January LPR May Remain Unchanged

China’s benchmark Loan Prime Rate may hold next Monday, as the People’s Bank of China kept the anchor rate of the Medium-term Lending Facility unchanged this week, Securities Daily reported citing analysts. Some banks are under great pressure on their net interest margins, with the 1.73% average net interest margin of commercial banks by end-Q3 lower than the “warning line” of 1.8% proposed by the Pricing Self-Regulatory Mechanism for Market Interest Rates. Despite major state-owned banks lowering their deposit rates last month, some small and medium-sized banks raised the rates to attract depositors instead. Lowering lending rates under this circumstance may be harmful to resolving the risks of smaller financial institutions, said Bian Quanshui, chief macro analyst at Western Securities. One-year LPR sits at 3.45%, with the five-year rate at 4.2%.