Deposit competition intensified, and the proportion of loans from the central bank increased significantly

category:Finance
 Deposit competition intensified, and the proportion of loans from the central bank increased significantly


The liability side of commercial banks mainly consists of deposits, interbank liabilities, bonds payable and borrowing from the central bank. Taking 36 listed banks as samples, this paper presents the panorama and changes of the liabilities side of banks in the first half of the year. Overall, the proportion of deposits of listed banks increased slightly in the first half of the year, the proportion of interbank liabilities and bonds payable decreased slightly, and the proportion of loans from the central bank remained unchanged.

In the first half of the year, interest payment rate of deposits decreased slightly due to the pressure drop of structural deposits by banks. At the same time, the money market interest rate is at a low level, and the cost of interbank liabilities and bonds payable has decreased significantly. For example, the issuance rate (weighted average) of one-year inter-bank deposit receipts decreased by 50bp from 2.96% in January to 2.46% in June. In addition, due to the central banks 1.8 trillion low-cost rediscount and refinancing, the cost of commercial banks to borrow from the central bank has also decreased. On the whole, the cost of debt of commercial banks decreased in the first half of the year, which provided space for the decline of loan interest rate. Looking back, what is the trend of debt cost of commercial banks in the second half of the year?

Large banks and some rural commercial banks have a solid deposit base

The assets and liabilities of listed banks continued to expand in the first half of this year: the assets of 36 banks totaled 202 trillion yuan, an increase of 7.8% compared with the end of last year. On the debt side, the total liabilities of 36 banks in the first half of the year amounted to 186 trillion yuan, an increase of 8% compared with the end of last year. From the individual point of view, the assets and liabilities of the 36 listed banks have maintained a positive growth, and there is no reduction of balance sheet, which shows that banks have increased their support to the real economy in the first half of the year.

Deposits are still the main source of liabilities for Chinese commercial banks. Deposits can be divided into general deposits and structural deposits. General deposits can be subdivided into demand deposits, time deposits and other deposits, and their principal and interest are included in the scope of deposit insurance. In recent years, the proportion of deposits has continued to rise, mainly due to the stricter supervision of interbank liabilities.

Wind data shows that by the end of June, the deposit balance of 36 listed banks totaled 141.83 trillion, an increase of 12.59 trillion compared with the end of last year; the proportion of deposits in total liabilities in the same period was 76%, 1.2 percentage points higher than that at the end of last year. This is related to the deposit derivative brought by the expansion of banks on balance sheet assets this year.

Deposits are relatively stable and low-cost funds. Banks prefer deposits when the outlets, personnel and customer base permit. The six major state-owned banks have always had natural advantages in the source of deposits. In the first half of the year, the proportion of deposits in large state-owned banks was 81.2%, an increase of 0.7 percentage points compared with the end of last year.

Due to the sinking network layout of rural commercial banks, the deposit base is also good. As of the end of June, the proportion of deposits of listed ABC in total liabilities was 77.3%, 2.1 percentage points higher than that at the end of last year. But different from the state-owned banks, the current deposit accounts for a low proportion of the total deposits, resulting in a higher deposit cost rate.

The data also shows that in the first half of the year, the proportion of deposits in urban commercial banks and joint-stock banks increased by 2.0 and 1.9 percentage points to 65.7% and 62.8% respectively, but the proportion was lower than that of large state-owned banks and agricultural commercial banks. The reason is that the network layout is relatively limited, the debt structure is relatively flexible, and the proportion of interbank debt financing is relatively large. As the deposit base is relatively weak, they are also the main receivers of high interest deposits.

In terms of the absolute value of individual banks, ICBC, CCB, ABC and BOC ranked among the top four. The deposit balances of the four major banks all exceeded 20 trillion, reaching 102 trillion in total, accounting for about three quarters of the total deposits of listed banks.

In recent years, with the intensification of deposit competition, some banks have increased the marketing of structured deposits, smart deposits and other products, resulting in upward pressure on the deposit interest rate of banks. However, in the first half of this year, the interest payment rate of bank deposits declined to a certain extent due to the guidance of the regulatory authorities to reduce the structural deposits with high interest rates.

