(Yicai) Dec. 22 -- All six of China’s big state-owned banks are cutting deposit rates again in an effort to bolster their bottom lines, while some smaller lenders are raising them to win over depositors.

Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, Industrial and Commercial Bank of China, and Postal Savings Bank of China each lowered their rates today, with ICBC, the first to announce, now paying less than 2 percent on all of its time deposits, except those for five years.

It is the third time this year that China’s large commercial banks have reduced deposit rates, after having cut them in June and September to help stimulate investment and consumer spending. As previously, smaller banks are now expected to make similar adjustments.

But each cut results in a narrower net interest margin -- the difference between the income earned from interest on loans and what is paid out in interest on deposits -- leading to a drop in operating income at the banks, said Dong Ximiao, chief researcher at Merchants-Unicom Consumer Finance.

For example, the banking sector as a whole has forfeited nearly CNY200 billion (USD28 billion) of income just as a result of slashing existing mortgage rates, Dong said. So banks will inevitably decide to cut deposit rates in order to reduce their liability costs, he added.

As lending rates are forecast to remain low for some time, further cuts in deposit rates are expected within the next three months, said Guo Yuwei, deputy general manager of the macroeconomics department at CIB Research.

In spite of the downward trend and with the new year approaching, a handful of small urban and rural commercial banks have raised their deposit rates.

Huaibin Rural Commercial Bank in Henan province announced on Dec. 12 that rates on new personal accounts with balances over CNY10,000 (USD1,400) would be raised, with that for a three-year time deposit rising to 2.4 percent from 2.35 percent. On Nov. 1, Heshan Zhujiang Rural Bank in Guangdong province increased the rate on one-year deposits to 2.25 percent from 2.1 percent.

Compared with the big and mid-sized banks, smaller regional banks usually attract depositors with relatively higher deposit rates, according to Liu Yinping, an analyst at the Rong360 Digital Technology Institute.

But as rates fall across the industry, narrowing the gap between banks, it is becoming more of a challenge for smaller outfits to keep depositors happy, Liu added. So with annual staff performance reviews due by year-end and the new year marketing period approaching, some may lift rates on some time deposits for a while in order to meet targets, said Liu.

Nevertheless, small banks are also under pressure from narrowing net interest margins, limiting their ability to offer favorable rates, noted Xue Hongyan, deputy head of the Star Atlas Institute of Finance. They also need to strike a balance between swelling deposits and maintaining earnings, he added.

Editors: Tang Shihua, Futura Costaglione