(Bloomberg) -- China’s largest state-owned lenders have cut their deposit rates on Friday, their second reduction this year as they rushed to salvage record low margins amid weakened profitability.
Major banks including Industrial & Commercial Bank of China Ltd. and China Construction Bank Corp. trimmed the interest offered on one-year, two-year, three-year and five-year time deposits by 25 basis points, according to levels shown on their respective apps.
Bloomberg News reported Tuesday that Chinese banks could reduce rates on 300 trillion yuan ($42.1 trillion) of deposits as soon as this week as the government’s stimulus measures further squeeze profits. The lenders last lowered the rates in July.
China last month unveiled its biggest package yet to shore up its sputtering economy, slashing policy rates as well as borrowing costs on $5.3 trillion in outstanding mortgages. The central bank also delivered the biggest-ever cut on the interest rate charged on its one-year policy loans and Governor Pan Gongsheng had said a reduction in deposit rates would follow.
Chinese banks embarked on their deposit rate cut cycle in late 2022 with a broad-based reduction, the first since 2015, after authorities urged them to boost lending. They lowered deposit rates three more times last year.
Despite the cuts, the industry’s net interest margins have been falling and hit a record low of 1.54% at the end of June, well below the 1.8% threshold deemed necessary to maintain reasonable profitability.
Combined profits at the banking sector grew just 0.4% in the first half of this year, the slowest pace since 2020.
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