In May, an unprecedented storm of deposit rate cuts swept through the entire Chinese private bank sector. 15 private banks lowered their rates 22 times in a single month. As former holders of the high deposit rate “fortress,” private banks exerted the most force in this round of interest rate cuts, shattering depositors’ last illusions of high-interest savings.
According to a report by First Financial on June 4, incomplete statistics show that out of 19 private banks, 15 banks completed rate cuts in May, with the frequency of cuts reaching 22 times in a single month. Different from the past “small steps,” private banks collectively unveiled a “hard move” at the end of May, with many banks dramatically lowering rates.
For example, Huatong Bank lowered its 2-year fixed deposit rate by 0.3 percentage points, and its 3-year and 5-year fixed deposits by 0.4 percentage points; Zhongbang Bank lowered the 3-year large-sum time deposit rate by 0.25 percentage points to 2.15%, and the 5-year large-sum time deposit rate by 0.3 percentage points to 2.2%.
Following this round of cuts, private banks’ 3-month, 6-month, and 1-year term deposits have completely entered the “1 era”; 2-year, 3-year, and 5-year deposit interest rates are generally below 2%, with a maximum of 2.4%. Among them, many banks have discontinued their 5-year term deposits.
By the end of May, the upper limit of deposit rates for private banks had across the board dropped to 2.4%, also shattering depositors’ last illusions of high-interest savings.
On May 20, the six major state-owned banks announced a cut in deposit rates, and joint-stock banks quickly followed suit. Contrary to the usual lagging behind, small and medium-sized banks in this round of rate cuts have deviated from their usual behavior, closely following the lead of large banks. For instance, some small and medium-sized banks announced rate cuts the following day, speeding up the transition of deposit rates into the “1 era.”
In early May, six private banks had already announced rate cuts, and from May 20 to May 30, within just 10 days, 14 banks officially announced rate cuts, especially on May 30, when the rate cut peak was reached. 11 private banks joined the rate cut camp, including Zhongbang Bank, Xinan Bank, Zhongguancun Bank, Jincheng Bank, Xinwang Bank, Lanhai Bank, Fumin Bank, Zhenxing Bank, Yilian Bank, Huatong Bank, Yumin Bank, and more.
According to industry statistics, in the private bank sector, the highest interest rate for a 3-month deposit is 1.5%, 1.8% for a 6-month deposit; 1.85% for a 1-year term deposit, and 2.4% for a 2-year term deposit; Huarui Bank offers the highest rates for 3-year and 5-year term deposits, at 2.4% and 2.35% respectively.
Since 2022, state-owned large banks have led seven large-scale deposit rate cuts, for example, for a 5-year term time deposit, the rate has dropped from 2.65% in 2022 to the latest 1.3%, halving over 3 years.
If we calculate based on a 100,000 yuan 5-year fixed-term deposit, the interest at maturity would be 13,250 yuan when deposited in 2022, but if deposited on June 1 of this year, the interest at maturity would only be 6,500 yuan, a reduction of 6,750 yuan in interest over 3 years, more than halving it.
“Currently, small and medium-sized banks are facing more severe net interest margin pressure. Additionally, the policy transmission mechanism is driving small and medium-sized banks to quickly follow the lead of large banks to avoid excessive narrowing of the spread between lending and deposit rates,” said Ai Ya-wen, a senior analyst at Rong360 Digital Technology Research Institute.
Regarding whether there will be further rate cuts for the remaining months of this year, Ai Ya-wen believes that the overall trend of deposit rates is downward. With continued loose domestic monetary policy, a globally low-interest rate environment, and sustained pressure on bank net interest margins, it is expected that the second half of 2025 may usher in a new round of deposit rate cuts.