Surprisingly, the Loan Prime Rate (LPR) for September has remained unchanged, with the rate for terms over five years still at 3.85%. Why did we hold steady when the US Federal Reserve cut rates by 50 basis points? Don't worry, here are two judgments from Old Mao:
Firstly, the absence of an official announcement does not mean that no signals have been sent to the market.
Small and medium-sized banks have already started to ease credit, with the maximum reduction in deposit rates being 50 basis points. This serves as a signal to the market. If banks unilaterally lower lending rates, it will put pressure on the banks' net interest margins. It is better to first reduce deposit rates and then lending rates, so that the pressure on bank profits is smaller. After all, banks are the central bank's own children.
Secondly, whether to make local adjustments or to implement a major overall policy is still under consideration.
On September 11th, the central media outlet "Securities Daily" has also been continuously sending signals about lowering the existing housing loan rates again. As for what the most suitable timing is, it is still under consideration. If the existing housing loan rates are lowered before the rate cut, and interest rates are universally reduced, people will still repay their loans early, and the pressure on banks to repay loans early cannot be alleviated. If the existing housing loan rates are lowered after the rate cut, and the reduction is significant, will it have too much impact on bank profits?
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The current average interest rate for existing housing loans is about 4%, higher than the average commercial loan rate for first homes (30 major key cities) at 3.21%. As of the end of the second quarter this year, the scale of China's existing housing loans is as high as 37.8 trillion yuan. Lowering the interest rates on existing housing loans can reduce the debt burden on people and stimulate consumption growth, but it will cut a piece of fat from the banks' profits. If the interest rates on existing housing loans are reduced by an average of 73 basis points in 2023, it may affect the banks' revenue by 170 billion yuan.
Whether to protect bank profits or to promote economic recovery, it is believed that the decision-makers will give the people of the whole country and the eagerly waiting real economy a satisfactory major policy, after all, the profit of a universal bank is equal to the total profit of nearly 4,800 listed companies on the A-share market. Let's wait and see, looking forward to the major policy.