Na­tion’s lenders in push to lure de­pos­i­tors

China Daily (Hong Kong) - - BUSINESS - By GAO CHANGXIN in Shang­hai gaochangxin@chi­nadaily.com.cn

Chi­nese banks are en­gaged in a war to at­tract de­posits as in­creased con­sumer spend­ing at the end of the year is drain­ing liq­uid­ity and as reg­u­la­tors are con­duct­ing checks, in­dus­try ob­servers have said.

Lenders, es­pe­cially smaller banks, are rais­ing the re­turns on their wealth man­age­ment prod­ucts in a bid to at­tract de­pos­i­tors.

In the last week of Novem­ber, a to­tal of 423 wealth man­age­ment prod­ucts hit the mar­ket with an av­er­age promised an­nu­al­ized re­turn of 5.3 per­cent, the Bei­jing Evening News re­ported. That fig­ure was up 0.13 per­cent­age point from the pre­vi­ous week and com­pares with 4.47 per­cent for the same pe­riod last year.

In the first week of De­cem­ber, the an­nu­al­ized av­er­age re­turn of the 439 prod­ucts launched grew by another 0.13 per­cent­age point to 5.43 per­cent. The same fig­ure in the year-ago pe­riod was just 4.47 per­cent.

Bank of China Ltd, one of China’s Big Four State-owned banks, re­cently launched a twoyear prod­uct with a 6.5 per­cent an­nu­al­ized rate. The min­i­mum in­vest­ment is just 100,000 yuan ($16,467).

In China, fi­nan­cial in­sti­tu­tions tra­di­tion­ally have liq­uid­ity is­sues to­ward the end of the year.

The China Bank­ing Reg­u­la­tory Com­mis­sion usu­ally con­ducts an an­nual year-end re­view to check if its re­quire­ments were met, in­clud­ing those on de­posit- to- loan ra­tios and core cap­i­tal ad­e­quacy ra­tios. To ful­fill the re­quire­ments, banks com­pete with each other for de­posits. More­over, Chi­nese con­sumers tend to spend more ahead of the Lu­nar New Year, which de­presses de­posits.

“This year, things are tighter be­cause the cen­tral bank has made it pretty clear that there won’t be easy money any­more,” said Zhang Qi, an an­a­lyst at Haitong Se­cu­ri­ties Co Ltd.

The Peo­ple’s Bank of China halted money-mar­ket op­er­a­tions last week, re­sult­ing in a net 37 bil­lion liq­uid­ity drain in the bank­ing sys­tem.

The war for cash ex­tended into the in­ter­bank money mar­ket. On Wed­nes­day, the one-month repo rate touched 8 per­cent. The three-week, onemonth and two-month repo rate closed at 6.3 per­cent, 7.4 per­cent and 7.2 per­cent, re­spec­tively. Those were the high­est lev­els since June’s credit crunch.

IPOs in China are slated to re­sume in Jan­uary af­ter a 14- month hia­tus, and many be­lieve that the tighter bank liq­uid­ity was partly caused by in­vestors tak­ing out cash from banks in prepa­ra­tion of new share pur­chases. The China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion said ear­lier that at least 50 com­pa­nies will be listed in Jan­uary.

Cai­jing mag­a­zine quoted an anony­mous source at China Pa­cific Insurance Group as say­ing that the new IPOs will shift funds away from banks, but that it won’t hap­pen so soon. The cur­rent rate hike is sea­sonal and caused by short-term events, the source added.

PRO­VIDED TO CHINA DAILY

In­dus­trial and Com­mer­cial Bank of China Ltd’s booth at a fi­nan­cial in­dus­try expo in Shang­hai in Novem­ber.

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