Industrial & Commercial Bank of China Ltd said it will lower deposit rates as much as 25 basis points on some tenors starting Dec 22.

(Dec 21): China’s biggest state-owned banks are launching a third round of deposit rate cuts in a year, as lenders work to maintain profitability amid shrinking margins and government policies aimed at boosting consumption and demand.

Industrial & Commercial Bank of China Ltd said it will lower deposit rates as much as 25 basis points on some tenors starting Dec 22. After the adjustment, the lender will pay an annual 1.45% for one-year deposits, down from 1.55%, and 1.65% on two-year deposit, down from 1.85%. It will pay 1.95% on three-year deposits, down from 2.2%, and 2% on five-year deposits, down from 2.25%.

China’s escalating push to have its banking behemoths backstop struggling property firms is adding to a maelstrom of woes for the US$57 trillion (RM265.36 trillion) sector. Banks’ net interest margins slumped to a record low of 1.73% as of September, data showed. That’s below a 1.8% threshold regarded as necessary to maintain reasonable profitability. Bad loans meantime have hit a new high, and a revenue growth streak since 2017 for some of the nation’s largest state banks may snap this year.

Economic data released for November showed China’s economic recovery remains under pressure from weak demand and a lingering property crisis. Lowering deposit rates may give banks more room to provide better terms on corporate and home loans. It could also encourage households to shift away from bank deposits toward other investments and consumption.

Chinese households increased the share of their income that they save during the pandemic, and shifted their financial assets toward bank deposits, hitting the performance of funds that buy stocks and bonds on behalf of households.