(Bloomberg) -- China’s largest state-owned lenders led by Industrial & Commercial Bank of China Ltd. lowered rates on some deposit products to ease 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 between 1.45%-1.8%, according to the bank’s website. Rates on other time and demand deposits were also lowered.
Other lenders including Agricultural Bank of China Ltd., Bank of China Ltd., Bank of Communications Co., China Construction Bank Corp. also trimmed deposit rates.
The moves follow a cut to Chinese benchmark lending rates earlier this month, part of an effort to boost the economy with cheaper credit. A reduction in deposit rates reduces a bank’s funding costs, offsetting lower interest rates on loans.
Chinese banks implemented a broad reduction in deposit rates in late 2022, the first such move since 2015, after authorities urged them to boost lending. They cut deposit interest three more times last year.
ICBC shares were little changed in early morning in Hong Kong. The bank’s shares are up about 15% this year after declining for four straight years. Agbank rose as much as 1.4%, bringing the year-to-date gain to almost 18%.
Despite the cuts to deposit rates, the industry’s net interest margins have been falling and hit a record low of 1.54% at the end of March. The margin has been below 1.8%, a level regarded as the minimum needed to maintain reasonable industry profitability, for the past five quarters.
--With assistance from Li Liu.
(Adds other big lenders in third graph.)
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