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 - 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].

Core Viewpoint - The recent trend of interest rate cuts among small banks in China indicates a shift towards lower deposit rates, with expectations of further reductions by the central bank to alleviate net interest margin pressures [1][6]. Group 1: Interest Rate Cuts - Multiple small banks have announced reductions in deposit rates, with changes primarily affecting fixed-term deposits, showing declines between 15 to 55 basis points, and some banks reducing rates by as much as 80 basis points [3][4]. - For instance, Zhejiang Pingyang Pudong Village Bank adjusted its fixed-term deposit rates across various terms, with three-year deposits dropping by 80 basis points [3]. - Jiangsu Sushang Bank's three-year deposit rate is currently at 2.2%, while two-year rates are at 2.1%, indicating a competitive environment for attracting deposits [1][4]. Group 2: Rate Inversion Phenomenon - The occurrence of "inverted" deposit rates, where longer-term deposits yield lower rates than shorter-term ones, has been noted, such as Shanghai Huari Bank's three-year rate being higher than its five-year rate [4][5]. - This inversion is attributed to market expectations of future rate declines and banks' strategies to attract short-term deposits to match their lending profiles [5]. Group 3: Future Outlook - Analysts predict that the central bank may implement another round of interest rate cuts and reserve requirement ratio reductions by the end of the year, which could lead to further declines in deposit rates [6][7]. - The current economic environment, including external monetary policy trends and domestic fiscal measures, suggests that there is room for further adjustments in the Loan Prime Rate (LPR) [7][8].

Core Viewpoint - The large certificate of deposit (CD) market is experiencing a "dual climate" where large and joint-stock banks have reduced their annual interest rates to the "1" range, while some small and medium-sized banks offer rates exceeding 2%, but face tight quotas and rapid sell-outs [1] Group 1: Market Dynamics - The disparity in large CD interest rates reflects the marketization of deposit rates, which is a natural outcome of financial market operations [2] - If large, medium, and small banks had uniform CD rates, it would undermine the market's regulatory function and diminish competition among banks of different sizes [2] - The current situation is a result of the "Matthew Effect," where larger banks dominate the deposit market, potentially leading to a depletion of resources for smaller banks [2] Group 2: Bank Characteristics - Large banks possess strong capital, brand recognition, and extensive networks, allowing them to maintain stable funding sources and rely less on high-interest deposits, resulting in lower CD rates [3] - In contrast, small and medium-sized banks struggle with brand influence and customer recognition, necessitating higher CD rates to attract deposits [3] Group 3: Operational Pressures - The "dual climate" in CD rates is also driven by the operational realities faced by small and medium-sized banks, which have significant challenges in expanding their business and maintaining asset quality [4] - These banks often resort to offering high-interest CDs to attract customers and alleviate pressure on their liabilities, especially during critical assessment periods [4] Group 4: Short-term Strategies and Long-term Solutions - While raising CD rates can temporarily enhance deposit attraction for small banks, it is not a sustainable long-term strategy and may lead to increased operational risks [5] - Small banks need to innovate through digital marketing, flexible product offerings, and partnerships with third-party platforms to build a differentiated competitive edge and enhance customer loyalty [5]

Core Viewpoint - The upcoming National Day and Mid-Autumn Festival have triggered a new round of deposit marketing competition among local banks, with various promotional strategies being employed to attract depositors, including higher interest rates and gift incentives. However, the declining interest rate environment poses challenges for sustainable deposit structures and customer retention beyond mere financial incentives [1][5][10]. Group 1: Deposit Marketing Strategies - Local banks are intensifying their deposit marketing efforts by launching unique deposit products with slightly higher interest rates than standard fixed deposits, as well as implementing "points exchange" and "gift-giving" strategies to attract customers [1][3]. - For instance, Pujiang Rural Commercial Bank introduced a "Filial Piety Deposit" product with a starting amount of 100,000 yuan, offering a 3-year interest rate of 2%, which yields 6,000 yuan upon maturity [3]. - Similarly, Fudian Bank has diversified its deposit product offerings, including personal large-denomination certificates of deposit and special products for new customers, with interest rates ranging from 1.45% to 1.95% depending on the term [4]. Group 2: Challenges and Regulatory Concerns - The competitive advantage of local banks in terms of high interest rates has diminished due to multiple rounds of interest rate cuts, leading to a convergence towards industry averages [4][5]. - The use of gift incentives for deposit attraction raises regulatory concerns, as it may violate guidelines that prohibit improper methods of deposit solicitation, such as cash returns or gifts [9]. - Regulatory scrutiny has increased, with local banks facing pressure to comply with rules that restrict promotional practices that could be interpreted as disguised high-interest deposit solicitation [9][10]. Group 3: Long-term Strategies for Local Banks - To adapt to the low-interest-rate environment, local banks need to rethink their deposit strategies, focusing on building sustainable liability structures and enhancing customer loyalty beyond financial incentives [1][5][11]. - Experts suggest that local banks should improve their service capabilities, strengthen risk management, and develop long-term strategies to remain competitive in the market [6][11]. - Additionally, local banks are encouraged to integrate community financial services, leverage financial technology, and optimize liquidity management to reduce reliance on high-cost deposits and enhance operational efficiency [11][12].

