Negative Interest Rate Makes Bank Net Profit Under Pressure.

A recent report by the international rating agency, S & P, pointed out that negative interest rates have hit banks' profits and exacerbated concerns about negative interest rates.

For large banks, their profits may fall by 12%, while the profits of regional banks may be as high as 20%.

Generally speaking, the Bank of Japan's revenue mainly consists of three parts: 1. interest rate on loan interest and interest on deposit; 2. fee; and 3. proceeds from treasury bonds.

Objectively speaking, the Central Bank of Japan carries out the classified interest rate (level three), so it only charges 0.1% of the excess reserves. The total amount may only be about 10 trillion yen at the beginning, while the total reserve of the central bank accounts for 260 trillion yen. Most of the reserves can get 0.1% interest, while the small part is zero interest rate.

But it seems that negative interest rate negative feedback on the Japanese banking industry is beyond the expectations of the central bank.

For the first income of banks, the current net interest margin of banks has narrowed.

It is reported that before the Yokohama bank and the eighty-two bank lowered the interest rate for 1 years below the fixed deposit rate to 0.02% the same year as the ordinary deposit, SONY bank lowered the ordinary deposit rate from 0.02% to 0.001%.

Some analysts have pointed out that banks will suffer losses as the new funds will be applied to negative interest rates.

Therefore, Japan's private banks reduce the deposit rate equivalent to the cost of financing.

In addition, the "corporate lending rate (i.e. the source of bank profits) has also declined recently, because TIBOR has dropped sharply in recent years."

The above Sumitomo Mitsui traders told reporters.

TIBOR is similar to China's SHIBOR, which is the daily interest rate of the Japanese capital lending market, especially the interbank venture capital lending. The interest rate is issued by the National Association of banks of Japan every day.

It is reported that

Commercial bank mortgage interest rate was pferred to the lowest level in history.

According to the relevant research, it is assumed that the long-term lending rate will drop by 20 basis points and the short-term loans will fall by 10 basis points. This will reduce the earnings of the three major banks by about 220 billion yen, which also accounts for about 6% of the total pre tax income.

Actually, the loan to deposit ratio of the Bank of Japan has always been lower.

According to the Oxford Institute of economic research, the latest Japanese domestic bank balance sheet shows that the total amount of Japanese loans is 476 trillion yen and the deposit is 680 trillion yen.

Before the implementation of negative interest rates, the interest rate of deposits has been reduced to about 0.02%~0.03% according to the quantity and duration. After the implementation of the negative interest rate policy, the deposit interest rate has dropped by 20 basis points again, and the current rate is 0.001%.

"It is certain that the deposit interest rate has fallen again, and the net profit margin of the Bank of Japan has been very narrow compared with other countries."

Taylor told our reporter.

Skimming the second fees does not mean third gains. The Bank of Japan has a large number of government.

The negative interest rate's change to the yield curve is also noteworthy.

"The downward trend of yield curve may benefit bank profits.

After the Bank of Japan carried out negative interest rates, the average bond yield dropped by about 30 basis points.

Taylor told our reporter.

In view of the bank's Japanese government bond holdings up to about 250 trillion yen, so the yield down will yield no small gains.

A rough calculation shows that banks or profits are about 1 trillion and 500 billion yen (US $13 billion 400 million), and large banks and regional banks have the same income.

"Of course, this is only a one-time gain, because when the above bonds expire, the yield of reinvestment will go down."

Taylor stressed to our reporter.

In February 9th, Japan's benchmark 10 year treasury bonds.

First fell to a negative value; in February 18th, the Japanese government issued the longest five year negative yield bond for the first time.

Nevertheless, large organizations such as life insurance institutions, pension funds, banks and so on have to buy.

?

Since the Bank of Japan announced the implementation of the negative interest rate policy, the yield curve has become more flat.

For example, in February, the yield spread of 20 - year treasury bonds and 10 - year treasury bonds narrowed 15 basis points, and the yield spreads between 10 - year and 2 - year treasury bonds narrowed by 10 basis points.

It is worth noting that a more flat yield curve is not favorable for banks because it may prefer to borrow short loans.

To cope with this negative trend, Japanese banks also have to take measures to increase their overseas businesses significantly, and their profits are even more impressive than those in China.

In addition to the independent monetary policy, structural reform is Japan's ultimate "antidote".

Relevant data show that over the past four years, Japan's domestic banks have increased overseas lending business, and their proportion of domestic loans has increased 2.5 times.

"The negative interest rate policy may be the main driving force to promote the overseas loan business of the Bank of Japan."

Taylor told reporters.