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Forget Toasters & Spiderman Towels, Chinese Banks Lure New Deposits With iPhones & Mercedes

Tyler Durden's picture




 

Amid the European crisis in 2012, European banks reached deep deep down to encourage depositors to lodge their savings in these highly levered financial institutions. Most notably, now defunct Bankia, which offered no lesser gift than a Spiderman Towel in exchange for a EUR300 deposit. So, one wonders just how desperate they are - and just how close to total collapse - when Chinese banks are offering Mercedes Benz, iPhones, or a gold pendant to encourage cash as Bloomberg reports one analyst warns, "Chinese banks are hemorrhaging their deposits."

 

 

As Bloomberg Businessweek reports,

Banks in the U.S. once gave away toasters and irons to lure depositors. Banks in China are upping the ante. With customers pulling out money and putting it into higher-yielding investments, they are offering Mercedes, iPhones, and daily deliveries of vegetables to sidestep interest rate caps and get people to stash some yuan in savings accounts.

 

“Chinese banks are hemorrhaging their deposits,” says Rainy Yuan, an analyst at brokerage Masterlink Securities in Shanghai. China’s banks lost 950 billion yuan ($154 billion) of deposits in the three months through September, the first quarterly drop since 1999.

 

In the first 11 months of the year, new deposits were 23 percent lower than in the same period last year, People’s Bank of China data show. Offering incentives to attract money is not the solution, Yuan says: “There is no fix for this. All the efforts they made to win savers back will only push up the costs, so it’s a losing battle to fight.”

However, The China Banking Regulatory Commission in September banned what it called “illicit” deposit-gathering practices, including gifts and rebates on deposits, without clarifying whether product giveaways in lieu of interest payments qualify as gifts.

Banks that flout the curbs could face punishment, the regulator said. The warning hasn’t deterred banks.

 

The iPhone promotion, at a Beijing branch of Ping An Bank in October, offered a 128-gigabyte iPhone 6 Plus in lieu of interest payments for depositing 38,000 yuan for five years.

 

For parking 903,000 yuan for the same period, savers could pick one of four Mercedes-Benz models. A Mercedes A180, which costs 252,000 yuan, would give investors the equivalent of an annualized return of almost 7 percent, compared with the benchmark rate of 4 percent on five-year deposits.

In northern Shanxi province, Industrial Bank offered a gold pendant for a one-year deposit of 10,000 yuan.

 

Also in Shanxi, Citic Bank promised a daily supply of eggs and vegetables for three weeks to elderly customers who deposited 10,000 yuan, Shanxi Daily reported in November.

 

In Ningbo, Ping An Bank is giving cash instead of gifts. Savers can get 258,000 yuan of interest payments immediately when depositing 1 million yuan, or receive an interest-and-principal payment of 1.3 million yuan in five years. A spokesman for Ping An Bank declined to comment.

Liao Qiang, a director at Standard & Poor’s in Beijing warns, "The battle for deposits will only get worse as China moves ahead with interest rate liberalization, which will drive up banks’ funding costs and hurt profit."

*  *  *

We are sure this will all end well. Buy Chinese stocks (like everyone else)!

 

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Wed, 12/31/2014 - 21:46 | 5611071 KnightTakesKing
KnightTakesKing's picture

Ho Lee Fook!

Wed, 12/31/2014 - 21:48 | 5611075 Jeff the Terrible
Jeff the Terrible's picture

They're not giving away houses like in 06'

 

http://y2u.be/VI6tBwVjyOY

Wed, 12/31/2014 - 22:10 | 5611136 CrazyCooter
CrazyCooter's picture

Assuming a closed banking system, the deposits pulled from Bank A will deposit to Bank B ... and then if Bank A is below their reserve requirements they just borrow the delta from Bank B at the intra-bank rate.

If this is system wide, the cash is leaving the CHINESE banking system. Otherwise, market (or other) forces are snuffing out which banks have the most dead bodies on balance sheet.

And at those teasers, it implies that the REAL intra bank rate is probably much higher than the reported intra-bank lending rate.

Curious.

Regards,

Cooter

Wed, 12/31/2014 - 23:39 | 5611317 americhinaman
americhinaman's picture

scaremongering by zerohedge.  actually, there's nothing wrong.  

the 5 year term deposit (CD) rate in China is just about 5%.  annualize it and that's about 27% over 5 years.  all they are doing is offering the interest upfront, in some cases in the form of a product which actually costs them less than that since they buy in bulk.  if anything, banks have been decreasing the deposit rate offers recently, as compared to the past 2 years.

in the US, the amount/value of the interest sound grossly extravagant, but the reality is that US interest rates are grossly inadequate.  5% annualized for a developing economy really isn't all that much, over history.  0% however, is very low.  at least not negative yet i guess.

