(Yicai) Aug. 28 -- Large state-owned banks in China may follow in the footsteps of regional lenders and lower their rates for two and three-year time deposits to return to higher gains, according to industry insiders.

Customers should lock in higher returns as soon as possible as large state banks may lower their rates for deposit accounts that have a fixed-term maturity, an account manager from a joint-stock bank in southern China said to Yicai.

Potential clients should "seize the moment," another account manager at a big state-owned lender said, adding that rates could be trimmed still this month.

Several regional lenders, including Chenghai Rural Commercial Bank, Shantou Gulf Rural Commercial Bank, and Xinjiang Bohu Rural Commercial Bank, have recently cut their two or three-year time deposit rates. Moreover, on Aug. 1, a branch of Bank of Guangzhou trimmed its rates of several maturities from six months to three years by 5 to 10 bips.

The prediction of lower returns for account holders is rooted in waning earnings growth at banks. Lenders' net interest margin was 1.74 percent in the second quarter, remaining below 1.8 percent for the second straight quarter. The gauge of profitability for large state banks was 1.67 percent, down from 1.69 percent in the first quarter, and joint-stock banks logged a figure of 1.81 percent in the quarter ended June 30, down from 1.83 percent.

Commercial banks need to maintain reasonable profits and NIMs, the central bank recently noted in its monetary policy report for the second quarter.

The other option of raising loan rates is not likely. Considering the general requirement of reducing financing costs for the real economy, banks may focus on deposit rates to maintain stable or high NIMs, said Chen Hao, senior analyst at CIB Research.

Cuts in deposit interest rates may accelerate because banks need to maintain reasonable profits, Dai Zhifeng, director of a research unit of Zhongtai Securities, wrote in a recent research report.

However, the decision is not only based on earnings. Member banks refer to the 10-year government bond rate when adjusting their deposit interest rates while the one-year loan prime rate acts as a benchmark for loan rates, Dai explained.

The 10-year treasury bond rate has declined to about 2.55 percent, down from 2.68 percent on June 1. The one-year LPR fell by 10 bips to 3.45 percent this month.

Editor: Emmi Laine