(Yicai) May 13 -- Funds deposited at banks in China have fallen sharply this year amid seasonal factors and efforts by lenders to scale down high interest rate-bearing liabilities, with much of the money flowing into off-balance sheet products including banks’ wealth management vehicles.

Corporate yuan deposits fell by CNY1.87 trillion (USD258.5 billion) last month, or CNY1.73 trillion more than the drop in the same period of last year, according to data from the People’s Bank of China. Personal deposits fell by CNY1.85 trillion, CNY650 billion (USD89.8 billion) more than the year-earlier decline.

In the first four month of this year, deposits sank by CNY3.92 trillion from CNY11.24 trillion (USD1.55 trillion) in the first quarter, the PBOC data also showed.

The main reason for the decrease is that since April the funds have been mainly transferring back to off-balance sheet products offered by the banks, including wealth management products, Ming Ming, chief analyst at Citic Securities, told Yicai.

A banking industry analyst at a public fund told Yicai that this shift has been driven by lenders’ efforts to restrict high-interest savings instruments such as agreement and call deposits, adding that the funds are also being ploughed into the bond market.

“Seasonality also matters,” the analyst said, as the outflow of deposits has usually been significant between April and July every year. 

The shift in funds has boosted the rebound in the wealth management business of banks. According to industry insiders, the market for these products swelled by about CNY2 trillion in April compared with March, and it is expected to top CNY30 trillion within the year.

The rise in investment yields has also bolstered enthusiasm for WM products, according to Dong Ximiao, chief researcher at Merchants Union Consumer Finance.

Some of the recent outflow of bank deposits has also been because April is a time when a lot of customers settle loans, staff in the credit departments of several joint-stock banks told Yicai.

Editor: Tom Litting