Thu, 01/01/2015 - 15:36 | 5612710 Matt
Matt's picture

The one offer is deposit 1 million yuan for 5 year term, get 258,000 yuan upfront. At 8% in the graphic, that is 3 percent more than the CD, and up front.

So how does it work? Doe the bank take the 1 million, create 10 million in fractional loans from that, and then issue the 258,000 yuan payout as a 5 year 0% loan? 

Thu, 01/01/2015 - 17:21 | 5613027 Thirtyseven
Thirtyseven's picture

That's sort of what I was thinking. 

Once the music stops there won't be nearly enough chairs. Of course what do bankers care; They have RE in San Fran and Vancouver?

Wed, 12/31/2014 - 23:58 | 5611352 Wild Theories
Wild Theories's picture

well, the banking liberalisation reforms PBoC is trying on is supposed to make it not as closed as before

I suppose in reality, it just means that former deposit capital is now much freer to leave China

 

I guess that's probably PBoC's aim all along, the only longterm solution to deflate a bubbly environment is to open a closed system and allow Chinese capital to leave, otherwise as long as you have more capital than avenues to invest in productively, you'll just be bouncing from one bubble to the next.

Expect we will hear more from the banking/financial reforms front from China this year.


the naysayers will probably pick the symptoms as further evidence of China imploding, but I think in reality, what it really means is if the macro economic condition becomes worse around the globe(which it will), things like oil slides further because nobody is cutting production but instead pumping till they drop, not only will jittery cash be looking for a safe place to park, so will newly freed capital from China start flowing west.

now I know I'm extrapolating wildly here, but I think this is another sign that we might be in for new highs in 2015

Thu, 01/01/2015 - 00:30 | 5611411 Marco
Marco's picture

Oh yeah, that's a recipe for improvement ... let the ownership of Chinese companies all go abroad (or at least claims on their profits, since that's all that China allows, if they don't change their mind).

Then they can slave away in a steady state and don't have to worry about accumulating savings, problem solved!

Thu, 01/01/2015 - 11:37 | 5612147 So Close
So Close's picture

A rolling loan gathers no loss.

Thu, 01/01/2015 - 01:51 | 5611522 tplink
tplink's picture

my best friend's half-sister makes $77 every hour on the computer . She has been laid off for 5 months but last month her pay check was $14292 just working on the computer for a few hours. read... www.works3.com

Thu, 01/01/2015 - 12:04 | 5612181 WmMcK
WmMcK's picture

-1 - but love the "half-sister" twist.

Thu, 01/01/2015 - 15:59 | 5612783 tony1787
tony1787's picture

The "half sister" part PROVES it must be true! They're goddamn geniuses!

Wed, 12/31/2014 - 21:49 | 5611074 Jeff the Terrible
Jeff the Terrible's picture

They're killing themselves over iphones in that country

 

http://y2u.be/VI6tBwVjyOY

Thu, 01/01/2015 - 06:18 | 5611802 Peanut Butter E...
Peanut Butter Engineer's picture

Unlike Americans where we prefer to kill each other over a pair of shoe.

Thu, 01/01/2015 - 10:16 | 5612037 Never One Roach
Never One Roach's picture

or be beaten up by a diverse person at McD's:

 

Korean-Americans Seek Boycott After an Attack in a McDonald’s in Queens

 

http://www.nytimes.com/2014/12/31/nyregion/korean-americans-seek-boycott...

 

 

Wed, 12/31/2014 - 21:52 | 5611091 kowalli
kowalli's picture

so all have problems xD

race to the buttom=)

Wed, 12/31/2014 - 21:53 | 5611092 SAT 800
SAT 800's picture

No shit ? MB's huh? how much interest do they pay?

Wed, 12/31/2014 - 21:54 | 5611095 SAT 800
SAT 800's picture

Oh; 900K for five years; no I don't think so; it was a nice thought though.

Wed, 12/31/2014 - 21:58 | 5611108 Usurious
Usurious's picture

 

 

if you have not read this one..........get ready

http://www.zerohedge.com/news/2014-12-30/commodity-prices-are-cliff-divi...

Wed, 12/31/2014 - 23:16 | 5611269 Shad_ow
Shad_ow's picture

Excellent article and discussion following it.  Thanks, I had missed it.

Wed, 12/31/2014 - 22:01 | 5611117 Ineverslice
Ineverslice's picture

 

fuck bloomberg

 

Wed, 12/31/2014 - 22:07 | 5611129 Peter Pan
Peter Pan's picture

As Mark Twain once said, I am more interested in the return of my capital than the return on my capital.

It looks like the Chinese might not have heard about him.

