Core Viewpoint - Recent adjustments by banks to their deposit products, including the cancellation of long-term fixed deposits, reflect a trend towards optimizing liability structures and reducing funding costs amid ongoing pressure on net interest margins [1][3][4]. Group 1: Changes in Deposit Products - Some small and medium-sized banks have begun to adjust the issuance scale of three-year and five-year fixed deposits, with some banks even canceling five-year fixed deposit products entirely [1][2]. - For instance, the Inner Mongolia Tuyuqi Mengyin Village Bank announced the cancellation of its five-year fixed deposit product, which previously had an interest rate of 1.9%, lower than its three-year deposit rate [1]. - Other banks, such as Hubei Jingmen Rural Commercial Bank, have also reduced their fixed deposit rates and removed five-year options from their product offerings [1]. Group 2: Market Trends and Implications - The adjustments in deposit products are primarily seen in small and medium-sized banks, while large state-owned and joint-stock banks continue to offer five-year fixed deposits [2]. - The yield advantage of medium- to long-term deposit products is diminishing due to multiple rate adjustments, leading to a shift in banks' strategies [2][3]. - Experts suggest that reducing the proportion of high-cost long-term deposits and increasing short-term deposits or diversifying funding sources is crucial for banks to optimize their liability structures [3]. Group 3: Future Outlook - Industry experts predict that more banks may adopt similar measures to phase out high-cost deposit products in response to interest margin pressures and policy guidance [4]. - The People's Bank of China plans to enhance its interest rate adjustment framework to lower banks' funding costs and promote a decrease in overall financing costs in society [5]. - It is anticipated that deposit rates, particularly for medium- to long-term products, will likely decline further, prompting banks to focus on both increasing non-interest income and managing their asset and liability sides effectively [5].

Investment Rating - The report maintains an investment rating of "Outperform the Market - A" [4] Core Viewpoints - The banking sector is experiencing a significant divergence in credit growth, with state-owned banks increasing their share of new credit while smaller banks are seeing a decline [1][2] - The net interest margin for commercial banks has stabilized, with a slight increase observed in shareholding banks [3] - The report emphasizes the importance of increasing bond allocations to drive total asset growth, particularly for state-owned and city commercial banks [2] - The overall asset quality of banks remains stable, but there is a noticeable divergence, with non-listed banks experiencing a rise in non-performing loans [9][20] - The report suggests that the banking sector is currently undervalued, with A-share banks trading at a price-to-book ratio of 0.73 and Hong Kong-listed state-owned banks at 0.55 [10][11] Summary by Sections Section 1: Credit Growth and Market Dynamics - Recent financial data indicates that new RMB loans and social financing are significantly lower than the same period last year, reflecting weak financing demand [1] - The decline in real estate loans and the low credit dependence of light asset industries are impacting the competitive landscape among banks [1] Section 2: Asset Growth and Bond Allocation - State-owned and city commercial banks have shown a notable increase in total asset growth compared to joint-stock banks, attributed to their stronger liability bases and increased bond allocations [2] - The report anticipates a continued trend of credit expansion among banks with strong credit growth potential and increased bond allocations [2] Section 3: Net Interest Margin and Profitability - The net interest margin for commercial banks was reported at 1.42% for the first three quarters of the year, indicating stabilization [3] - The report notes that banks with a higher proportion of credit business and better middle-income advantages are likely to perform better in terms of fundamentals [10] Section 4: Asset Quality and Non-Performing Loans - The non-performing loan ratio for commercial banks was reported at 1.52%, with a slight increase observed [9][20] - State-owned and shareholding banks maintained stable non-performing loan ratios, while city and rural commercial banks experienced a faster increase [9][20] Section 5: Market Valuation and Investment Opportunities - The report highlights that the current valuation of the banking sector is significantly lower than that of banks in major international economies, suggesting potential for valuation recovery [10][11] - The report recommends focusing on state-owned banks, China Merchants Bank, and Ningbo Bank as investment opportunities [12]

