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Rate cuts: China’s state banks face margin squeeze as they comply with the call to slash mortgages to aid an ailing property market

  • Banks will cut rates on 16 trillion yuan (US$2.2 trillion) of existing loans, helping households save up to 109 billion yuan in interest, ANZ says
  • The rate cut will have a tangible impact on bank profit margins, and China’s major lenders are already preparing to reduce deposit rates

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A construction site of residential buildings by Chinese developer Country Garden is pictured in Tianjin, China on August 18, 2023. Photo: Reuters
Yuke Xiein Beijing
China’s biggest state-owned banks, mired in bad property loans, now face further downward pressure on profit as they prepare to respond to Beijing’s call to cut mortgage rates and revive the country’s faltering property market.
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Industrial and Commercial Bank of China (ICBC) and Agricultural Bank of China (ABC) cut their deposit rates by between five and 25 basis points, according to their websites.

China Construction Bank (CCB), the world’s third-largest bank by assets, said on Thursday that it would “implement the task of reducing interest rates on existing mortgages of first-time buyers in a lawful, orderly fashion,” to “support the revival and expansion of consumption.”
Shanghai-based Bank of Communications, China’s fifth-largest bank, held an internal meeting on Wednesday to “initiate the project to adjust the existing mortgage rates on personal home loans”, according to a notice obtained by the Post. The bank’s investor relations officers declined to disclose information about the meeting.
The People’s Bank of China (PBOC) building in Beijing, pictured on June 26, 2023. Photo: Bloomberg
The People’s Bank of China (PBOC) building in Beijing, pictured on June 26, 2023. Photo: Bloomberg
The moves came as the central bank and financial regulators unveiled new rules on Thursday to allow banks to cut interest rates on existing mortgages, which will lead to an 80-basis-point reduction on household interest payments, according to local media outlets.
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