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Forget Toasters & Spiderman Towels, Chinese Banks Lure New Deposits With iPhones & Mercedes
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."
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We are sure this will all end well. Buy Chinese stocks (like everyone else)!
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Ho Lee Fook!
They're not giving away houses like in 06'
http://y2u.be/VI6tBwVjyOY
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
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.
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?
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?
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
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!
A rolling loan gathers no loss.
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
-1 - but love the "half-sister" twist.
The "half sister" part PROVES it must be true! They're goddamn geniuses!
They're killing themselves over iphones in that country
http://y2u.be/VI6tBwVjyOY
Unlike Americans where we prefer to kill each other over a pair of shoe.
or be beaten up by a diverse person at McD's:
Korean-Americans Seek Boycott After an Attack in a McDonald’s in Queenshttp://www.nytimes.com/2014/12/31/nyregion/korean-americans-seek-boycott...
so all have problems xD
race to the buttom=)
No shit ? MB's huh? how much interest do they pay?
Oh; 900K for five years; no I don't think so; it was a nice thought though.
if you have not read this one..........get ready
http://www.zerohedge.com/news/2014-12-30/commodity-prices-are-cliff-divi...
Excellent article and discussion following it. Thanks, I had missed it.
fuck bloomberg
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.
AKA Sam-Uel Lang-Horne Clem-Ens
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.
Sum Ting Wong ?
sum dip shit?
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.
Duplicate
Fuck cars, toasters and cell phones. Give me some 2015 Year Of The Sheep 10 oz ingots and I'll deposit some fiat.
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.
Who actually believe's those return rates.
C'mon now.
3 weeks of daily eggs and vegetables...what an odd premium to offer on a bank account.
It does make you wonder if they're not planning on staying liquid for more than 3 weeks and 1 day, doesn't it?
I'd rather have the Spider-Man towel.
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?
BEING the master counterfeiters they are, the Chinese may be giving away Ifake Phones and even a fake Mercedes - the BAIC BJ80
How is a revese engineered Benz made in Beijing much different from one made in Bavaria?
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.
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
Be a shame if it got hacked . . .
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.
"Rainy Yuan" commenting on a currency washout?
Gotta be an alias.