Banks raise deposit rates as grip loosens
By Feng Jianmin |
June 9, 2012, Saturday
|
Print Edition
Print Edition
CHINA'S largest state-owned banks and some small local banks yesterday raised their short-term deposit rates to attract funds, hours after China cut interest rates and loosened its grip on the deposit rate.
The five largest state-owned banks - Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank and Bank of Communications - set their demand deposit rate at 0.44 percent, 1.1 times the benchmark and the maximum allowable.
They maintained their one-year deposit rate unchanged at 3.5 percent as before the interest rate cut, 0.25 percentage point higher than the new benchmark rate set by the People's Bank of China.
Some get more aggressive
Some city commercial banks, including the Bank of Nanjing, Bank of Qingdao and Bank of Wenzhou, took a more aggressive move by raising their one-year deposit rate to 3.575 percent and demand deposit rate to 0.44 percent, both the ceiling rates.
Overseas banks including HSBC and Citi Group also joined the competition for funds by setting one-year deposit rates at 3.5 percent, above the benchmark. These banks had previously used the benchmark rates for all lending and fixed-term deposits longer than 1 year.
Other banks, including domestic-listed Everbright Bank, Minsheng Bank and Industrial Bank, stuck to the benchmark rates but analysts believe they will join the war for funds within the coming month.
The banks' reaction yesterday triggered a wide drop in stock prices of listed banks on concerns that the higher cost for funds could hurt banks' profitability.
"We believe the interest rate cut, along with the start of the interest rate deregulation, will likely be taken positively by China's market overall but negatively for bank shares in the short term," May Yan, an analyst with Barclays Capital, wrote in a report yesterday.
It said the move indicates China will take more solid measures to liberalize its interest rate. In the long term, the market-oriented move benefits the banking sector as it differentiates banks' business models and performances.
"Liberalization of interest rates could benefit large banks because of their abundant resources," said an Everbright Securities analyst, who declined to be named. "But smaller banks, which will generally face higher costs for funds, could put more efforts into developing wealth-management products and making profits from the capital market."
The five largest state-owned banks - Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank and Bank of Communications - set their demand deposit rate at 0.44 percent, 1.1 times the benchmark and the maximum allowable.
They maintained their one-year deposit rate unchanged at 3.5 percent as before the interest rate cut, 0.25 percentage point higher than the new benchmark rate set by the People's Bank of China.
Some get more aggressive
Some city commercial banks, including the Bank of Nanjing, Bank of Qingdao and Bank of Wenzhou, took a more aggressive move by raising their one-year deposit rate to 3.575 percent and demand deposit rate to 0.44 percent, both the ceiling rates.
Overseas banks including HSBC and Citi Group also joined the competition for funds by setting one-year deposit rates at 3.5 percent, above the benchmark. These banks had previously used the benchmark rates for all lending and fixed-term deposits longer than 1 year.
Other banks, including domestic-listed Everbright Bank, Minsheng Bank and Industrial Bank, stuck to the benchmark rates but analysts believe they will join the war for funds within the coming month.
The banks' reaction yesterday triggered a wide drop in stock prices of listed banks on concerns that the higher cost for funds could hurt banks' profitability.
"We believe the interest rate cut, along with the start of the interest rate deregulation, will likely be taken positively by China's market overall but negatively for bank shares in the short term," May Yan, an analyst with Barclays Capital, wrote in a report yesterday.
It said the move indicates China will take more solid measures to liberalize its interest rate. In the long term, the market-oriented move benefits the banking sector as it differentiates banks' business models and performances.
"Liberalization of interest rates could benefit large banks because of their abundant resources," said an Everbright Securities analyst, who declined to be named. "But smaller banks, which will generally face higher costs for funds, could put more efforts into developing wealth-management products and making profits from the capital market."
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