Thu, 01/01/2015 - 11:58 | 5612172 WmMcK
WmMcK's picture

AKA Sam-Uel Lang-Horne Clem-Ens

Wed, 12/31/2014 - 22:22 | 5611162 alexmark2013
alexmark2013's picture
"China's Shadow Economy started to look like the subprime crisis in the US's back in 08." http://investmentwatchblog.com/chinas-shadow-economy-started-to-look-like-the-subprime-crisis-in-the-uss-back-in-08/
Thu, 01/01/2015 - 01:42 | 5611498 andrewp111
andrewp111's picture

It doesn't matter if the PBOC simply prints enough to cover the holes in the system, as they have always done. No government owned bank will be allowed to go under.

Wed, 12/31/2014 - 22:38 | 5611191 SickDollar
SickDollar's picture

Sum Ting Wong ?

Thu, 01/01/2015 - 05:04 | 5611737 Yen Cross
Yen Cross's picture

 sum dip shit?

Wed, 12/31/2014 - 23:00 | 5611232 Seasmoke
Seasmoke's picture

Damn I am sucker for MB. I would probably do it. Hope that doesn't get offered here. I could see 7 years of gold and silver. Real money. Out the window.
Hi my name is Seasmoke. And I am a recovering Fiat holic.

Thu, 01/01/2015 - 00:02 | 5611361 robertocarlos
robertocarlos's picture

Duplicate

Thu, 01/01/2015 - 00:03 | 5611366 TalkToLind
TalkToLind's picture

Fuck cars, toasters and cell phones.  Give me some 2015 Year Of The Sheep 10 oz ingots and I'll deposit some fiat.

Thu, 01/01/2015 - 00:04 | 5611371 firstdivision
firstdivision's picture

Shit is getting silly out there.  Don't know if everyone noticed, but the dollar index is higher than during the fucking crisis...http://www.marketwatch.com/investing/index/dxy/charts?symb=DXY&countryco...

 

This is going to be an interesting year coming up. 

Thu, 01/01/2015 - 00:07 | 5611376 Luckhasit
Luckhasit's picture

Who actually believe's those return rates.

C'mon now.

Thu, 01/01/2015 - 01:13 | 5611466 Bemused Observer
Bemused Observer's picture

3 weeks of daily eggs and vegetables...what an odd premium to offer on a bank account.

Thu, 01/01/2015 - 06:31 | 5611808 Oliver Jones
Oliver Jones's picture

It does make you wonder if they're not planning on staying liquid for more than 3 weeks and 1 day, doesn't it?

Thu, 01/01/2015 - 01:25 | 5611479 Silver Bullet
Silver Bullet's picture

I'd rather have the Spider-Man towel.

Thu, 01/01/2015 - 01:38 | 5611493 andrewp111
andrewp111's picture

If they are giving you the interest upfront on a 5 year deposit, and they are gone before the 5 years are up, they made money, right?

Thu, 01/01/2015 - 02:09 | 5611569 JoJoJo
JoJoJo's picture

BEING the master counterfeiters they are, the Chinese may be giving away Ifake Phones and even a fake Mercedes - the BAIC BJ80

Thu, 01/01/2015 - 17:23 | 5613031 Thirtyseven
Thirtyseven's picture

How is a revese engineered Benz made in Beijing much different from one made in Bavaria?

Thu, 01/01/2015 - 02:47 | 5611613 Dubaibanker
Dubaibanker's picture

Difference between Western banks and Chinese banks, despite any deposit withdrawals, is that ALL Chinese banks are fully owned and controlled by the Chinese Govt! They simply cannot fail just like banks in Venezuela, Ukraine or Pakistan or Afghanistan or Somalia cannot fail.

Banks in US used to give advance deposit interest and such attractive offers are always cost justified. Some banks around the world still give advance interest or do draws for prizes etc. This is just another such offer.

It is just the turn of the Chinese to continue growing and we are hearing such things for the first time, that is all. No bank, whether private or Govt owned can offer any prize where the bank will lose money.

Thu, 01/01/2015 - 05:12 | 5611743 Yen Cross
Yen Cross's picture

Well lmfao. I guess we are going to have some new alternatives in'15?

 Russia’s Settlement Alternative to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) | Global Research

 Bitchez

Thu, 01/01/2015 - 10:11 | 5612025 cornflakesdisease
cornflakesdisease's picture

Be a shame if it got hacked . . .

Thu, 01/01/2015 - 09:00 | 5611938 shovelhead
shovelhead's picture

In China, the living standards are higher even if you get swindled when the bank goes tits up.

You just drive your new MB up to a luxury apt. in the Ghost City of your choice and the floundering developer will be glad to let you squat as long as you leave your lights on all night and park your car out front so it doesn't look so empty.

Thu, 01/01/2015 - 13:04 | 5612328 jez
jez's picture

"Rainy Yuan" commenting on a currency washout?

 

Gotta be an alias.

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