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].

Core Viewpoint - The article discusses the significant decline in bank deposit interest rates, which have dropped to historical lows, and the resulting pressure on banks to meet mid-year assessment targets for deposit growth [1][2]. Summary by Sections Deposit Rate Decline - As of May, the average interest rates for 3-year and 5-year fixed deposits have decreased to 1.711% and 1.573%, respectively, with a month-on-month decline of over 30 basis points [3][5]. - All types of fixed deposit rates have entered the "1% era," with 3-month and 6-month rates at 1.004% and 1.212%, respectively [3][5]. Bank Assessment Pressure - With the recent drop in deposit rates, banks are experiencing a noticeable decline in the scale of fixed deposit inflows, increasing the pressure to meet mid-year deposit targets [2][7]. - Banks are mobilizing staff to market various financial products, including deposits, wealth management, and insurance, to meet these targets [7][9]. Market Dynamics - The decline in deposit rates has led to a rise in the activity of fund brokers, who are offering high prices to attract deposits for banks [7][8]. - Regulatory bodies have issued warnings against irregular deposit-raising practices, emphasizing the need for banks to optimize their assessment systems [8][11]. Product Sales and Strategies - The sales of wealth management products have not performed as well as deposits, but they remain a crucial source of income for banks [9]. - Insurance products are also being promoted aggressively, with banks offering incentives to attract customers [10]. Regulatory Environment - Recent regulatory measures have aimed to curb excessive deposit-raising activities, prohibiting practices such as offering gifts or cash incentives for deposits [11][12]. - The focus is shifting towards sustainable and compliant methods of attracting deposits, rather than relying on high-interest rates or promotional gifts [12][13].

Core Viewpoint - The article discusses the significant decline in bank deposit interest rates, which have dropped to historical lows, and the resulting pressure on banks to meet mid-year assessment targets for deposit accumulation [1][2]. Group 1: Deposit Rate Decline - As of May, the average interest rates for 3-year and 5-year fixed deposits have decreased to 1.711% and 1.573%, respectively, with a month-on-month decline of over 30 basis points [3][4]. - All types of fixed deposits have entered the "1% era," with 3-month deposits averaging 1.004% and 6-month deposits at 1.212% [3]. - The decline in deposit rates has led to a noticeable drop in the scale of fixed deposit accumulation, increasing the pressure on banks to meet their mid-year deposit targets [2][6]. Group 2: Bank Strategies and Responses - Banks are actively marketing various financial products, including wealth management and insurance, to compensate for the lack of deposit growth [2][8]. - There is a notable increase in the activity of fund brokers, who are offering high prices to help banks meet their deposit targets, with reports of daily returns exceeding 91% for these transactions [6][7]. - Some banks have resorted to promotional activities, such as offering gifts for deposits, which have drawn regulatory scrutiny and led to the cessation of such practices [9][10]. Group 3: Regulatory Environment - Regulatory bodies have issued warnings against the seasonal spikes in deposit accumulation and have mandated banks to optimize their assessment systems to curb irregular deposit behaviors [7][10]. - The emphasis is on maintaining stable deposit growth without resorting to non-compliant methods such as offering gifts or excessive interest rates [10][11]. - Analysts suggest that banks should focus on sustainable methods to attract deposits, such as efficient payroll services and selling financial products, rather than relying on high-interest rates or promotional gifts [10][11].

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]

Core Viewpoint - The recent interest rate cuts by the central bank are aimed at stabilizing growth and market expectations, with significant implications for the banking sector and liquidity management [1][2]. Group 1: Monetary Policy Changes - On May 7, the central bank announced a 50 basis point reduction in the reserve requirement ratio, releasing approximately 1 trillion yuan of long-term low-cost funds [1]. - The central bank also lowered the policy interest rate by 10 basis points, with the 7-day reverse repo rate decreasing from 1.5% to 1.4%, and the 1-year LPR adjusted from 3.1% to 3% [1]. - State-owned banks collectively reduced deposit rates, with the 1-year fixed deposit rate lowered by 15 basis points to around 1.5% [1]. Group 2: Market Reactions and Trends - Following the "double cut," the overall funding environment remained loose, with overnight rates declining from a range of 1.55%-1.65% to 1.45%-1.55% [2]. - The 1-year deposit rates for state-owned banks fell from approximately 1.75% to around 1.65%, but concerns over upcoming maturity pressures led to a rebound in rates above 1.7% [2]. Group 3: Factors Affecting Liquidity and Stability - The short-term funding and deposit rates did not align quickly with the policy rates due to the central bank's cautious liquidity management and potential credit weakness in May [3]. - Banks are focusing on managing liability duration to mitigate interest rate risks, leading to a decrease in overall stability of bank liabilities [3]. - A record high of 4.1 trillion yuan in interbank certificates of deposit is set to mature in June, prompting banks to absorb deposits in May to alleviate pressure [3].