Core Viewpoint - The People's Bank of China released financial statistics for October 2025, indicating a significant decrease in social financing and loan growth compared to previous years, aligning with seasonal expectations [1][3][4]. Social Financing - In October 2025, new social financing amounted to 815 billion yuan, a year-on-year decrease of 5.97 billion yuan, with a stock growth rate of 8.5%, down 0.2 percentage points from the previous month [1][3]. - The decline in social financing was attributed to a seasonal slowdown in loan issuance and government bond issuance, with a notable reduction in both RMB loans and government bond financing [1][4]. - Direct financing showed signs of recovery, with corporate bond financing increasing by 2.469 billion yuan, up 1.482 billion yuan year-on-year, and stock financing rising by 696 billion yuan, marking eight consecutive months of year-on-year growth [1][4]. Loan Issuance - Financial institutions reported an increase of 220 billion yuan in RMB loans for October 2025, which is 280 billion yuan lower than the same month last year and below seasonal averages [2][5]. - The total amount of loans to enterprises increased by 350 billion yuan, with short-term loans remaining stable compared to the previous year [5][6]. - Household loans decreased significantly, with short-term loans down by 2.866 billion yuan year-on-year, indicating weak consumer demand despite promotional efforts [4][5]. Money Supply - As of the end of October 2025, M1 grew by 6.2% year-on-year, while M2 increased by 8.2%, both showing a decline from the previous month [2][6]. - The increase in deposits was primarily driven by fiscal deposits, which rose by 7.2 billion yuan, reflecting a decrease in fiscal spending intensity [6][7]. Monetary Policy - The monetary policy emphasizes maintaining reasonable interest rate spreads to protect banks' net interest margins, with a focus on improving asset quality [7]. - The average weighted interest rate for RMB loans was reported at 3.24%, with tax-adjusted rates aligning closely with government bond yields, limiting the scope for further rate cuts [7].

Group 1 - Zhejiang Commercial Bank is no longer the leader among Zhejiang banks, as it has been surpassed by Ningbo Bank in total assets and operating income [1] - In the first three quarters, Zhejiang Commercial Bank reported a net profit of 11.668 billion yuan, a year-on-year decline of 9.59%, with a more significant drop of 18.45% in the third quarter [1][2] - The bank is experiencing a lack of growth momentum, contrasting with the overall trend in the banking industry, where 42 A-share listed banks achieved a net profit growth of 1.5% to 1.6% [2] Group 2 - The net interest margin (NIM) of Zhejiang Commercial Bank has been declining, reaching a historical low of 1.42% by the end of the second quarter [6][12] - The bank's NIM for the first three quarters was 1.67%, slightly above the industry average but still down 13 basis points year-on-year [11][12] - The bank's reliance on high-cost time deposits is squeezing its interest margin, with an average interest-bearing liability cost rate of 1.95% [14][15] Group 3 - The bank's non-interest income has also declined, with a 14.3% year-on-year drop in the first three quarters, contrasting with a 61.7% increase in the previous year [17] - The bank's strategy has shifted from pursuing high growth to focusing on quality and efficiency, as indicated by its new leadership [26][34] - The bank's asset quality has improved, with a non-performing loan (NPL) ratio of 1.36%, down from 1.53% at the end of 2021, although it remains lower than its peers [20][22] Group 4 - The new president of Zhejiang Commercial Bank faces dual pressures of transformation and compliance, as the bank has received multiple regulatory fines for various violations [30][31] - The bank's provisioning coverage ratio has dropped to 159.56%, indicating a potential weakening of its financial buffer against future asset quality fluctuations [25] - The bank's retail banking segment has reported losses, with credit impairment losses exceeding income in the first half of 2025 [23]

