Core Viewpoint - The intention of banks to guide depositors towards "short-term" deposits remains clear, as they respond to the pressure of narrowing net interest margins through refined pricing strategies to reshape the deposit market landscape [1][7][9]. Summary by Sections Deposit Rate Trends - Several banks previously exhibited extreme inversion in deposit rates, where shorter-term deposits offered higher rates than longer-term ones. However, this phenomenon has diminished with the recent wave of deposit rate cuts [2][6]. - As of May 21, 2023, major banks like China Merchants Bank have aligned their one-year and five-year deposit rates at 1.30%, eliminating the extreme inversion [2][9]. - Despite the disappearance of extreme inversions in some banks, certain smaller banks still exhibit varying degrees of rate inversion, particularly in their short- to medium-term deposits [5][6]. Market Response and Future Expectations - Analysts suggest that the trend of "large banks leading, smaller banks following" in deposit rate cuts will continue, potentially leading to a gradual disappearance of existing rate inversions in smaller banks [6][7]. - The recent deposit rate cuts are expected to positively impact banks' net interest margins, as the reduction in deposit costs may exceed the decline in asset yields for the first time historically [11]. Current Deposit Rates - As of May 21, 2023, the deposit rates for major banks are as follows: - Industrial and Commercial Bank of China: 1-year at 0.95%, 5-year at 1.30% - China Merchants Bank: 1-year at 0.95%, 5-year at 1.30% - Other banks like CITIC Bank and Minsheng Bank have similar rates for various terms [8][9]. Implications for Banking Sector - The banking sector is facing significant pressure on net interest margins, with the first quarter of 2023 showing a decline in net interest margin to 1.43%, a historically low level [9]. - The ongoing trend of financial disintermediation is leading to a "liability shortage" for banks, compelling them to attract deposits through higher rates in interbank markets, which could counteract the benefits of lower deposit costs [11].

Core Viewpoint - The recent adjustment of deposit rates by major banks marks the seventh round of rate cuts, significantly lowering the cost of bank liabilities and stabilizing profit margins, which is expected to enhance the banks' internal growth capabilities and maintain sound operations [4][7]. Group 1: Deposit Rate Adjustments - As of May 21, nine joint-stock banks have announced adjustments to their deposit rates, following the lead of the six major state-owned banks [5]. - The new rates include a 5 basis point reduction in demand deposit rates and a 15-25 basis point reduction in time deposit rates, with the one-year fixed deposit rate falling below 1% [3][5]. - The current demand deposit rate is now close to zero, and the one-year fixed deposit rate has been set at 1.15% for most banks [5][6]. Group 2: Impact on Banking Sector - The reduction in deposit rates is expected to lower banks' funding costs, thereby stabilizing net interest margins and enhancing their ability to support the real economy [8][12]. - Analysts suggest that the ongoing low interest rate environment may lead to a shift in deposits from large banks to smaller banks, which could affect the competitive landscape [8][12]. - The overall banking sector is entering a low interest rate and low spread cycle, with net interest margins for various types of banks showing a downward trend [10][12]. Group 3: Future Outlook - The adjustments in deposit rates are anticipated to lead to a decrease in overall deposit rates by approximately 0.11-0.13 percentage points, which may help stabilize banks' net interest margins [13]. - Despite the downward pressure on net interest margins, it is expected that the decline will not continue indefinitely, as measures to control funding costs are taking effect [12][13]. - The shift in deposit rates may also influence the allocation of bank assets towards bonds, potentially increasing demand in the bond market [8][13].