Core Viewpoint - The article discusses the increasing pressure on banks to retain deposits as customers shift their funds from low-interest savings accounts to wealth management products, driven by recent interest rate cuts [1][2][3]. Group 1: Deposit Trends - Following the interest rate cut on May 20, many customers have opted to transfer their deposits to wealth management products, with the one-year fixed deposit rate dropping below 1% [2][3]. - As of May 29, the total scale of bank wealth management products reached 31.35 trillion yuan, an increase of 1.49 trillion yuan since the end of January [2]. - The trend of "deposit migration" is exacerbated by expectations of further monetary easing, leading banks to issue interbank certificates of deposit to alleviate funding pressures [2][8]. Group 2: Funding Pressure on Banks - The reduction in deposit rates has raised the cost of acquiring funds for banks, particularly as loan rates decline, putting additional pressure on net interest margins [3][9]. - Banks are responding by increasing efforts to attract corporate deposits through services like payroll management and treasury management, which are less sensitive to interest rate changes [7][10]. - The recent interest rate cuts have led to a significant increase in the issuance of interbank certificates of deposit, with rates rising approximately 6 basis points post-rate cut [8][9]. Group 3: Challenges in Wealth Management Products - Wealth management product managers face challenges in meeting customer expectations for returns, with many customers seeking annualized returns of around 2.3% despite declining bond yields [12][13]. - The demand for low-volatility investment options complicates the promotion of wealth management products that include equity-linked features, as many customers prefer conservative risk profiles [4][16]. - The competition for high-quality bonds has intensified, making it difficult for banks to secure sufficient high-yield bonds to meet the demand from wealth management products [14][15]. Group 4: Strategic Adjustments - Banks are adjusting their product offerings by incorporating assets like REITs and convertible bonds to enhance returns while managing volatility [17]. - There is a plan to introduce products linked to gold ETFs to attract customers looking for stable returns amid rising gold prices [17]. - The overall strategy involves balancing the need for higher returns with the requirement for low volatility to satisfy customer preferences [12][16].

Core Viewpoint - The recent reduction in deposit interest rates by major banks has led to a significant shift of funds from deposits to wealth management products, creating pressure on banks' funding costs and challenging their ability to maintain net interest margins [2][3][5][7]. Group 1: Deposit Rate Changes and Market Reactions - Major banks initiated a new round of deposit rate cuts on May 20, with one-year fixed deposit rates falling below 1% [2][7]. - As of May 29, the scale of bank wealth management products reached 31.35 trillion yuan, an increase of 1.49 trillion yuan since the beginning of the year, indicating a trend of "deposit migration" towards these products [2][5]. - The issuance rate of one-year AAA-rated interbank certificates of deposit rose to 1.7%, approximately 6 basis points higher than on May 20, increasing banks' funding costs [3][7]. Group 2: Challenges for Banks - Banks are facing increased pressure on their liability side as retail deposits flow into wealth management and other asset management products [5][6]. - To counteract this, banks are focusing on corporate clients, promoting loan products alongside payroll services to secure low-cost settlement funds [6][8]. - The reduction in deposit rates has made it more challenging for banks to retain deposits, as corporate clients are less sensitive to rate changes compared to retail clients [6][8]. Group 3: Wealth Management Product Adjustments - Wealth management product managers are under pressure to meet customer expectations for returns, with many clients seeking annualized returns of around 2.3%, despite declining bond yields [3][9][11]. - There is a growing demand for high-yield, low-volatility investment options, leading banks to accelerate the development of structured wealth management products that incorporate equity-like assets [9][12]. - The market for high-rated bonds is tightening, making it increasingly difficult for banks to secure the necessary assets to meet client expectations [10][11]. Group 4: Future Strategies and Market Outlook - Banks are adjusting their asset allocation strategies to include more REITs and convertible bonds, aiming to enhance overall returns while controlling volatility [12]. - The anticipated continuation of high interest rates by the Federal Reserve may lead banks to increase investments in dollar-denominated fixed-income products for stable income [12]. - The ongoing "asset shortage" in the bond market is expected to persist, driven by the migration of deposits into wealth management products, which increases demand for high-quality bonds [10].

