Major Chinese Banks Cut Yuan Deposit Rates to Protect Profits

Chinese banks including major state lenders cut interest rates on a range of yuan deposits Friday as they moved to protect their profitability after Beijing announced mortgage-rate cuts to boost the property market.

Industrial & Commercial Bank of China, Bank of China, Agricultural Bank of China, China Construction Bank and Bank of Communications were among the lenders that cut deposit rates in a coordinated manner. The rate on one-year time deposits was lowered by 10 basis points to 1.55%, the two-year rate was cut by 20 basis points to 1.85%, and rates on three- and five-year deposits were trimmed by 25 basis points to 2.2% and 2.25%, respectively, according to the banks' online statements.

Friday's deposit rate cuts were the third such action in a year and bigger than those in June and last September. Chinese banks are facing shrinking profit margins, with Beijing tasking them with supporting the country's sputtering economy.

China's central bank on Thursday said it will lower the minimum down-payment requirements for first- and second-time home buyers and cut rates on existing mortgages, the latest efforts by authorities to rescue a protracted property slump.

Previously, the central bank cut interest rates on one-year loans by the steepest margin in three years. Lowering deposit rates will help Chinese lenders ease the pressure from the coming mortgage-rate cuts and rescue their narrowing profit margins, as well as encourage Chinese households to consume more.

Beijing's latest property support will likely help cut rates on existing mortgages by 80 basis points on average for first-time home buyers, potentially benefiting more than 40 million borrowers with 25 trillion yuan ($3.444 trillion) of loans, according to state-run Shanghai Securities Times, citing people close to the regulators.

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(END) Dow Jones Newswires

August 31, 2023 23:47 ET (03:47 GMT)

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