Core Insights - The recent announcement by Inner Mongolia's Tongyu Mengyin Village Bank to cancel its 5-year fixed deposit product marks a significant shift in the banking sector, reflecting a broader trend of declining deposit rates and the market's response to interest rate adjustments [1][3][6] Deposit Rate Trends - Many banks are suspending or lowering the rates on 5-year fixed deposit products, with some banks like China Merchants Bank offering only a 1.3% interest rate for 5-year deposits, which is lower than the 1.4% for 2-year deposits [2][4] - The phenomenon of longer-term deposit rates being lower than shorter-term rates has become common, with several banks reporting that their 5-year deposit rates are less attractive compared to 3-year options [3][5] Market Dynamics - The market for 3-year specialty fixed deposit products is highly competitive, with customers needing to "抢" (grab) limited quotas, indicating a scarcity of available products [1][2] - Banks are adjusting their deposit products in response to market conditions, with some banks increasing the entry thresholds for 3-year deposits, reflecting a shift in customer demand and risk appetite [3][4] Future Outlook - Industry experts predict that deposit rates will continue to decline, driven by banks' need to reduce funding costs and maintain profitability amid shrinking net interest margins [6][7] - The ongoing adjustments in deposit products and rates are seen as necessary for banks to manage their liabilities effectively, especially for smaller banks that may struggle with long-term deposits [8][9]

Core Insights - The announcement from Inner Mongolia's Tongyu County Mengyin Village Bank regarding the cancellation of 5-year fixed deposits has drawn market attention, marking the first instance of such a move by a bank [1] - Many banks are suspending or have already removed 5-year specialty fixed deposit products, while 3-year specialty fixed deposits are becoming competitive and require prior reservation to secure [2][3] - The phenomenon of long-term deposit rates being lower than short-term rates has become commonplace, with several banks offering lower rates for 5-year deposits compared to 3-year deposits [4][5] Summary by Sections Deposit Rate Adjustments - Mengyin Village Bank has reduced its 5-year fixed deposit rate to 1.9%, which is only 0.5% higher than its 3-year fixed deposit rate before adjustments [1] - Other banks, including China Merchants Bank, have also suspended their 5-year specialty fixed deposit products, offering only standard fixed deposits at lower rates [2][3] Market Trends - The trend of long-term deposit rates being lower than short-term rates is evident, with banks like China Merchants Bank and SPDB offering 5-year fixed deposits at rates below 1.4% [4][5] - The average rate for 3-year specialty fixed deposits can reach up to 1.75%, making them more attractive compared to 5-year options [4] Future Outlook - Industry experts predict that deposit rates will continue to decline, leading banks to adjust their deposit products and strategies to manage costs effectively [6][7] - The narrowing of net interest margins across the banking sector is a significant concern, prompting banks to reconsider their long-term deposit offerings [8]

Core Viewpoint - The recent cancellation of long-term deposit products by banks, particularly in Inner Mongolia, highlights a trend where banks are attempting to alleviate pressure on net interest margins by phasing out these products, which were once key for attracting deposits [1][2][4]. Group 1: Market Trends - Several village banks in Inner Mongolia have announced the cancellation of five-year fixed deposit products, with other banks also reducing interest rates on various deposit terms by 5 to 10 basis points [2][3]. - Nearly half of the private banks have quietly removed three-year and five-year fixed deposit products from their apps, with some institutions now offering a maximum deposit term of only one year [2][3]. - Major banks have also followed suit, with many national and regional banks discontinuing long-term deposit products and large certificates of deposit [3][4]. Group 2: Financial Implications - The direct reason for the removal of long-term deposits is to ease the pressure on net interest margins, which have reached historical lows, with commercial banks' net interest margin dropping to 1.42% as of the second quarter [4][5]. - The narrowing of net interest margins is evident across different types of banks, with city commercial banks, rural commercial banks, and private banks experiencing declines of 8 basis points, 14 basis points, and 30 basis points respectively compared to the previous year [4]. - Analysts suggest that the reduction in high-cost long-term deposits will help lower banks' funding costs, potentially stabilizing and improving net interest margins in the future [4][6].

