Core Viewpoint - The article discusses the impact of the downward adjustment of deposit interest rate ceilings on the deposit interest rates of commercial banks in China, emphasizing the need for sustainable growth strategies in the deposit market amidst changing regulatory environments and market dynamics [1][9]. Summary by Sections Deposit Interest Rate Ceiling Adjustment - Since 2012, the adjustment of the RMB deposit interest rate ceiling has progressed through three phases, with commercial banks' deposit interest rates showing asynchronous changes compared to the ceiling adjustments [2]. - The downward adjustment of deposit interest rate ceilings has led to a significant decline in the average deposit interest rates of A-share listed banks, particularly from 3.58% in June 2012 to 2.25% in October 2015, a drop of 133 basis points [3][4]. Changes in Deposit Interest Rates (2016-2020) - From 2016 to 2020, the deposit interest rate ceiling remained unchanged, leading to a decline in deposit interest rates in 2016 and 2017, followed by a rebound in 2018 and 2019 [6]. - The average deposit interest rate of A-share listed banks increased slightly in 2020, driven by growth in city commercial banks and rural commercial banks [6]. Recent Trends (2021-Present) - Since June 2021, the deposit interest rate ceiling has entered a phase of active downward adjustment, with significant reductions in long-term deposit interest rates [7]. - Despite the downward trend in loan yields, the average deposit interest rate of A-share listed banks has shown rigidity, increasing by 0.06 percentage points from 2021 to 2023 [8]. Market Rebalancing and Evolution - Regulatory policies and self-discipline requirements have led to a more standardized use of interest rates in deposit competition, resulting in new growth patterns for different types of banks [9][10]. - The growth rates of general deposits for large banks and small banks have shown alternating trends, influenced by the differential setting of deposit interest rate ceilings [10][12]. Future Outlook and Recommendations - The article suggests that the deposit market may face renewed pressures from deposit disintermediation, particularly as interest rates decline and non-deposit products become more attractive [20][21]. - Recommendations for sustainable deposit growth include enhancing non-price competitiveness, strengthening self-discipline in interest rate pricing, and balancing the sources and term structures of deposits [25][28][31].

Investment Rating - The report maintains a "Positive" outlook for the banking industry in China as of June 11, 2025 [4] Core Insights - The banking sector is experiencing a transition from a surplus of deposits to a structural shortage, with significant differentiation between state-owned banks and smaller banks [8][27] - Recent adjustments in deposit rates are expected to stabilize the deposit base of large banks, despite ongoing deposit disintermediation [36][45] - The report highlights three main investment themes: convertible bonds with rebound potential, high-dividend stocks, and banks with long-term liabilities and capital advantages [40] Summary by Sections 1. Review of Deposit Growth: From Surplus to Shortage - Since 2009, deposit growth has lagged behind loan growth, indicating a shift in liquidity conditions from surplus to structural shortage [12][14] - The transition is attributed to changes in monetary policy and the rise of wealth management products, which have contributed to deposit disintermediation [19][22] 2. New Characteristics of Deposit Growth in 2025: From Industry-wide to Structural Shortage - The overall deposit gap in the banking sector has shown signs of improvement, but state-owned banks continue to face significant deposit shortages [27][28] - In Q1 2025, the deposit growth rate for large banks was only 71%, down from an average of 80% since 2019, indicating a potential arbitrage chain where entities take low-interest loans from large banks and deposit them in smaller banks for higher interest [32][34] 3. New Round of Deposit Rate Adjustments and Stability of Large Banks' Liabilities - The report expresses cautious optimism regarding the current round of deposit disintermediation, noting that past adjustments have had diminishing impacts over time [36][38] - Large banks are expected to maintain deposit stability due to regulatory constraints and the rapid adjustment of deposit rates by smaller banks [45] 4. Investment Recommendations - The report identifies three key investment lines: 1. Convertible bonds with rebound potential, specifically targeting Hangzhou Bank and Nanjing Bank [40] 2. High-dividend stocks, with a focus on CITIC Bank, Industrial Bank, and Jiangsu Bank [40] 3. Banks with long-term liabilities and capital advantages, such as Chongqing Rural Commercial Bank [40]

Investment Rating - The report indicates a positive outlook for the banking sector, suggesting that certain stocks may have alpha potential due to policy catalysts and a cyclical recovery [4]. Core Insights - Multiple banks have lowered their deposit rates, with the one-year and five-year Loan Prime Rate (LPR) reduced by 10 basis points on May 20, 2025. This trend reflects a broader market-driven decline in deposit costs [1][2]. - The average deposit cost rate for China Merchants Bank decreased significantly by 25 basis points to 1.29% in Q1 2025, indicating a trend of improving deposit costs across the sector [1]. - The report highlights that banks like Chongqing Bank, Minsheng Bank, and CITIC Bank have substantial room for further deposit cost reductions, suggesting a favorable environment for banks to optimize their funding costs [2]. Summary by Sections Section 1: Focus of the Week - Several banks have adjusted their deposit rates downward, with over half of listed banks participating in this trend by May 24, 2025 [1]. - The report notes that the average deposit cost rate for China Merchants Bank has shown improvement since Q2 2024, aligning with previous forecasts of enhanced cost reduction in liabilities [1]. Section 2: Sector Perspective - The banking sector is expected to benefit from expansionary policies aimed at stabilizing the economy, with specific banks like Ningbo Bank, Postal Savings Bank, and China Merchants Bank highlighted as potential investment opportunities [4]. - The report emphasizes that the cyclical recovery may take time, but the ongoing interest rate cuts could sustain the dividend strategy for banks like Shanghai Bank and Jiangsu Bank [4]. Section 3: Key Data Tracking - The report tracks various financial metrics, including the issuance of interbank certificates and the average rates for different types of bank notes, indicating a dynamic market environment [9][8]. - It also notes the increase in the proportion of deposits with a remaining maturity of less than one year, which rose by 3 percentage points to 37.4% by the end of 2024, suggesting a trend towards concentrated deposit maturities [2][16].

