China Banks Trim Deposit Rates to Bolster Record-Low Margins

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An Industrial & Commercial Bank of China branch in Shanghai. Photo: Bloomberg

(Bloomberg) — Industrial & Commercial Bank of China Ltd. and Agricultural Bank of China Ltd. lowered rates on some deposit products, easing pressure on profit margins following earlier cuts to lending rates.

ICBC cut rates on deposits of two years or more by 20 basis points to 1.45%-1.8%, according to the bank’s website. Rates for time deposits of up to one year were cut by 10 basis points. Annualized rates for demand deposits will drop by five basis points. The changes are effective from Thursday.

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ICBC and Agricultural Bank of China lowered deposit rates by 10-20 basis points.
Changes are effective from Thursday, aiming to reduce funding costs and offset lower loan interest rates.
Despite these cuts, the industry’s net interest margins hit a record low of 1.54% by March's end, staying below the essential 1.8% for the past five quarters.

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Who’s Who

Industrial & Commercial Bank of China Ltd.: Industrial & Commercial Bank of China Ltd. (ICBC) has lowered deposit rates for terms of two years or more by 20 basis points to 1.45%-1.8%, and for time deposits up to one year by 10 basis points. The annualized rates for demand deposits will drop by five basis points. These changes are effective from Thursday. The adjustments aim to reduce funding costs following earlier cuts to lending rates.

Agricultural Bank of China Ltd.: Agricultural Bank of China Ltd., one of the nation's largest state-owned lenders, reduced rates on deposits of two years or more by 20 basis points. Rates for time deposits of up to one year were also cut by 10 basis points. This move comes in response to a recent cut in Chinese benchmark lending rates to boost the economy with cheaper credit.

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What Happened When

Late 2022：: Chinese banks implemented a broad reduction in deposit rates, the first such move since 2015, after authorities urged them to boost lending.