China Merchants Bank Co Class H ((HK:3968)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for China Merchants Bank Co Class H painted a picture of mixed performance, highlighting both achievements and challenges. While the bank celebrated significant strides in asset growth, wealth management, and maintaining asset quality, it also faced hurdles such as declining net operating income, lower capital ratios, and weak retail loan demand. Despite these challenges, the bank’s strategic focus on stable growth and asset management provides a positive outlook for the future.
Stable Core Profit Indicators
China Merchants Bank reported that its core profit indicators remained robust, with Return on Average Assets (ROAA) and Return on Average Equity (ROAE) maintained at high levels of 1.22% and 13.96%, respectively. These figures showed slight increases compared to the first half of the year, indicating a stable financial foundation.
Retail AUM Growth
The bank’s retail assets under management (AUM) reached an impressive RMB 16.6 trillion, marking an 11% growth rate compared to the end of last year. Additionally, the number of retail clients increased by 4.76%, showcasing the bank’s strong performance in attracting and retaining customers.
Wealth Management Business Growth
In a positive turn, the bank’s wealth management fee and commission income rose by 18% year-on-year, marking the first positive growth in this segment in three years. This growth underscores the bank’s successful efforts in revitalizing its wealth management business.
Stable Asset Quality
The bank maintained stable asset quality, with a slight decrease in the non-performing loan (NPL) ratio by 0.01 percentage points to 0.94%. The allowance coverage ratio stood at an impressive 405.93%, reflecting the bank’s prudent risk management practices.
Corporate Loan Growth
Corporate loans saw a significant increase of 10.01% compared to last year-end, with notable contributions from the manufacturing and power sectors. This growth highlights the bank’s strategic focus on expanding its corporate lending portfolio.
Net Operating Income Decline
Despite the positive developments, the bank faced a decline in net operating income, which decreased by 0.52% year-on-year. However, the rate of decline has narrowed compared to the first half, indicating potential stabilization.
Decreasing Capital Ratios
The bank reported decreases in its capital ratios, with the CET1 CAR, Tier 1 CAR, and total capital ratio dropping by 0.93, 1.23, and 1.46 percentage points, respectively, compared to last year-end. This decline presents a challenge in maintaining capital adequacy.
Weak Retail Loan Demand
Retail loan growth was sluggish, with only a 1.43% increase. The bank faced pressure on loan yields and insufficient effective credit demand, posing a challenge to its retail lending segment.
Interest Margin Pressure
The bank’s net interest margin decreased by 12 basis points year-on-year, although the rate of decrease has narrowed. This pressure on interest margins reflects the challenging interest rate environment.
Forward-Looking Guidance
Looking ahead, China Merchants Bank provided guidance for the first three quarters of 2025, reporting a slight decrease in net operating income to RMB 251.28 billion, while net profit attributable to shareholders increased by 0.52% to RMB 113.7 billion. The bank emphasized its focus on balancing quality, profitability, and scale amidst an uncertain external environment. Despite challenges like weak retail loan demand, the bank’s NII grew by 1.74% to RMB 160.04 billion, and wealth management services showed robust growth.
In conclusion, the earnings call for China Merchants Bank Co Class H highlighted a mixed performance, with both achievements and challenges. The bank’s strategic focus on stable growth and asset management provides a positive outlook, despite facing hurdles such as declining net operating income and weak retail loan demand. Investors and stakeholders will be keenly watching how the bank navigates these challenges while maintaining its strong performance in asset growth and wealth management.