China’s major banks to cut time deposit rates on Friday – sources

BEIJING/SHANGHAI (Reuters) – Some major Chinese commercial banks will cut time deposit rates on Friday, three sources with knowledge of the matter said, providing room to reduce lending costs amid a faltering economy.

Rates for 1-year and 2-year time deposits will be cut by 10 basis points (bps) and 20 bps, respectively, and rates for 3- and 5-year time deposits will be cut by 25 bps, the sources said.

In addition, lenders will cut rates for 1-year and 2-year large-scale certificates of deposit (CDs) by 10 bps and 25 bps, respectively, and cut rates for 3-year and 5-year large-scale CDs by 30 bps, the sources said.

The People’s Bank of China didn’t immediately reply to a Reuters’ request for comment.

State-owned Industrial and Commercial Bank of China (ICBC) announced it would cut interest rates on some deposits from Friday.

The deposit rate cut would be the third such reduction this year, following previous rounds in June and September.

The cuts could offset pressure on banks’ net interest margins – a key gauge of profitability – as they are urged by the government to support the economy. Lowering deposit rates will give banks much needed wiggle room to cut lending rates.

China stood pat on benchmark lending rates at the monthly fixing on Wednesday, after the central bank kept its medium-term policy rate steady earlier last week.

But market watchers expect Beijing to deliver further monetary easing into the new year to support a sputtering economic recovery. China faces a daunting task in trying to revive growth amid a property sector downturn, local government debt risks, slow global growth and geopolitical tensions.

Following news of the deposit rate cuts, China’s 10-year treasury yield, which moves inversely to price, fell to as low as 2.611%, a level not seen since Sept. 1.

(Reporting by Beijing and Shanghai Newsroom; Editing by Toby Chopra and Mark Potter)