Chinese Banks' Net Interest Margins Under Pressure

Many banks in China including China Construction Bank, and China Merchants Bank see time deposit interest rates inverted and yields on large-denomination certificates of deposit continue to decline, Yicai.com reported. Banks are facing pressure on the net interest margin brought about by lower loan interest rates, coupled with sufficient liquidity and the lack of effective credit demand, their motivation to absorb deposits, especially medium- and long-term high-cost deposits, has been greatly weakened, the newspaper said citing analysts. Such pressure may ease in H2 as banks further balance the cost of its asset side and liability side, with recovering credit demand, the newspaper said citing analysts.