Nomura On The Reports Of Lower Benchmark Bank Deposit Rates

Nomura note that “according to media reports, China’s major state-owned banks will cut benchmark deposit rates from today, which would mark the first such cut since 24 October 2015.”

• “This cut means a reversal of the PBoC’s interest rate liberalization program. The cut is good for bank margins and will perhaps make room for further cuts to the LPR. The cut also means that Chinese banks must weather tough conditions, as the economy faces multiple headwinds.”
• “Without a coordinated move to lower banks’ funding costs, there is little room for the PBoC to effectively reduce lending rates and boost credit demand.”
• “We strongly believe that these moderate interest rate cuts will have a negligible impact on the economy. In our view, adjusting the way in which the pandemic is handled and a decisive package to boost property demand are the two keys to an economic recovery in China.”