(Yicai) Feb. 21 -- Ping An Bank headed stock gains among Chinese lenders after the central bank pared a key mortgage rate benchmark by the most on record.

Ping An [SHE: 000001] surged by its 10 percent daily trading limit to close at CNY10.80 (USD1.50) a share. Bank of Ningbo [SHE: 002142] jumped 5.6 percent to CNY22.97, while Qilu Bank [SHA: 601665] added 5.2 percent to CNY4.49 (7 US cents).

Banking stocks led gains across mainland stock markets, with the Shanghai Composite Index adding almost 1 percent, taking its winning streak to a sixth consecutive trading session. The Shenzhen Component Index and the ChiNext Index rose by 0.8 percent and 0.4 percent, respectively.

The People’s Bank of China lowered the long-term loan prime rate for the first time in nearly six months yesterday, cutting the five-year rate by a more-than-expected 25 basis points to 3.95 percent, the most since the reference rate was introduced in 2019. The one-year LPR was left at 3.45 percent.

Analysts said the move will help boost the property market. Coupled with the package of policy support already put in place, risks in the real estate industry will ease further, which should in turn improve the size and quality of bank assets, they pointed out.

The lower LPR can also reduce the cost of financing debt replacement for urban investment and development companies, helping to mitigate local government debt risks and thereby contributing to lower risk in banking operations.

But the cut will also lead to narrower net interest margins at banks, crimping their performance. Loans of more than five years account for about 40 percent of all bank lending, according to financial services firm China International Capital Corporation.

Borrowers are expected to save about CNY100 billion (USD13.9 billion) in interest expenses after the LPR was lowered and annual banking revenues may fall by 4 percent and profits narrow by 7 percent, CICC calculated.

Editors: Dou Shicong, Emmi Laine