Group 1 - The recent reduction in deposit rates by state-owned and joint-stock banks has prompted smaller banks, including city commercial banks and rural commercial banks, to follow suit, leading to many deposit rates entering the "1" range [1][2] - The adjustment in deposit rates has resulted in a noticeable "deposit migration" effect, with clients moving large sums from traditional deposits to wealth management products and insurance [1][5] - The latest data indicates that the average interest rates for various deposit products have reached historical lows, with some banks offering rates as low as 0.05% for demand deposits and 1.30% for three-year fixed deposits, reflecting a decrease of 25 basis points [2][3] Group 2 - The decline in deposit rates is expected to encourage consumers to allocate funds towards consumption and investment, thereby enhancing economic vitality and optimizing asset allocation [4] - The trend of deposit migration is exacerbated by the low attractiveness of traditional savings, with many clients opting for bank wealth management products and insurance instead [5][6] - Analysts suggest that the reduction in deposit rates will pressure banks' liability management, leading to increased reliance on interbank liabilities and higher issuance rates for interbank certificates of deposit [7][8]

Core Viewpoint - The article highlights the significant decline in deposit interest rates in China, leading to a shift in consumer behavior towards alternative investment options, particularly among younger individuals seeking better returns on their savings [3][10]. Group 1: Interest Rate Decline - Major state-owned banks collectively lowered deposit rates, with one-year fixed deposit rates dropping below 1% for the first time, now at 0.95%, and savings account rates at 0.05% [5][6]. - Several national joint-stock commercial banks followed suit, with one-year fixed deposit rates now averaging around 1.15% and two-year rates at 1.2% [5][6]. - Smaller banks have also adjusted their rates, with many now offering one-year fixed deposit rates between 1.1% and 1.2% [5][6]. Group 2: Disappearance of High-Yield Products - The once-popular large-denomination certificates of deposit (CDs) have seen a decline in demand, with average rates for one-year CDs at 1.719% as of March 2025, down from over 3% last year [8][9]. - Many banks have removed two-year and longer-term CDs from their offerings, with current rates for shorter-term CDs not exceeding 1.4% [8][9]. - The attractiveness of large-denomination CDs has diminished compared to other investment products, such as money market funds, which currently offer competitive yields [9]. Group 3: Shift to Alternative Investments - In response to declining deposit rates, younger consumers are increasingly turning to alternative investment strategies, coining the term "new three golds," which includes money market funds, bond funds, and gold funds [10][12]. - Investors are prioritizing low-risk, inflation-beating, and higher-yielding products, with many reallocating significant portions of their savings into bond funds and gold ETFs [12][14]. - Data shows a growing trend of younger investors diversifying their portfolios, with millions now investing in a combination of money market funds, bond funds, and gold funds [15].

Investment Rating - The report maintains a "Positive" outlook for the banking industry, indicating a relative strength compared to the market benchmark index [6][7]. Core Insights - The banking sector is expected to benefit from a period of intensive policy implementation aimed at stabilizing growth, with monetary easing leading the way, followed by fiscal measures. This is anticipated to have a profound impact on the banking fundamentals in 2025 [2]. - The downward adjustment of deposit rates is expected to protect the banks' net interest margins, while the risk of deposit disintermediation is likely to be moderate [6]. - 2025 is projected to be a year of solidifying asset quality for banks, with improved risk expectations in real estate and urban investment properties underpinned by supportive policies [2]. Summary by Sections Investment Recommendations and Targets - Focus on two main investment lines: 1. High dividend and core index weight banks such as Agricultural Bank of China (601288), Industrial and Commercial Bank of China (601398), China Merchants Bank (600036), and Industrial Bank (601166) [7]. 2. City commercial banks with strong fundamentals and regional advantages, including Chongqing Rural Commercial Bank (601077), Chongqing Bank (601963), Jiangsu Bank (600919), Qingdao Bank (002948), and Shanghai Bank (601229) [7]. Interest Rate Adjustments - On May 20, 2025, the 1-year and 5-year Loan Prime Rate (LPR) was lowered by 10 basis points, and state-owned banks announced reductions in deposit rates across various terms [6]. - The first round of interest rate cuts in 2025 is expected to have a neutral impact on banks' net interest margins, with an estimated increase of 3.1 basis points for listed banks in 2025 due to the deposit rate adjustments [6][14]. Deposit Rate Trends - The report highlights a trend of decreasing deposit rates, with significant reductions observed since October 2024, particularly among smaller banks, which have been more aggressive in their rate cuts compared to larger banks [9][14]. - The overall decline in deposit rates is expected to lead to a more favorable structure for new deposits, thereby supporting banks' funding costs [6]. Asset Quality and Risk Management - The report anticipates a significant improvement in asset quality for banks in 2025, driven by policy support and better management of risks in key sectors such as real estate [2]. - The net interest margin for commercial banks was reported at 1.43% in Q1 2025, reflecting a smaller decline compared to previous years, indicating a potential stabilization in margins moving forward [6].