Wu Yonggang, a researcher with Guotai Junan Securities, said his calculations showed different results. He said the rate cuts would in fact narrow the interest rate spread of deposits and loans, although the negative effect could be largely offset by the reduced reserve requirement, which he estimated would pump 710 billion yuan into the banking system.

He said the effects would be positive for big banks like the Industrial and Commercial Bank of China and China Construction Bank but negative for small and medium-sized banks.

She Minhua, a CITIC Jiantou Securities analyst, said the latest rate cuts had mostly eliminated the potential for further reductions next year, and as a result, listed banks were likely to see their profits wiped out or might even experience a loss in 2009.

Bank stocks on Thursday under-performed the benchmark Shanghai stock index, which rose 1.05 percent while banks were up just 0.5 percent on average.

Wednesday's cuts were the fourth since mid-September. They were also the largest since October 1997, when the PBOC slashed the one-year rate by 1.44 percentage points to support growth amid the Asian financial crisis.

Large lenders are Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications and Postal Savings Bank of China.