China Merchants Bank Co., Ltd. Unsponsored ADR Class H ((CIHKY)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call of China Merchants Bank Co., Ltd. Unsponsored ADR Class H painted a balanced picture of the company’s financial health. While the bank showcased stable core profit indicators and robust growth in wealth management and corporate loans, it also faced challenges such as decreasing net operating income and pressure on net interest margin (NIM) due to weak retail loan demand and declining payment-related income.
Stable Core Profit Indicators
The bank reported a net operating income of RMB 251.28 billion, marking a slight year-on-year decrease of 0.52%. However, this decline was less pronounced compared to the first half of the year. Net profit attributable to shareholders rose to RMB 113.7 billion, reflecting a year-on-year increase of 0.52%.
Wealth Management Business Growth
China Merchants Bank’s wealth management segment demonstrated strong growth, with net fee and commission income experiencing positive year-on-year growth for the first time in three years. Retail assets under management (AUM) increased by RMB 1.67 trillion to RMB 16.6 trillion, an 11% growth rate. Additionally, wealth management fee and commission income surged by 18% to RMB 20.67 billion.
Corporate Loan Growth
The bank’s corporate loan portfolio expanded significantly, reaching RMB 3.15 trillion, which represents a 10.01% increase compared to the previous year-end. This growth underscores the bank’s strong performance in the corporate lending sector.
Stable Asset Quality
Asset quality remained stable, with the non-performing loan (NPL) ratio at 0.94%, a slight improvement from previous levels. The NPL ratios in the property and manufacturing sectors also decreased, indicating effective risk management.
Decreasing Net Operating Income
Despite a decrease in net operating income by 0.52% year-on-year, the bank managed to narrow this decline compared to the first half, showcasing resilience in a challenging economic environment.
Pressure on NIM
The bank’s net interest margin (NIM) faced downward pressure, decreasing by 12 basis points year-on-year to 1.87%. This decline is attributed to weak demand in the retail sector and prevailing low interest rates.
Challenges in Retail Loan Growth
Retail loan growth was modest at 1.43%, reflecting insufficient effective credit demand in this segment. This poses a challenge for the bank as it seeks to stimulate growth in retail lending.
Pressure on Credit Card and Payment-Related Income
The bank experienced a decline in payment-related income, particularly from credit card transactions, which saw a 7.7% drop in transaction value during the third quarter.
Forward-Looking Guidance
Looking ahead, China Merchants Bank aims to continue its transformation into an international, comprehensive, and intelligent institution, aligning with China’s national development plans. Despite a challenging environment, the bank’s net interest income rose by 1.74% to RMB 160.04 billion, and it maintained a stable asset quality with a non-performing loan ratio of 0.94%. The bank’s strategic focus on wealth management and corporate lending is expected to drive future growth.
In summary, China Merchants Bank’s earnings call highlighted a balanced financial performance with strong growth in wealth management and corporate loans, despite facing challenges in retail loan demand and payment-related income. The bank’s forward-looking strategy aims to align with national development plans, focusing on international and comprehensive growth.