Small Banks To Lower Deposit Rates Further

Small and medium-sized commercial banks may need to lower their deposit interest rates further due to capital adequacy pressure, said Jia Dongxu, senior macro analyst at Shenwan Hongyuan. The capital adequacy ratios of city and rural commercial banks were 12.63% and 12.22% in Q4 2023, which were lower than the industry average of 15.06%. Meanwhile, banks’ profitability is under greater pressure with the average net interest margin falling 4 basis points to 1.69% in Q4, a new low since statistics were collected in 2010. Major state-owned banks lowered their deposit interest rates three times last year, but the rate reduction of smaller banks has largely lagged. (Source: Securities Daily)