be challenges in maintaining net interest margins as the banking industry faces the repricing effect of existing loans and the need for continued “interest rate cuts.”

Looking ahead, experts suggest that private banks should enhance their comprehensive competitiveness and explore differentiated, specialized development paths. By focusing on their strengths, refining management systems, and improving product design, private banks can navigate the changing landscape of the banking industry while ensuring sustainable growth and profitability.

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