Core Viewpoint - Several banks are discontinuing long-term fixed deposit products, particularly 3-year and 5-year terms, in response to ongoing pressure on net interest margins and a shift in their profit models [2][8]. Summary by Sections Bank Actions - Multiple banks, including village banks, have announced the cancellation of 5-year fixed deposit products, with some also removing 3-year fixed deposits from their offerings [2][4]. - As of November 10, 9 private banks have removed 5-year fixed deposit products from their apps, and some have also discontinued 3-year fixed deposits [4][5]. Interest Rate Adjustments - Interest rates for 1-year and 3-year fixed deposits are now often higher than those for 5-year deposits, leading to a common phenomenon of "rate inversion" [2][5]. - For example, the Inner Mongolia Tuyuqi Mengyin Village Bank has adjusted its 1-year fixed deposit rate from 1.50% to 1.45% and its 3-year rate from 1.95% to 1.85% [3][6]. Market Trends - The trend of banks discontinuing long-term deposit products is primarily observed in smaller banks, while larger state-owned and joint-stock banks still offer 5-year fixed deposits [7][8]. - The maximum term for large-denomination certificates of deposit has also been reduced, with many banks no longer offering 5-year products and only providing 1-year options [7][8]. Profitability and Cost Management - Banks are actively managing their liability costs by reducing deposit rates and discontinuing high-cost deposit products, reflecting a shift towards more precise control over their funding sources [8][9]. - The net interest margin for many banks remains under pressure, with 14 out of 26 listed banks reporting a decline in this metric [8].

Group 1 - The core issue in the banking sector in 2025 is the unexpected changes in the deposit market, leading to four peculiar phenomena for depositors [2] - The issuance of large-denomination certificates of deposit (CDs) has significantly decreased, with the interest rate for a 3-year CD dropping from 1.80% at the beginning of the year to 1.55% [3] - There is an unusual inversion in deposit rates, where some banks offer a 3-year fixed deposit rate of 1.55% while the 5-year rate is only 1.50% [6] Group 2 - There is a widening gap in deposit rates between large state-owned banks and smaller banks, with state-owned banks offering a 3-year deposit rate of 1.35% compared to 1.65%-1.75% from smaller banks [7] - Bank staff are increasingly promoting wealth management products, which offer higher annual returns of 2%-2.2% compared to traditional fixed deposit rates [10] Group 3 - The narrowing net interest margin for banks, which was 1.43% at the end of Q1 2025, has led to reduced issuance of large-denomination CDs and the inversion of deposit rates [12] - Banks are pushing wealth management products as a strategy to compensate for declining net interest income, as they seek to maintain profitability [12]

Core Insights - The A-share banking sector reported a total operating income exceeding 4.3 trillion yuan for the first three quarters, with the six major state-owned banks achieving a profit scale of 1.07 trillion yuan, indicating strong performance despite underlying structural issues [1][2] - The net interest margin (NIM) has shown signs of stabilization, yet remains at historically low levels, with retail loan delinquency rates continuing to rise, highlighting potential long-term challenges for the banking industry [1][4] Group 1: Net Interest Margin Trends - The banking sector's NIM showed a slight recovery in Q3 2025, with Jiangyin Bank reporting a NIM of 1.56%, up 2 basis points from Q2, and Ruifeng Bank at 1.49%, up 3 basis points, contributing to a 6.12% year-on-year increase in net interest income [1][2] - Despite short-term stabilization, the long-term trend of declining NIM persists, with the average NIM for commercial banks at 1.42% in Q2 2025, down 0.12 percentage points year-on-year [2][3] Group 2: Asset Quality and Retail Loan Risks - The overall asset quality of the banking sector appears stable, with most banks maintaining non-performing loan (NPL) ratios below 1.5%, but retail loans are becoming a high-risk area, with consumer loan NPL rates rising to 1.29% as of Q2 2025 [4][5] - The increase in retail loan delinquency is attributed to employment pressures affecting borrowers' income stability, leading to heightened "co-borrowing" risks, where clients with multiple loans face significantly higher delinquency rates [4][5] Group 3: Business Structure and Revenue Sources - Traditional lending remains a dominant revenue source for banks, but there is a growing need for diversification into intermediary services, as evidenced by a 4.60% year-on-year increase in net fee and commission income for A-share listed banks [6][7] - The shift towards a dual-driven model of "lending + wealth management" is essential for improving profitability in retail banking, requiring long-term customer cultivation and ecosystem development [6][7] Group 4: Non-Performing Loan Management - The improvement in NPL ratios is largely driven by increased asset disposal efforts, with a significant rise in the volume of bad debt write-offs and transfers, indicating a proactive approach to managing asset quality [7][8] - However, the reduction in NPLs does not eliminate long-term risks, particularly in the real estate sector, where NPL rates remain elevated, and smaller banks face greater challenges due to concentrated lending practices [8][9]