As for whether the cost of deposit liabilities can continue to fall or remain at a low level. Frankly speaking, the competition for deposits is still very fierce. Zhang Qingsong said.

The proportion of interbank liabilities continued to decline

Interbank debt is an important tool for banks to make up for the gap of capital sources. Generally speaking, interbank liabilities are measured by the sum of interbank deposits, interbank borrowing funds and sell buy backs in the banks balance sheet. Among them, interbank deposit is the main component of interbank liabilities, and interbank deposits of listed banks account for more than 50% of interbank liabilities.

Interbank debt was once a sharp weapon to support the expansion of small and medium-sized banks. However, since 2017, the supervision of interbank business has become stricter, and the proportion of interbank liabilities has continued to decline, and this trend has also continued in the first half of this year. Wind data shows that in the first half of the year, the balance of interbank liabilities of 36 listed banks totaled 21.4 trillion, an increase of nearly 800 billion compared with the end of last year; however, the proportion of interbank liabilities in total liabilities was 11.1%, down 0.5 percentage points compared with the end of last year.

In terms of bank types, the proportion of interbank liabilities of all types decreased in the first half of the year compared with the end of last year. Specifically, the proportion of large banks, joint-stock banks, urban commercial banks and agricultural commercial banks decreased by 0.3, 0.8, 0.5 and 0.7 percentage points to 9.1%, 17.2%, 13.5% and 3.7% respectively. Due to the extensive sources of liabilities and stable structure of large banks, the recognition degree of agricultural commercial banks is not high, and the dependence of the two on the liabilities of the same industry is low, while the proportion of joint-stock banks and urban commercial banks is relatively high.

The bonds payable by banks are mainly interbank certificates of deposit, financial bonds and secondary capital bonds. Since 2014, with the issuance of inter-bank certificates of deposit, banks bond financing has gradually increased. Among the bonds payable by banks, the interbank certificates of deposit (CDS) gradually occupy a dominant position.

According to wind data, the balance of bonds payable by 36 listed banks in the first half of the year totaled 12.1 trillion, a contraction of about 300 billion compared with the end of last year. In terms of proportion, the proportion of bonds payable to total liabilities decreased from 7.2% at the end of last year to 6.5% at the end of June, down 0.7 percentage points.

In terms of bank types, the proportion of bonds payable of state-owned large banks, joint-stock banks, urban commercial banks and agricultural commercial banks decreased at the end of June: 3.6%, 11.1%, 14.5% and 12.2%, respectively, down 0.4, 1.1, 1.7 and 2.8 percentage points compared with the end of last year.

The duration of interbank liabilities and interbank certificates of deposit is generally short, mostly within one year. From February to May this year, the central bank repeatedly reduced the reserve rate and interest rate, the market interest rate continued to fall, and the interest payment cost of interbank liabilities and interbank certificates of deposit decreased significantly. However, the balance and proportion of the two declined instead of rising, indicating that banks do not want to increase the amount of interbank liabilities.

Liu Jin, President of Everbright Bank, said at the banks performance meeting in the first half of the year that, while the market liquidity remained reasonable and sufficient in the first half of the year, the interbank debt interest rate fell sharply. From the perspective of cost, there are periodic opportunities to increase the absorption of interbank liabilities. However, Everbright Bank always adheres to the core positioning of deposits, consolidates the debt base and promotes sustainable development.

According to the analysis, the main reasons are as follows: first, the proportion of deposits has increased, and the demand for interbank liabilities has decreased; second, the interest rate of certificates of deposit in some periods is still generally higher than the deposit interest rate; third, the supervision still strictly restricts the use of interbank funds; fourth, the deposit interest rate is more stable, but the interbank liabilities and interbank deposit certificate interest rate may rise with the market interest rate, but the interest rate is not stable. Compared with the expansion of interbank liabilities brought by the central banks money supply, deposits give banks a stronger sense of security.

