Market Insight | Domestic bank stocks generally rise, interest rate cuts have limited impact on bank interest spreads, state-owned major banks consider lowering deposit benchmark rates
Domestic bank stocks are generally rising, with the stock prices of Agricultural Bank of China, Bank of Chongqing, Bank of Communications, and Postal Savings Bank of China all showing an increase. On July 22nd, the People's Bank of China announced the latest Loan Prime Rate (LPR), with the interest rate cut having limited impact on bank interest spreads. Huafu Securities believes that the interest rate cut is beneficial for the banking sector, helping to boost credit demand and improve economic expectations. Open Source Securities points out that in a low interest rate environment, the investment value of banks with stable profits and high dividends is highlighted. It is reported that the adjustment of the central bank's policy interest rates is expected to simultaneously affect deposit rates, with state-owned banks considering lowering deposit rates
According to the information from the Wise Finance app, domestic bank stocks are generally rising. As of the time of publication, Agricultural Bank of China (01288) rose by 2.65% to HKD 3.49, Bank of Chongqing (01963) rose by 2.6% to HKD 5.13, Bank of Communications (03328) rose by 2.47% to HKD 5.8, and Postal Savings Bank of China (01658) rose by 2.43% to HKD 4.21.
On the news front, on July 22, the latest Loan Prime Rate (LPR) was announced. The 1-year LPR is 3.35% and the 5-year LPR and above is 3.85%, both down by 10 basis points from the previous period. Huafu Securities believes that overall, the rate cut is beneficial for the banking sector. Although statically, the rate cut has a negative impact on bank interest margins, the magnitude is relatively controllable and within market expectations. In the medium to long term, the rate cut helps boost credit demand, improve economic expectations, and thus benefit the fundamentals of banks. Kaiyuan Securities stated that in a low-interest rate environment, the phenomenon of "asset shortage" is intensifying, highlighting the investment value of banks with stable profits and high dividends.
Minsheng Securities pointed out that the adjustment of the central bank's policy interest rates this time is expected to have an impact on deposit rates as well. In April 2022, the People's Bank of China established a deposit rate marketization adjustment mechanism under the guidance rate self-discipline mechanism. Member banks of the self-discipline mechanism adjust deposit rates reasonably by referring to bond market rates represented by the 10-year government bond yield and loan market rates represented by the 1-year LPR. Yesterday afternoon, there was news indicating that after the interest rate marketization reform, the linkage between deposit and loan rates has strengthened, and state-owned major banks are considering lowering deposit benchmark rates