Major Chinese banks cut deposit rates, paving the way for mortgage rate cuts

BEIJING, Sept. 1 — Five of China’s largest banks cut interest rates on a range of deposits on Friday in a coordinated effort to ease pressure on their shrinking margins as lenders move to lower mortgage rates to prop up a struggling real estate sector and a faltering economy. to hold.

The banks, including the Industrial and Commercial Bank of China (601398.SS)China Construction Bank Corp (601939.SS) and the Agricultural Bank of China (601288.SS) On Friday, they cut their deposit rates by between five and 25 basis points, websites of each bank showed.

Three sources familiar with the matter told Reuters on Tuesday that major state-owned banks would cut deposit rates as they prepare to cut existing rates mortgagespart of Beijing’s efforts to revive the debt crisis-hit real estate sector.

From September 25, new home buyers with a mortgage can apply to their banks for a lower interest rate on their existing loans, the Chinese central bank and financial regulator announced on Thursday.

Two of China’s largest cities, Guangzhou and Shenzhen, also eased mortgage restrictions this week. broadening the definition so that homebuyers can enjoy preferential loans for the purchase of their first home.

The moves come as embattled developer Country Garden is extending a deadline for creditors to vote on whether or not to defer payments on an onshore private bond, according to a document Reuters has accessed.

The vote on the 3.9 billion yuan ($535 million) private bond issue, now scheduled for Friday afternoon, is a major hurdle for Country Garden (2007.HK) will have to overcome as it strives to avoid bankruptcy amid a spiraling financing crisis and opposition from some creditors.

The company’s mounting problems are the most recent to hit the real estate industry and have led to fears of contagion to the financial system at a time when the country is already facing a broader economic slowdown.

Country Garden, China’s largest private developer, did not immediately respond to Reuters’ request for comment.

PRICES REDUCED

Lenders cut interest rates on one-year term deposits by 10 basis points (bps) to 1.55%, and interest rates on two-year term deposits by 20 basis points and three-year and five-year term deposits by 25 basis points.

The deposit rate cuts are the third cut in a year, with the size of the cuts being larger than previous rounds in June and September last year.

The cut will partially offset pressure on banks’ shrinking net interest margins — a key measure of profitability — said Nicholas Zhu, a banking analyst at Moody’s.

“The impact of the deposit rate cut is material, as nearly three-quarters of Chinese banks’ liabilities are deposits,” said Zhu.

Several medium-sized Chinese banks, including Industrial Bank Co Ltd (601166.SS) and China Bohai Bank Co Ltd (9668.HK)also announced that they will start cutting interest rates on a range of deposits by 10-25 basis points from Friday.

Chinese mortgage loans totaled 38.6 trillion yuan ($5.29 trillion) at the end of June, representing 17% of banks’ total loan portfolio.

Reporting by Ziyi Tang, Ryan Woo and Wang Jing; Edited by Lincoln Feast

Our standards: The Thomson Reuters Principles of Trust.

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