Core Viewpoint - A new round of interest rate cuts for large-denomination certificates of deposit (CDs) has begun, with some products' rates falling below 1% for the first time in recent years, indicating a significant shift in the banking sector's approach to deposit rates [1][9]. Summary by Category Interest Rate Changes - Major banks, including state-owned banks, have reduced the annualized interest rates for 1-month and 3-month large-denomination CDs to 0.9%, marking a historic low [1][3]. - The latest issuance by Bank of China shows a reduction of 25 basis points for 1-month, 3-month, 6-month, and 1-year products, while the 3-year product saw a reduction of 35 basis points [3][10]. - Other banks, such as Industrial and Agricultural Banks, have also lowered their rates to 0.9% for similar products [3][6]. Implications for the Banking Sector - The reduction in deposit rates is seen as a strategy to alleviate pressure on net interest margins, which have been declining [10][11]. - Analysts suggest that lowering deposit rates will help banks stabilize their net interest margins and reduce financing costs for the real economy [10][11]. Investor Guidance - Investors are advised to adjust their expectations regarding investment returns and consider a diversified asset allocation strategy in light of the declining interest rates [1][8][11]. - The trend of decreasing deposit rates is expected to continue, prompting investors to seek alternative investment options such as cash management products, money market funds, and government bonds [11].

Core Viewpoint - Several Chinese banks have announced a reduction in RMB deposit interest rates effective from May 21, 2025, indicating a trend towards lower interest rates in the banking sector [1][2]. Group 1: Interest Rate Adjustments - The seven joint-stock banks, including Ping An Bank, Industrial Bank, Minsheng Bank, CITIC Bank, Huaxia Bank, Guangfa Bank, and Pudong Development Bank, will lower the interest rate on demand deposits from 0.1% to 0.05%, a decrease of 5 basis points [1]. - The fixed deposit rates for 3-month, 6-month, and 1-year terms will be adjusted from 0.85%, 1.10%, and 1.30% to 0.70%, 0.95%, and 1.15%, respectively, each down by 15 basis points [1]. - For 3-year and 5-year fixed deposits, the rates will be reduced from 1.55% and 1.60% to 1.30% and 1.35%, representing a decrease of 25 basis points [1]. Group 2: Specific Bank Adjustments - Minsheng Bank will adjust its 2-year deposit rate from 1.30% to 1.15%, while the other six banks will lower their rates from 1.35% to 1.20%, a reduction of 15 basis points [2]. - Prior to this announcement, China Merchants Bank and Everbright Bank had already adjusted their deposit rates effective May 20, aligning their rates with the six major state-owned banks [2]. - After the adjustments, China Merchants Bank's fixed deposit rates for various terms will be set at 0.65%, 0.85%, 0.95%, 1.05%, 1.25%, and 1.30% for 3-month, 6-month, 1-year, 2-year, 3-year, and 5-year deposits, respectively [2].

Core Viewpoint - The recent reduction in deposit rates by major banks in China is a response to macroeconomic pressures and aims to lower the banks' funding costs, thereby supporting the economy and enhancing financial stability [1][3]. Group 1: Deposit Rate Adjustments - Six major state-owned banks and some national joint-stock banks have lowered their deposit rates, with the maximum reduction reaching 25 basis points [1][2]. - After the adjustments, the interest rates for various deposit products are as follows: - Demand deposit rate is now 0.05% - 3-month, 6-month, 1-year, and 2-year fixed deposit rates are 0.65%, 0.85%, 0.95%, and 1.05% respectively - 3-year and 5-year fixed deposit rates are 1.25% and 1.3% respectively [2]. Group 2: Impact on Banking Sector - The coordinated reduction in deposit rates and LPR (Loan Prime Rate) is seen as a significant measure to support the real economy and alleviate the pressure on banks' net interest margins [4]. - The net interest margin for commercial banks has narrowed to 1.43% in Q1, down 9 basis points from the previous quarter, indicating ongoing challenges for banks [4]. Group 3: Strategic Recommendations for Banks - Banks are encouraged to optimize their deposit product structures and dynamically adjust the scale of different types of deposits to reduce high-cost deposits [5][6]. - There is a call for banks to enhance their market analysis capabilities and implement differentiated pricing strategies for various customer segments and deposit terms [6]. - Emphasizing regional operations and adapting to local market characteristics can help banks develop flexible deposit pricing strategies [6].