In fact, since July, with the central banks monetary policy margin tightening, the market interest rate has risen, and the cost of interbank liabilities and bonds payable has risen sharply.

The title of borrowing from the central bank means that after the central bank lends money to the bank, the bank forms a liability to the central bank. At present, such liabilities are formed by the operation of monetary policy instruments such as MLF, PSL, reverse repurchase, tmlf (targeted medium-term lending facility) and refinancing. On the whole, the proportion of commercial banks borrowing from the central bank is relatively low.

Analysis shows that the deposit base of state-owned large banks and agricultural commercial banks is good, and the source of funds is relatively stable, while the joint-stock banks and urban commercial banks have relatively weak ability to absorb reserves, and they are more willing to steadily borrow from the central bank. It is worth noting that the balance of loans from the Central Bank of the listed agricultural Commercial Bank of China was 61.907 billion last year, a significant increase of 32.6% over the same period of last year, and its proportion in debt also increased by 0.6% to 3.6%. This reflects that the structural policy of the central bank has indeed played an effective supplementary role in the debt of agricultural commercial banks since the outbreak.

Generally speaking, the main counterparties of monetary policy instruments such as MLF of the central bank are state-owned banks and joint-stock banks. However, the refinancing tools launched in response to the epidemic this year have benefited agricultural commercial banks in a large range. In response to the epidemic situation, in the first half of the year, the central bank innovated and launched the policy of 300 billion yuan of special re loan for epidemic prevention and control, the rediscount policy of 500 billion yuan of re loan and re discount policy tools of 100 billion yuan of re loan to support small and micro businesses and private enterprises. The loans of agricultural commercial banks are mainly invested in small and micro enterprises and private enterprises, which are supported by the central banks re loan and rediscount amount, which is reflected in the increase of borrowing from the central bank on the balance sheet.

In terms of cost, the interest rate of the central banks 1.8 trillion loan is relatively low. For example, the interest rate of the 300 billion special loan for epidemic prevention and control is only about 1.6%. Therefore, the average cost of bank borrowing from the central bank should be significantly downward. In the second half of the year, the central bank will continue to lend new loans, but 300 billion yuan of anti epidemic loans have been completed in the first half of the year. The interest rate of the remaining loans is higher than 300 billion yuan of anti epidemic loans. In the second half of the year, the borrowing cost of banks from the central bank may rise slightly.

Looking back, structural deposits have continued to drop since July and the magnitude is greater than that in the first half of the year, which helps to reduce deposit costs. However, the market interest rate rose rapidly, and the cost of interbank liabilities and bonds payable rose correspondingly. Under the interaction of the two, the trend of interest bearing cost of banks is still uncertain. After the long-term pressure drop of commercial banks, the lack of inter-bank liabilities is shown by the lack of CDs. Among them, small and medium-sized banks have greater pressure drop and significant debt pressure, so the effect of structural targeted RRR reduction for small and medium-sized banks may be better. This will help reduce interbank liabilities and bond payable costs, thus providing room for lower loan interest rates. (this article is excerpted from the report on the development trend of Chinas financial industry (2020), which will be released at the 15th Asian financial annual meeting in the 21st century to be held on November 10-11, 2020) source: 21st century economic report editor in charge: Wang Xiaowu_ NF

Looking back, structural deposits have continued to drop since July and the magnitude is greater than that in the first half of the year, which helps to reduce deposit costs. However, the market interest rate rose rapidly, and the cost of interbank liabilities and bonds payable rose correspondingly. Under the interaction of the two, the trend of interest bearing cost of banks is still uncertain. After the long-term pressure drop of commercial banks, the lack of inter-bank liabilities is shown by the lack of CDs. Among them, small and medium-sized banks have greater pressure drop and significant debt pressure, so the effect of structural targeted RRR reduction for small and medium-sized banks may be better. This will help reduce interbank liabilities and bond payable costs, thus providing room for lower loan interest rates. (this paper is excerpted from the report on the development trend of Chinas financial industry (2020), which will be released at the 15th Asian financial annual conference in the 21st century to be held on November 10-11, 2020)