THE latest interest rate cut is viewed as neutral overall for bank profits, analysts said yesterday.

China yesterday cut both one-year benchmark lending and deposit rates by 0.27 percentage point. The cut means the one-year deposit rate is now at 3.6 percent while the one-year lending rate falls to 6.66 percent. Except for the six-month lending rate which was cut by 0.09 percentage point to 6.03 percent, the central bank has marked down all the other rates for lending in different maturities by 0.27 percentage point.

But the long-term deposit rates were cut by a wider margin - the rate for three-year deposit accounts was cut by 0.36 percentage point and the five-year deposit rate was cut by 0.45 percentage point.

"The bigger cut on deposits than on lending showed the central government is monitoring the banking industry's profitability," said Wu Xiaoling, a Greatwall Securities Co analyst, yesterday.

The interest spread between savings of more than five years and lending rose by 0.18 percentage point to 2.07 percent to cushion the impact on banks after the latest mortgage policy, Wu said.

Banks faced a negative interest spread of 33 basis points before the rate cut. After the reduction, the spread falls to 9 basis points, giving banks some breathing space.