(Yicai) Sept. 20 -- China’s loan prime rate, the country’s benchmark lending rate, remained the same this month as last month, despite market expectations that the five-year rate would be lowered.

The one-year LPR and five-year LPR for September stayed unchanged at 3.45 percent and 4.2 percent, respectively, the People’s Bank of China said today.

There had been expectations that the five-year LPR would be trimmed this month after the one-year LPR was lowered by 10 basis points in August and after several state-owned banks said earlier in September that they will cut their deposit yields.

There is not a lot of motivation among lenders to reduce the LPR, analysts said. But the possibility of the LPR being lowered again before the end of the year cannot be ruled out.

“The medium-lending facility loan rate was left unchanged in September, which actually indicated that the LPR would also stay the same,” said Wang Qing, chief macro analyst of Golden Credit Ratings.

“In September, there were already cuts to the reserve requirement ratio and reductions in deposit rates by state-owned banks, providing room for the five-year LPR to be lowered further,” said Ming Ming, chief economist of CITIC Securities. “However, banks’ net interest margin remains under pressure and lenders are not likely to lower the LPR this month.”

Temporarily keeping the five-year LPR unchanged will help slow the narrowing of bank interest rate spreads and alleviate pressure, said Dong Ximiao, chief researcher at CMF Finance. This will enable banks to maintain sustainable fee reductions in the real economy and ensure the soundness of long-term development.

Corporate loan interest rates are already at a historical low, said Dong. The LPR was trimmed twice earlier this year in June and August. The one-year and five-year LPRs were lowered by 10 basis points each in June and the one-year rate by 10 basis points in August.

The lowering of existing mortgage rates is going to negatively affect the interest rate spread of listed banks by 4.94 basis points and state-owned banks will be hit even harder, with the spread tumbling by 5.7 basis points, according to a report by Kaiyuan Securities.

However, if banks lower the interest rate of existing mortgages and the proportion of early mortgage repayments decreases by 5 percentage points, the interest rate spread of listed banks is expected to improve by 1 basis point, the report said.

If more policies to stabilize growth and spur the property market are rolled out, it is still possible that the MLF rate will be trimmed further which will lead to a follow-up reduction in the LPR in the fourth quarter, Wang said. Keeping the net interest margin basically stable will mainly depend on methods such as trimming deposit yields.

Editor: Kim Taylor