The bank deposit market is undergoing profound changes. The once highly sought-after long-term large-denomination certificates of deposit (CDs) are quietly disappearing, making five-year products hard to come by. Three-year large-denomination CDs have also become scarce, with many banks offering product options with a maximum term of two years.
This change reflects the realistic predicament faced by the banking industry. The continuous narrowing of the net interest margin has forced banks to re-examine the cost structure of liabilities. Under the pressure of declining returns on the asset side, controlling high-cost liabilities has become an inevitable choice for banks. Long-term large-denomination CDs have gradually been regarded by banks as a burden rather than an asset due to their relatively high interest payment costs.
Deposit Rates Enter the “1 Era”
The current interest rate level of large-denomination CDs has undergone fundamental changes. The annualized interest rate of one-month large-denomination CDs of state-owned banks has dropped to 0.9%, and the interest rate of three-year products is only 1.55%. The situation for joint-stock banks is similar, with a one-month interest rate of 1.1% and a two-year product interest rate of 1.4%.
Although city commercial banks have a slight advantage in terms of interest rates, the increase is limited. The annualized interest rate of products with the same term is only 5 to 10 basis points higher than that of joint-stock banks. Private banks have become a high ground for interest rates, with the annualized interest rate of three-year large-denomination CDs reaching 2.3%, though the number of such banks is limited.
It is worth noting that the one-year and two-year large-denomination CD interest rates of many banks remain consistent. The extension of the term has not led to an increase in returns, breaking the traditional interest rate term structure. The performance of some large-denomination CD products is even worse than that of money market funds, with the annualized yield of one-month and three-month products lower than that of money market funds that can be deposited and withdrawn at any time.
Transfer Zone Becomes a New Battlefield
Facing the reality of declining interest rates for newly issued large-denomination CDs, depositors have turned their attention to the large-denomination CD transfer zone. These existing products, often issued during periods of high interest rates, can still offer an annualized interest rate of about 1.9%. In contrast, the annualized interest rate of newly issued two-year large-denomination CDs is currently only 1.5%.
Bank customer managers have also intensified the promotion of transferred products. A customer manager from a branch of a joint-stock bank in South China proactively recommended transfer products with a remaining term of 2 to 3 years and provided additional service incentives. Depositors began to “wait in line” at the transfer zones of multiple banks, directly purchasing the products with the highest interest rates, no longer paying attention to the remaining terms of the transferred CDs.
The product features in the transfer zone are distinct. Most of the transferred CDs are three-year products with a remaining term of about two years. The annualized interest rate calculated at maturity is 0.1 percentage point higher than that of newly issued two-year products. These products can usually be transferred a second time, offering higher returns and a shorter holding period compared to purchasing newly issued products.
Regional Differences in Interest Rates
The same bank offers different interest rates for the same product to depositors in different regions. The annualized interest rate of six-month large-denomination CDs of Bank of Shanghai is 1.3% in Zhejiang, 1.35% in Shanghai, 1.38% in Jiangsu, and reaches 1.4% in Chengdu. This regional differentiated pricing strategy reflects the varying degrees of banks’ capital demands in different markets.
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