Core Viewpoint - Major Chinese banks have collectively lowered their RMB deposit rates, marking a significant shift as the one-year fixed deposit rate has fallen below 1% for the first time, indicating a transition into a "1 era" for deposit rates [1][5][9]. Summary by Category Deposit Rate Adjustments - On May 20, major banks including ICBC, ABC, BOC, CCB, and others reduced their demand deposit rates by 0.05 percentage points to 0.05%, with fixed deposit rates seeing a maximum decrease of 25 basis points [1][5]. - The one-year fixed deposit rate has dropped to 0.95%, while three-year and five-year fixed deposit rates are now at 1.25% and 1.30%, respectively [5][6]. - Postal Savings Bank has slightly higher rates compared to the major banks, with one-year and six-month fixed deposit rates at 0.98% and 0.86% [6]. Loan Market Rate Changes - The new Loan Prime Rate (LPR) has also been adjusted, with the one-year LPR decreasing to 3% and the five-year LPR to 3.5%, marking the first decline of the year [1][9]. - This simultaneous adjustment of LPR and deposit rates is expected to help stabilize banks' net interest margins [8][12]. Market Reactions and Predictions - Analysts predict that the reduction in deposit rates will lead to a decrease in interest income for depositors, with an example showing a drop in interest from 4500 yuan to 3750 yuan for a three-year deposit of 100,000 yuan [7][12]. - The overall trend indicates that banks are likely to continue adjusting their rates in response to market conditions, with expectations of further reductions in deposit rates across various banks [14][15]. Economic Implications - The adjustments are seen as a response to the need for banks to lower their funding costs and support the real economy, while also maintaining operational stability [11][12]. - The decline in deposit rates is anticipated to push more investors towards alternative investment products, such as money market funds and bonds, as traditional savings yield lower returns [15][16].

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].

Group 1 - The People's Bank of China (PBOC) is set to announce the latest Loan Prime Rate (LPR) on May 20, with the current 1-year LPR at 3.1% and the 5-year LPR at 3.6%, remaining unchanged for six consecutive months [1] - PBOC Governor Pan Gongsheng announced a 0.1 percentage point reduction in policy rates, which is expected to lead to a corresponding decrease in LPR [1][2] - Major banks are anticipated to act first in lowering deposit rates, while smaller banks will follow based on their circumstances and market competition [1] Group 2 - A report indicates that a new round of deposit rate cuts is imminent, with the average interest rate for new personal housing loans at approximately 3.1% as of April [2] - For a personal mortgage loan of 1 million yuan over 30 years, the monthly payment is expected to decrease by 54 yuan, resulting in a total repayment reduction of 19,000 yuan [2] Group 3 - On May 20, major state-owned banks announced reductions in RMB deposit rates, with the largest cut being 25 basis points [5] - The Industrial and Commercial Bank of China (ICBC) lowered its current deposit rate to 0.05% and adjusted various term deposit rates downwards, with the 3-year and 5-year rates reduced to 1.25% and 1.3% respectively [5][10] - Agricultural Bank of China, Bank of China, and other major banks made similar reductions in their deposit rates, reflecting a coordinated effort to adjust to market conditions [10][16] Group 4 - Analysts suggest that the recent deposit rate cuts are a result of banks adjusting their strategies based on market conditions, which may enhance their ability to support the real economy [18] - The long-term deposit rates have seen larger cuts, particularly for terms over three years, which may lead to a shift in consumer behavior towards other investment options [18]

Core Viewpoint - The banking wealth management products are facing continuous pressure on yields due to the market-oriented adjustment of deposit interest rates, leading to a significant trend of "increased volume but decreased price" in the market for the first quarter of 2025 [1][2]. Group 1: Market Trends - In the first quarter of 2025, a total of 7,481 new wealth management products were launched, an increase of 254 products compared to the previous quarter, with wealth management subsidiaries issuing 5,346 products, accounting for 71.46% of the market [2]. - The average performance benchmark for newly issued open-ended wealth management products has dropped to 2.25%, down 0.21 percentage points, while closed-end products have an average benchmark of 2.69%, down 0.06 percentage points [2][3]. Group 2: Factors Influencing Performance - The decline in performance benchmarks reflects a decrease in market expectations for the future returns of underlying assets, influenced by low market interest rates, bond market fluctuations, and the implementation of self-discipline mechanisms for interbank deposit rates [3]. - The performance benchmarks for wealth management subsidiaries' newly issued open-ended and closed-end products are 2.25% and 2.75%, respectively, both showing a downward trend [2]. Group 3: Recommendations for Improvement - Industry experts suggest that wealth management subsidiaries should innovate products by diversifying asset classes and investment strategies, focusing on investor needs, and enhancing investor education to improve competitiveness [4]. - Potential measures include leveraging policies that encourage investment in the stock market, upgrading existing product systems, and extending the duration of wealth management products to improve yield performance [4].