Banks may become collateral damage as China’s ‘big bang’ squeezes margins, degrades assets

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Banks’ net interest margins may be reduced by a fifth of a percentage point, according to an estimate by S&P Global Ratings.

That margin became thinner after the People’s Bank of China instructed banks to reduce their mortgage rates by 0.5 percentage point on existing loans, while keeping deposit rates unchanged.“We expect [banks’] NIM to remain under pressure” in the second half, extending into 2025, “driven by existing mortgage rate cuts and government directives to lower borrowing costs to support the economy”, said Fitch Ratings’ director of Asia-Pacific financial institutions Vivian Xue.“We expect this to be partly offset by further reduction in the reserve requirement ratio and deposit rates.

Net interest margin [NIM], the difference between what a bank pays for deposits and what it earns from loans, is a key source of income and a gauge of its profitability.

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Article Details

Author / Journalist: Yuke Xie

Category: Business

Markets: Hong KongChina

Topics: Point Percentage Analysts Announced Basis Mortgage Interest Banks Margins Deposit Rates

Source Website Secure: Yes (HTTPS)

News Sentiment: Neutral

Fact Checked: Legitimate

Article Type: News Report

Published On: 2024-09-25 @ 18:52:46 (2 days ago)

News Timezone: GMT +8:00

News Source URL: scmp.com

Language: English

Article Length: 230 words

Reading Time: 2 minutes read

Sentences: 5 lines

Sentence Length: 46 words per sentence (average)

Platforms: Desktop Web, Mobile Web, iOS App, Android App

Copyright Owner: © SCMP

News ID: 22705571

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