Interest rate on yuan deposits set to drop
The interest rate on retail yuan deposits is likely to drop after the Hong Kong Monetary Authority announced relaxations in yuan business last week.
The Treasury Markets Association's webpage showed that the yuan interbank offered rate with a tenor of 12 months fell to 2.7 to 2.9 per cent from 2.8 to 3per cent after the authority announced that it would relax two requirements to allow banks to use less capital for yuan business and encourage them to offer more yuan loans and other products.
The interest rate drop signals that the yuan supply in the market is growing after the measures.
Paul Wong, the chief of treasury at Shanghai Commercial Bank, speaking after the unveiling of full-year results yesterday, said he expected interest rates on retail yuan deposits to fall.
"Banks can use a lower price to tap the yuan through [other] banks, so they are less willing to offer a high interest rate to tap retail yuan deposits," Wong said.
Yuan deposits in Hong Kong grew 2.5 per cent on the month to 668.1 billion yuan in March, the HKMA announced yesterday. Deposits have been growing since October last year.
The total remittance of yuan for cross-border trade settlement amounted to 340.8 billion yuan, up by more than half compared with the 221.7 billion yuan in remittances seen in the previous month.
Total deposits dropped 1 per cent in March and total loans and advances rose 1.2 per cent, the authority said. The Hong Kong dollar loan-deposit ratio edged up to 80.6 per cent at the end of March from 79.7 per cent a month ago.
Meanwhile, Shanghai Commercial Bank said its net profit fell 8.36 per cent to HK$1.65 billion last year compared with 2011, after falls in both interest income and fee income.
The bank's net interest income fell 2.9 per cent while the net interest margin averaged at 1.55 per cent, the bank said. Net fee and commission income dropped 5.4 per cent.
Shanghai Commercial Bank's chairman, Lincoln Yung Chu-kuen, said the bank had no plan to list.
Customer yuan deposits were 12 billion yuan, Wong said. He said the bank had experienced fast growth in yuan deposits since non-residents were allowed to open yuan accounts in Hong Kong in August last year.