Core Points - The China Securities Index of State-Owned Enterprises AH Price Preferred Index has shown a recent increase, with a 1.86% rise over the past month and a 1.90% increase year-to-date [1] - The index includes various sub-indices that reflect the performance of different sectors, such as banking, securities, and energy, using an AH price preferred investment strategy [1] - The top ten holdings in the index are dominated by major companies like Kweichow Moutai and China Merchants Bank, indicating a concentration in high-performing stocks [1] Market Composition - The index's holdings are primarily from the Shanghai Stock Exchange (48.19%) and Hong Kong Stock Exchange (37.43%), with a smaller portion from the Shenzhen Stock Exchange (14.39%) [2] - The financial sector represents the largest portion of the index at 34.19%, followed by industrials (15.98%) and consumer staples (12.60%), highlighting the index's focus on key economic sectors [2] Index Adjustment Mechanism - The index undergoes semi-annual adjustments in line with its benchmark indices, and monthly category conversions are based on a specific price ratio between mainland and Hong Kong securities [3] - Adjustments to the index are made under special circumstances, such as delisting or corporate actions like mergers, ensuring the index remains reflective of the market [3]

Core Viewpoint - The recent reduction in deposit rates by major Chinese banks marks a significant shift in the savings landscape, with large-denomination certificates of deposit (CDs) losing their appeal as rates enter the "1 era" [1][4][5]. Summary by Sections Deposit Rate Changes - On May 20, major banks including Bank of China, China Construction Bank, and Industrial and Commercial Bank of China announced reductions in RMB deposit rates, following expectations of a decrease in the Loan Prime Rate (LPR) [1]. - The rates for large-denomination CDs have been lowered, with 1-year, 2-year, and 3-year products seeing reductions of 25 basis points and 35 basis points compared to last year [1][4]. Current Rates for Large-Denomination CDs - As of the latest offerings, the 1-year, 2-year, and 3-year large-denomination CD rates are as follows: - Bank of China: 1.2%, 1.2%, 1.55% [4] - Agricultural Bank of China: 1.45%, 1.45%, 1.9% [5] - China Construction Bank: 1.2%, 1.55% [5] - Smaller banks are also adjusting their rates, with Tianjin Bank reducing its 3-year CD rate from 2.10% to 2.05% [5]. Impact on Savings and Investment Behavior - The current round of deposit rate cuts is noted as one of the largest in recent years, potentially leading to a shift of deposits towards non-bank financial institutions [8]. - A report indicates that the reduction in deposit rates and the cleanup of manual interest payments have driven funds towards wealth management products and bond funds, with a notable increase in bank wealth management scale [9]. Wealth Management Market Trends - The yield on fixed-income products has improved, with recent data showing a 0.50% return over the past three months and a 1.26% return over the past six months [9]. - The total scale of bank wealth management has seen a significant increase, reaching 31.3 trillion yuan, surpassing previous quarter-end levels [9]. Market Outlook - Despite the growth in wealth management products, analysts express skepticism about replicating last year's strong performance in the bond market, citing a challenging investment environment [10].

Investment Rating - The industry rating is "Positive" (maintained) [4] Core Viewpoints - The reduction in deposit rates is greater than expected, with the average reduction being 16 basis points, which is higher than the 10 basis points reduction in loan rates, indicating a clear regulatory support for interest margins [5] - The phenomenon of deposit disintermediation is expected to persist long-term, although the degree of disintermediation is weaker than last year due to manual interest compensation governance [2] - The average annualized yield for cash management products is 1.46%, which is higher than the actual interest rate for state-owned banks' 1-year deposits by 36 basis points, suggesting that wealth management products still have a comparative advantage over deposits [2] Summary by Sections Deposit Rate Adjustments - As of May 20, 2025, the LPR for 1-year and 5-year has been lowered by 10 basis points to 3.0% and 3.5% respectively, with significant reductions in various deposit rates across state-owned banks and China Merchants Bank [5] - The new rates for different deposit types include a reduction in the current deposit rate to 0.05% and a 15 basis point reduction for 3-month, 6-month, and 1-year fixed deposits [5] Market Impact - Short-term market expectations for interest rate cuts have been fully priced in, with limited immediate impact on bond market prices. However, in the medium to long term, the reduction in deposit rates may improve funding costs and lead to a decline in bond yields [3] - The improvement in funding costs is expected to enhance the ticket yield for banks, as previous constraints on allocation due to funding costs are alleviated [3] Investment Recommendations - The report suggests that bank stocks are not in the latter stage but rather at the beginning of a long cycle, with regulatory support for interest margins and declining rates benefiting dividend stocks [6] - Key recommendations include city commercial banks such as Jiangsu Bank and Chengdu Bank, as well as dividend-paying banks like Agricultural Bank and China CITIC Bank [6]

