(Yicai) Sept. 28 -- China's existing mortgage rate cut has a generally controllable impact on Chinese commercial banks' net interest margin, mainly because of falling deposit interest rates and early mortgage repayments, a report from the Chinese unit of US rating agency Fitch Ratings showed.
Lowering the existing mortgage interest rates will likely weigh down Chinese listed lenders' net interest margin by between 3 and 6 basis points, according to the report released by Fitch Bohua on WeChat yesterday. Meanwhile, falling deposit rates are expected to buoy banks' net interest margin up by 3.7 bps, with lower early mortgage repayment also contributing.
Chinese banks should lower the interest rates on existing personal housing loans from Sept. 25 in an effort to expand consumption and investment, China's National Administration of Financial Regulation and the People's Bank of China said on Aug. 31. Lenders should issue new loans to replace the existing ones individuals were granted to purchase their first houses or alter the existing mortgage rates, they added.
Large state-owned banks will be affected the most, followed by joint stock banks, urban commercial banks, and rural commercial banks, Fitch Bohua noted. Rural commercial banks and lenders with strong retail businesses and solid customer deposit foundations may even experience a rebound in net interest margin.
Overall, banks' net interest margin will still decline to some extent, Fitch Bohua pointed out. It is still possible that commercial banks' lending rates will fall while supporting the recovery of the real economy's needs and assisting local governments in resolving debts, it added.
Lowering deposit costs is inevitable to mitigate the pressure on banks' net interest margin and profitability level, with policy space to reduce costs still available for the central bank in the future.
Editor: Futura Costaglione