Core Viewpoint - The upcoming National Day and Mid-Autumn Festival have triggered a new round of deposit marketing among local banks, with various promotional strategies being employed to attract depositors, including higher interest rates and gift incentives. However, the declining interest rate environment poses challenges for sustainable deposit growth and customer retention beyond mere financial incentives [1][5]. Group 1: Deposit Marketing Strategies - Local banks are intensifying their deposit marketing efforts by launching unique deposit products with slightly higher interest rates than standard fixed deposits, as well as implementing gift and points redemption strategies to attract customers [1][3]. - For instance, Pujiang Rural Commercial Bank introduced a "Filial Piety Deposit" product with a 3-year interest rate of 2% for a minimum deposit of 100,000 yuan, while standard fixed deposit rates for similar terms are lower [3]. - Fudian Bank has diversified its deposit product offerings, including large-denomination certificates of deposit and special products for new customers, with interest rates ranging from 1.45% to 1.95% depending on the term [4]. Group 2: Challenges and Regulatory Concerns - The competitive advantage of local banks in terms of high interest rates has diminished due to multiple rounds of rate cuts, leading to a convergence with industry averages [4][5]. - The use of gift incentives for deposit attraction raises regulatory concerns, as such practices may violate guidelines against improper deposit solicitation methods [8][12]. - The regulatory environment has tightened, with explicit prohibitions on using gifts or cash returns to attract deposits, which could impact the marketing strategies of local banks [8][12]. Group 3: Long-term Strategies for Sustainability - Experts suggest that local banks need to shift from price competition to enhancing non-price competitive advantages, such as improving service capabilities and risk management [5][9]. - There is a need for local banks to integrate financial services with community needs, leveraging public service scenarios to enhance customer loyalty and deposit retention [10][11]. - Innovations in financial technology, such as blockchain for smart settlements and big data for risk management, are recommended to improve operational efficiency and reduce reliance on high-cost deposits [11].

Core Viewpoint - The recent reduction in deposit rates by several major banks has led to a surge in demand for large-denomination certificates of deposit (CDs), resulting in a scarcity of available products in the market [1][2][10]. Group 1: Impact of Deposit Rate Cuts - Major state-owned banks have lowered their fixed deposit rates by 10 basis points for various terms, leading to a situation where products with annual interest rates above 3.5% are hard to find [2][6]. - The reduction in deposit rates is expected to lower banks' funding costs, which may facilitate a decrease in loan rates and improve the financing environment for businesses [11][14]. Group 2: Market Dynamics and Demand for Large-denomination CDs - The demand for large-denomination CDs has surged, with many banks reporting that their products are in short supply, necessitating advance reservations for purchases [10][12]. - The current liquidity in the market is reasonable, and the recent cut in the reserve requirement ratio by the central bank has released approximately 530 billion yuan, further supporting the downward trend in deposit rates [12][15]. Group 3: Future Trends in Deposit Rates - Experts predict that while the short-term reduction in deposit rates may be limited, a long-term downward trend is expected as banks seek to manage their liabilities and maintain net interest margins [13][15]. - The adjustment of deposit rates is seen as a strategy to optimize the structure and duration of bank deposits, which will help stabilize funding costs and support lending to the real economy [14][15].

Core Viewpoint - The recent reform of the deposit interest rate self-discipline pricing mechanism aims to promote the alignment of asset and liability pricing in banks, facilitating a more market-oriented approach to interest rates [1][2][3] Group 1: Market Rate Reform - The People's Bank of China (PBOC) has established a deposit interest rate marketization adjustment mechanism, allowing banks to adjust deposit rates based on the 10-year government bond yield and the 1-year Loan Prime Rate (LPR) [1] - This reform follows the previous adjustment in June, where the self-discipline upper limit for deposit rates was modified to include a certain basis point above the benchmark deposit rate [1][2] Group 2: Impact on Loan and Deposit Rates - The new mechanism encourages banks to reference market rates, which can more accurately reflect the supply and demand for funds, thereby enhancing the efficiency of monetary policy transmission [1][2] - By linking deposit rates to the LPR, which is influenced by the central bank's policy rates, the reform aims to create a dual influence between deposit rates and LPR, potentially leading to lower deposit rates and increased likelihood of LPR reductions [2][3] Group 3: Benefits for Banks and the Economy - The adjustment of the deposit interest rate mechanism is expected to lower banks' funding costs, which in turn can support a decrease in loan rates while maintaining banks' interest margins [3] - This approach is seen as a flexible and market-oriented alternative to direct interest rate cuts, allowing banks to enhance their lending capacity to the real economy amidst tightening monetary policies in developed economies [3]

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]