China Construction Bank offers richer clients higher rates on ‘big-sum savings’ accounts

State lender offers yearly return as high as 2.25pc, or 1.5 times the one-year benchmark savings rate – but client have to make minimum daily deposits of 10,000 yuan in the first 90 days, and more than 1m yuan yearly

PUBLISHED : Wednesday, 17 May, 2017, 5:29pm
UPDATED : Wednesday, 17 May, 2017, 11:22pm

China Construction Bank has been quietly attracting larger deposits by offering higher rates of interest to select clients in Shanghai – a fresh sign that it is working hard to secure a weapon to improve earnings after Beijing’s call for lower leverage levels

The Beijing-based bank has been marketing the savings scheme hard since last week in Shanghai, which offers a yearly return as high as 2.25 per cent, or 1.5 times the one-year benchmark savings rate. Client have to maintain an average daily deposit value of more than 1 million yuan (US$145,115) for one year and make minimum daily deposits of 10,000 yuan in the first 90 days, according to two customer relationship managers at the bank.

The saving scheme offers savers more flexibility than term deposits, they added, yet higher returns than standard deposit accounts.

The newly introduced big-sum savings option is being used to “attract deposits from rival banks”, said one of the managers, who declined to be named. A press officer from the bank in Shanghai said she was unware of the issue.

The bank, one of China’s “Big Five” state-owned lenders, has been marketing similar plans for a number of years, but with lower average requirements and rewards.

The 10,000 yuan daily requirement was the same, but the 1 million yearly total was not needed, and the maximum interest rate offered was 1.75 per cent.

Analysts said they consider the latest aggressive marketing step doesn’t necessarily mean the bank is under pressure to boost funding, but rather that it was showcasing how important deposits now are, against the backdrop of Beijing’s appeal for deleveraging by big banks, which are better funded and equipped to improve their balance sheets.

“Big state-owned banks with strong funding capabilities enjoy more room than smaller rivals in handling the deleveraging,” said Zhao Yarui, a senior researcher at Bank of Communications in Shanghai.

“The big banks with ample deposits can actually benefit from charging higher rates in the interbank market as net lenders, and shore up their net interest margins.”

The big banks with ample deposits can actually benefit from charging higher rates in the interbank market as net lenders, and shore up their net interest margins
Zhao Yarui, senior researcher, Bank of Communications in Shanghai

The net interest margin is the difference between the interest income generated by banks and the interest paid out to savers, as a proportion of its interest-bearing assets.

In the first quarter, CCB led listed banks in improving its net interest margin, effectively a measurement of banks’ earnings capability on interest income, and a main source of income.

Besides interest income, banks also earn money from fees and service charges.

The deleveraging drive is leading to diverging performance in both asset growth and net interest margins at banks across China, analysts say.

In the first quarter, the industry average net interest margin dropped by 19 basis points to 2.03 per cent with signs of stabilising at big banks, while decreases at smaller banks were more pronounced, Shenwan Hongyuan Securities’ Wang Sheng wrote in a research note last Friday.

When it comes to asset expansion, big banks have steadily accelerated growth to 11.3 per cent in the first quarter, the fastest growth since 2013, , Wang noted, while smaller lenders have scaled back their pace.

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