China banking net interest margin continuing to increase

The latest figures from the China Banking Regulatory Commission (CBRC) shows that China commercial banks’ deposit net interest margin has been increasing from 2.57% in 2013Q1 to 2.68% in 2013Q4, despite of the pressure from the interest rate liberalization.

We think the “unusual” growth is probably due to the tight monetary policy and the capital shortage issue since last June. These two factors result in a successive increase in the interest rate in currency market, which are beneficial to commercial banks. As a result, the returns from both issuing loans or investment have been on the uptrend.  

It will be interesting to see how these figures vary for Q12014. The impact of increase competition from both banks and online finance companies may give us a very different picture.