Core Viewpoint - The recent reduction in the Loan Prime Rate (LPR) signals a shift in monetary policy aimed at stimulating economic activity through lower borrowing costs for both businesses and individuals [2][3]. Group 1: LPR Reduction Details - The 1-year LPR and the 5-year LPR have been lowered by 10 basis points to 3.0% and 3.5%, respectively, marking the first reduction in 7 months since October 2024 [2]. - A decrease in LPR will lead to lower loan rates for businesses and individuals, with an example showing that a 10 basis point drop could save a homebuyer approximately 20,000 yuan in interest over a 30-year mortgage [2]. Group 2: Impact on Deposit Rates - On the same day as the LPR reduction, major state-owned banks and some joint-stock banks announced a decrease in deposit rates, with 1-year fixed deposit rates falling below 1% to 0.95% [2][5]. - The reduction in deposit rates is seen as a strategy to attract depositors before further declines, with some banks offering rates as low as 0.05% for demand deposits [2]. Group 3: Economic Context and Analysis - The LPR reduction is attributed to external economic pressures, particularly the escalation of the US-China trade conflict, necessitating a stronger counter-cyclical adjustment in macroeconomic policy [3]. - The weighted average interest rate for new corporate loans was approximately 3.2%, down about 50 basis points year-on-year, while the average for new personal housing loans was around 3.1%, down about 55 basis points [3]. Group 4: Bank Profitability and Future Outlook - The recent cuts in deposit rates are expected to help lower banks' funding costs, potentially allowing for further reductions in LPR [6]. - The net interest margin for commercial banks has been narrowing, with the latest data showing a decline to 1.43%, down 9 basis points from the previous quarter [6]. - Analysts predict that the recent LPR cut will lead to further decreases in loan rates, as banks adjust to maintain their interest margins [6].

Group 1 - The Ministry of Finance and the Financial Regulatory Administration issued a notice to accelerate the digital development of bank confirmation letters, emphasizing the need for a unified platform and improved service functions [1] - The People's Bank of China released a data security management measure to enhance data protection and clarify the obligations of data processors throughout the data lifecycle [1] - The Shenzhen Financial Regulatory Bureau supports state-owned and joint-stock banks in establishing technology financial centers, outlining 25 policy measures for high-quality development in technology finance [1] Group 2 - Recent adjustments in deposit rates by several small and medium-sized banks have led to an inverted yield curve, where shorter-term deposit rates exceed longer-term rates [2] - The Shanghai Stock Exchange held a training session for commercial bank wealth management companies to enhance their capabilities in equity asset management, with a focus on increasing participation in the capital market [2] - Ping An Life has increased its holdings in Agricultural Bank of China and Postal Savings Bank of China, marking its second acquisition of these banks this year, indicating a trend of insurance companies favoring bank stocks [2] Group 3 - Shanghai Bank elected Gu Jianzhong as the new chairman of its board, pending approval from the banking regulatory authority [3] - Everbright Bank appointed Ma Bo as its first Chief Risk Officer, a position aimed at enhancing theoretical research and practical exploration within the bank [4] Group 4 - Huaxia Bank announced that the qualification of its director, Duan Yuangang, has been approved by the regulatory authority [5] - Zhu Jiangtao, a long-serving executive at China Merchants Bank, is expected to take on the role of president at China Merchants Securities, marking a new challenge outside the banking sector [5] - Zhejiang Wuyi Rural Commercial Bank was fined 3.14 million yuan for multiple regulatory violations, including breaches of financial statistics management and customer identity verification [5] Group 5 - Zhejiang Merchants Bank successfully issued 5 billion yuan in technology innovation bonds with a 3-year term and a coupon rate of 1.66%, aimed at supporting technology innovation projects [6]