As November rolled in, the latest figures regarding credit income and expenditure echoed the broad trends reflected in social financing data—the restoration of credit dynamics still requires time and accumulationEvidence suggests that the performance of mortgage loan demands continues to improve, indicating that recent policies aimed at restoring resident confidence and expectations are beginning to show results.

By the end of November, the disparity between the growth rates of deposits and loans among the major national banks was recorded at a striking -1.39%, an increase in the decline by 0.91% compared to the end of OctoberIn particular, the four largest banks experienced a loan-deposit growth gap of -1.65%, while smaller banks outperformed state-owned giants, boasting a gap of -0.74% at the end of November

Despite the bleak statistics concerning state-owned banks, smaller banks have shown a trend of convergence in their growth differentials, with a slight narrowing of decline by 0.15% on a month-to-month basisWhen analyzing the structure of deposits, it was evident that all types of banks experienced a growth in current deposits, but the growth of term and non-bank deposits saw a notable slowdown.

Interestingly, while credit growth among smaller banks has decelerated, state-owned banks have begun to accelerate their bond allocationsNovember saw a year-on-year decrease in deposits, amounting to 10,608 billion yuan and 1,673 billion yuan for state-owned and smaller banks, respectivelyHowever, after stripping away non-bank deposits, a growth in deposits was notable for various types of banks.

Some insights from the analysis by Kaiyuan Securities revealed distinct features in the deposit data for November

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Firstly, both state-owned and smaller banks significantly improved their growth in corporate current deposits, growing by an impressive 4,222 billion yuan and 1,990 billion yuan year-on-year, respectivelyThe decline of M1, which measures the most liquid forms of money, also contracted significantlyThis can be attributed to the recovery in sales of real estate companies in first-tier cities following the new policy promulgated on September 24th, which facilitated the transition of household savings into purchases of real estateThe improved cash flow for these companies contributed to this riseAdditionally, some of the funds raised through the issuing of special refinancing bonds were utilized to address debts owed by the government to enterprises, leading to an accumulation of corporate current deposits.

Secondly, it's worth noting that while both personal and corporate term deposits across different banks saw year-on-year decreases, state-owned banks experienced a net outflow of term deposits in a single month

It appears that in the current low-interest-rate environment, household saving behaviors are undergoing a transformationTraditionally, changes in interest rates were transmitted slowly to the banks' liabilities, leading to a rigid cost structure regarding liabilitiesThus, term deposits offered a more attractive value propositionHowever, as the effects of lowering interest rates become apparent, depositors are confronted with choices for reinvestment upon maturity.

In light of improvements in the capital markets following the September 24th reforms, coupled with a continuous decline in long-term bond yields that increased the attractiveness of wealth management products, some long-term deposit customers opted to invest their funds in the capital market or convert to current deposits upon maturityIn this atmosphere, banks recognized the need to relieve the pressure on interest margins brought about by high-interest liabilities, consequently adopting controls on the new inflow of expensive deposits

Thus, the trend toward increased term deposits in November showed slight signs of easing.

Another observation from the November data is that both state-owned and smaller banks saw a significant decline in non-bank deposits—12,720 billion yuan and 2,683 billion yuan year-on-year, respectively—creating a primary drag on deposit growthThis downturn can be attributed, in part, to high base figures from the same period in 2023, as well as solid growth in wealth management, which inflated by approximately 6,000 billion yuan within the monthThese trends indicated that funds were transitioning from savings deposits initially to non-bank depositsAlso, following the issuance of special refinancing bonds, when non-bank entities purchase debt from banks, reduced both the asset-side bonds and the liability-side non-bank deposits simultaneously.

When analyzing the domestic loan situation in November, a stark contrast was noted, with state-owned and smaller banks seeing decreases of 294 billion yuan and 3,621 billion yuan, respectively

As the fourth quarter unfolded, the credit growth for smaller banks started to decelerateZooming in on the details, it appears that the demand from enterprises remains unstable; for instance, in November, deposit-taking financial institutions registered a drop of 5,178 billion yuan in enterprise loans year-on-yearThis could stem from a reduction in banks' credit disbursement motivation during the fourth quarter and the refinancing policy replacing some high-interest municipal loans with special bonds.

Conversely, the demand for residential mortgage loans appears to be marginally recovering, with a positive shift in personal medium- and long-term loans of 794 billion yuan year-on-year noted among deposit-taking institutions in NovemberThis uptick is largely attributed to consumption loans, alongside supportive measures boosting residential purchase demands while the trend of homeowners prepaying their mortgages began to stabilize

Notably, state-owned banks reported an increase of 95 billion yuan in medium- and long-term loans, while smaller banks observed a decrease of 1,615 billion yuan, potentially indicating a disparate impact of debt resolution policies on credit scales between these banks.

Resulting from differing behaviors in bond allocation, state-owned banks enjoyed a year-on-year growth in bond investments of 4,402 billion yuan, while their smaller counterparts experienced a decline of 2,927 billion yuanAnalysts from Kaiyuan Securities point to the fact that the issuance of 2 trillion yuan in special refinancing bonds this year primarily relied on state-owned banks, which still possess ample demand for bond configurationsMoreover, as the yields of long-term bonds continued to spiral downwards in the fourth quarter, it’s possible that some smaller banks chose to liquidate portions of their bonds preemptively to secure profits.

In summary, the credit income and expenditure data for November provide a narrative that aligns seamlessly with the social financing metrics, revealing that credit restoration attempts still require significant time