Deposit Rate Reform: PSBC Is The Biggest Beneficiary
One key change brought about by the deposit rate reform will be the pricing
mechanism. According to news reports, regulators require banks to price deposit rates by adding basis points (premium) to the benchmark instead of using a multiple, which is similar to the LPR reform. Regulators will place a cap on premiums to prevent excessive competition. PSBC is the biggest beneficiary of the reform. The cap on premium may lead to an outperforming NIM in 2H21. Upgrade the sector to OVERWEIGHT. Top pick is CCB (939 HK) with a target price of HK$8.50.