2.1% Fixed Deposit Rate Attracts Savers: How Langfang Bank Can Break Through Performance Decline and Risk Pressure

How can AI and Langfang Bank’s high-interest deposit strategy respond to narrowing net interest margins?

This report (chinatimes.net.cn) by journalists Zhang Meng and Lu Mengxue, Beijing

A 2.1% deposit rate has attracted many depositors’ attention.

“I compared several banks nearby, and in the end, I chose this one,” depositor Xiao Lin told reporters. She explained that Langfang Bank’s branches in Tianjin currently offer a 2.1% fixed deposit rate for three- and five-year terms. “I specifically asked, and this rate is only available at Tianjin branches; even branches in Hebei can’t match this level.”

Since March this year, small and medium-sized banks have launched a new round of deposit rate cuts, with rates above 2% becoming rare. Against the backdrop of continuous narrowing of banks’ net interest margins, Langfang Bank offering higher-than-local peers’ deposit rates in some regions has drawn market attention to its underlying strategy and sustainability.

High interest rates attract a rush of depositors

“One-year rate is 1.7%, two-year 1.9%, and three- and five-year are both 2.1%,” a branch manager at Langfang Bank in Tianjin told reporters recently.

In the context of generally declining deposit rates, this level stands out. Since March, small and medium-sized banks have initiated another round of rate cuts. Shanghai Huarui Bank’s client manager confirmed that the bank lowered fixed deposit rates in early March, with the three-year rate dropping from 2.05% to 2%, and the two-year from 2% to 1.95%. Village banks once considered “high-rate zones” also adjusted rates: Pukou Jingfa Village Bank in Nanjing lowered three- and five-year fixed deposit rates from 2.2% to 1.88%; Yunnan Yuanjiang Beiyin Village Bank cut the five-year rate from 2.2% to 1.9%.

Suddenly, fixed deposit products with rates over 2% became scarce. Social media posts about high-interest deposits surged in popularity, with many depositors transforming into “deposit special forces,” traveling across cities just to lock in relatively high rates before further cuts.

Xiao Lin calculated, “Don’t be fooled by the 2.1% versus 1.9%; for 200,000 yuan over three years, the interest difference is over a thousand yuan.”

However, behind the high rates, Langfang Bank’s own profitability pressure cannot be ignored. Its 2024 annual report shows net interest income of 3.372 billion yuan, down 19.52% from 4.19 billion yuan in 2023; net interest margin has fallen from 1.53% to 1.19%.

“Net interest margin, also called net interest spread, is an indicator of a bank’s core profitability,” a banking insider explained. According to data from the China Banking and Insurance Regulatory Commission, the net interest margin for commercial banks in Q4 2024 was 1.52%.

United Credit Ratings pointed out in a related report that in 2024, Langfang Bank promoted retail channel development and optimized its liability structure. Coupled with high household savings willingness amid economic downturn, its savings deposits maintained rapid growth. By the end of 2024, the bank’s savings deposit balance reached 167.367 billion yuan, accounting for 73.49% of total deposits, a 10.44% increase from the previous year. Notably, fixed deposits accounted for over 89% of total deposits, still a high proportion, putting pressure on its interest expense reduction.

“From the current operational situation, relying on high interest rates to attract deposits lacks sustainability and may instead deepen the bank’s operational difficulties,” said Yuan Shuai, deputy director of the Investment Department at the China Urban Development Research Institute. He warned that such practices carry layered risks, not only worsening profitability but also potentially leading to continuous losses and threatening the bank’s survival.

Performance decline and risk mitigation dilemma

Recent annual reports show that Langfang Bank’s operating pressure has been mounting.

From 2022 to 2024, its operating income was 4.963 billion, 4.563 billion, and 3.613 billion yuan respectively; net profits were 803 million, 569 million, and 243 million yuan. In 2024, both operating income and net profit dropped by over 20% and more than 57%, respectively, indicating a sharp decline in profitability.

The bank explained in its 2024 annual report: “The current economic downward pressure is significant, corporate credit risks are increasing, and the difficulty in controlling non-performing loans has risen sharply. We have increased provisioning to strengthen risk resistance, which has led to a reduction in net profit.”

But issues seem to go beyond provisioning.

Data shows that interest net income dominates Langfang Bank’s revenue structure. In 2023, interest net income was 4.19 billion yuan, accounting for 91.82% of total operating income; in 2024, it was 3.372 billion yuan, making up 93.33%. The decline of nearly 20% in interest net income directly caused overall revenue to fall.

Non-interest income also declined sharply in 2024, with fee and commission net income at 44.96 million yuan, down 60.78% year-on-year; investment net gains at 36.36 million yuan, down 83.38%. However, net gains from fair value changes increased from 4.93 million in 2023 to 152 million in 2024.

Beyond profitability, asset quality is also a concern. From 2022 to 2024, non-performing loan (NPL) ratios were 2.4%, 2.03%, and 2.44%, respectively. After a decline in 2023, the ratio increased again in 2024; provisioning coverage ratios were 156.4%, 153.19%, and 104.29%. Additionally, the concentration of loans to the largest single customer rose from 7.01% at the end of 2022 to 15.85% at the end of 2024, increasing risk exposure.

Langfang Bank stated in its annual report that in 2025, it will “optimize risk mitigation mechanisms, strengthen capital base through multiple channels, and continue to enhance non-performing asset disposal.” The United Credit Ratings report also noted that since 2025, under government initiatives, Langfang Bank has maintained significant efforts to dispose of non-performing loans, with hidden NPLs gradually cleared. By the end of March 2025, the bank had disposed of 10.701 billion yuan of NPLs, with 9.706 billion yuan transferred.

Yuan Shuai advised that banks should shift toward low-cost, stable deposit sources, such as improving service quality and customer experience to attract deposits, thereby reducing funding costs and creating room for net interest margin recovery. Meanwhile, banks must tighten lending standards, stop lending to high-risk sectors, and intensify collection of existing NPLs through debt restructuring and bulk transfers to reduce NPLs and gradually restore asset quality.

责任编辑：冯樱子 主编：张志伟