(Yicai) Oct. 18 -- China's big six state-owned lenders have lowered their deposit rates for the second time since the end of July and sixth since September 2022.

Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, Industrial and Commercial Bank of China, and Postal Savings Bank of China today cut the interest rates on deposits of different maturities by 25 basis points. The three-month, six-month, one-year, and two-year rates were lowered to 0.8 percent, 1 percent, 1.1 percent, and 1.2 percent, respectively, while the three- and five-year rates were trimmed to 1.5 percent and 1.55 percent.

The six lenders' earlier deposit rate cut was carried out on July 25, when they lowered the rates by between 10 bps and 20 bps.

This round of deposit rate cuts was not unexpected. The People’s Bank of China’s Governor Pan Gongsheng said on Sept. 24 that banks were expected to further trim their deposit rates by between 20 bps and 50 bps in response to the large policy stimulus unveiled that day.

The policies introduced that day included paring the seven-day reverse repurchase rate by 20 bps to 1.5 percent to lower comprehensive financing costs and slashing the interest rates on existing mortgages.

China's banking industry needs to reduce deposit rates to lower fund costs because the net spread has fallen to a new record low due to the quick decline in loan interest rates. Other lenders are expected to follow state-owned lenders soon.

The research institute under BOC expects that some residents will likely start relocating their deposits to smaller banks with higher nominal deposit rates, while more savings may eventually flow to more risky asset management market.

Editors: Tang Shihua, Futura Costaglione