Recently, many banks have successively disclosed their 2022 annual reports. Judging from the deposit data disclosed in the annual report, the balance of deposits of many banks has increased, the proportion of retail time deposits has increased, and the trend of fixed-term deposits is more obvious.
Regarding the reasons for this phenomenon, some banks stated in their annual reports that in 2022, affected by the turmoil in the capital market, customers will increase their investment in time deposit products, and the proportion of demand deposits will decline.
The proportion of time deposits increased
According to the annual report disclosed by China Merchants Bank recently, as of the end of 2022, the balance of customer deposits of China Merchants Bank was 7,274.513 billion yuan, an increase of 1,161.836 billion yuan or 19.01% from the end of the previous year, and the increase in deposits hit a record high.
The balance of deposits of many other banks also saw relatively large growth. The annual report shows that as of the end of 2022, the balance of customer deposits (excluding accrued interest) of China CITIC Bank was 5,099.348 billion yuan, an increase of 362.764 billion yuan or 7.66% over the end of the previous year; 11.8%.
Among them, the growth rate of retail fixed deposits is relatively large, and the trend of fixed deposits is obvious. The annual report shows that by the end of 2022, China Merchants Bank's retail demand deposit balance was 1.983363 billion yuan, a year-on-year increase of 27.31%; the retail time deposit balance was 1.120825 billion yuan, a year-on-year increase of 53.48%. As of the end of 2022, Ping An Bank's personal time deposit balance was 737.850 billion yuan, a year-on-year increase of 39.79%.
In addition, the proportion of retail time deposits in many banks has also increased. For example, as of the end of 2022, the balance of China Everbright Bank 's retail demand deposits was 259.4 billion yuan, accounting for 6.62%, a decrease from the proportion at the end of 2021. The retail time deposit balance was 807.101 billion yuan, accounting for 20.60%; at the end of 2021, the bank's retail time deposit balance accounted for 16.40%.
Regarding the trend of deposit termization, some banks disclosed the reasons in their annual reports. China Merchants Bank stated that due to the turmoil in the capital market, customers increased their investment in time deposit products, and the proportion of demand deposits decreased.
Reduce the cost of debt
People in the industry believe that the trend of fixed-term deposits is obvious, and the deposit cost rate is rigid to a certain extent, which will squeeze the net interest margin of commercial banks.
Judging from the annual report data disclosed so far, the net interest margin of some banks has declined. The annual report shows that in 2022, CITIC Bank's net interest margin will be 1.97%, a decrease of 0.08 percentage points from the previous year. The net interest margin of Ping An Bank was 2.75%, a year-on-year decrease of 4 basis points; the average cost ratio of liabilities was 2.16%, a year-on-year decrease of 5 basis points, of which the average cost rate of deposits was 2.09%, a year-on-year increase of 5 basis points. The net interest margin of Bank of Changshu was 3.02%, a year-on-year decrease of 0.04 percentage points.
On the asset side, due to factors such as the reduction of the loan market quotation rate (LPR) and the continuous profit-sharing of the real economy, the return on assets has declined, which has also affected the net interest margin of commercial banks. Since 2022, the 1-year LPR and the 5-year-plus LPR have been reduced by 15 basis points and 35 basis points, respectively, and corporate financing costs have continued to decrease.
Looking forward to 2023, some banks expect that the net interest margin will still be under pressure to narrow, but the narrowing range will be limited. Ping An Bank stated in its annual report that under the background of asset re-pricing and profit-making real economy, it is expected that the net interest margin will still narrow in 2023. Bank of Hangzhou said in a recent institutional survey that it is expected that there will be a certain downward pressure on interest margins in 2023, but the decline in net interest margins will be much lower than in 2022.
In order to solve the problem of narrowing net interest margins, a number of banks revealed countermeasures, and reducing debt costs is one of them . For example, China Merchants Bank stated that it will continue to strengthen the volume and price control of high-cost deposits to cope with the rising pressure on deposit costs. Zijin Bank said in an institutional survey that the bank will actively adjust its liability structure, strictly control the scale of high-interest deposits, optimize FTP pricing of deposits, and guide the conversion of medium and long-term deposits to short-term deposits. Improve the customer pricing management system, and continue to carry out refined and differentiated pricing management.
On March 27, the RRR cut was officially implemented. Industry insiders believe that the RRR cut will help reduce the cost of bank liabilities and ease the pressure on bank interest margins.
At the same time, improving non-interest income is also one of the future work priorities of some banks. At the 2022 performance briefing, Miao Jianmin, chairman of China Merchants Bank, said that the key strategy for 2023 is to "strengthen capital-heavy businesses and expand capital-light businesses." The purpose is to respond to the narrowing of net interest margin, increase wealth management business and fees, reduce the risk of heavy capital business, improve the ability to ride through the economic down cycle and interest rate down cycle, and finally realize the leading model of China Merchants Bank