Core Viewpoint - The banking industry is shifting back to a deposit-centric model, emphasizing the importance of attracting low-cost deposits to optimize liquidity and improve profitability in the face of declining net interest margins [1][2][3][5][11]. Group 1: Historical Context - Historically, attracting deposits was the primary focus for banks, especially before the interest rate liberalization in 2012, which allowed for a more competitive banking environment [1][14]. - From 2012 to 2016, the focus shifted from deposit-based banking to asset-based banking, with smaller banks relying more on interbank funding [1][15][16]. Group 2: Regulatory Changes - Since the financial deleveraging began in the second half of 2016, there has been a consensus among commercial banks to return to a deposit-centric approach due to regulatory changes that restrict reliance on interbank funding [2][17][18]. - The People's Bank of China has included off-balance-sheet wealth management products in the broad credit indicators, making it more challenging for banks to depend on interbank liabilities [2][17]. Group 3: Current Challenges - The net interest margin for commercial banks dropped to a historical low of 1.42% in 2025, with city commercial banks averaging even lower at 1.37% [5][21]. - Many banks are facing pressure to reduce deposit costs while maintaining profitability, leading to a focus on the quality of deposits rather than just quantity [11][27]. Group 4: Strategic Shifts - City commercial banks are now prioritizing the acquisition of low-cost, stable deposits and are moving away from aggressive pricing strategies [11][27]. - Some banks, like Qilu Bank, have successfully increased their deposits and net interest margins despite industry-wide pressures, indicating a potential competitive advantage for those who adapt early [12][28]. Group 5: Future Outlook - The competition among city commercial banks will increasingly focus on the ability to secure stable deposits at low costs, rather than merely accumulating large deposit volumes [12][28][29]. - There is an expectation for banks to actively manage their balance sheets and reduce unnecessary deposit levels in light of current lending challenges [11][30].