Falling deposit rates in China may help banks cut loan costs

Falling deposit rates in China may help banks cut loan costs

Banking















Bloomberg

China’s central bank repeated a pledge to proactively address mounting economic pressure and also highlighted a drop in deposit rates, a decline that could spur banks to lower the cost of borrowing for the first time in months.

The People’s Bank of China (PBOC) reaffirmed it will focus on supporting small businesses, sectors and groups hit by Covid-19 outbreaks, and vowed to use various monetary policy tools to keep overall liquidity ample, according to its first-quarter monetary policy report.

The mention of the recent drop in deposit rates could be an indication that lenders will soon lower their loan prime rate, the de facto benchmark lending rate, Citic Securities analysts led by Cheng Qiang wrote in a report. Banks last reduced the rate in January after the central bank cut the rate on its one-year policy loans, and the announcement for May is due at the end of next week.

The weighted average deposit rates declined by 10 basis points to 2.37% in the last week of April, the PBOC report said. Bloomberg reported in mid-April that the PBOC had urged banks to cut the rates. A lower