China Merchants Bank 3968

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Former China Merchants Bank president Tian Huiyu under investigation for graft

Based in the southern technology hub of Shenzhen, has benefited from its focus on retail banking.

Even after this week’s drop of 13 percent in Hong Kong, the bank still trades at about 1.5 times its book value, more than double the average for its listed peers.

Merchants Bank on Friday reported a 12.5 percent increase in net income in the first quarter to 36 billion yuan (US$5.5 billion) and reiterated that its operations are normal.

Still, its non-performing ratio of real estate loans rose to 2.57 percent as of March, up 1.18 percentage points from the end of 2021.

Source: Bloomberg

https://www.thestandard.com.hk/breaking ... -for-graft

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Macquarie Lowers CM BANK (03968.HK) TP to $41, Rating Underperform

CM BANK (03968.HK) posted 1Q22 net profit of about RMB36 billion (up 12.5% YoY), trailing street consensus.

The lender began to trim reserves in support of earnings, said Macquarie, assuming CM BANK's adjusted ROE to retreat structurally after its developer lending business exit.

The bank's asset quality may deteriorate further. The NPL ratio climbed from 0.91% in 4Q21 to 0.94% in 1Q22, but the broad-based NPL ratio rose from 1.75% in 4Q21 to 1.98% in 1Q22.

Meanwhile, loan provisions expanded by 80% YoY.

Still, the 1Q22 coverage ratio fell to 463% for NPLs and 229% for broad-based NPLs, down from 484% and 252% last year.

Related News: HSBC Global Research Cuts CM BANK (03968.HK) TP to $53.2, Rating Hold

Overall, the stock was retained at Underperform, with target price cut from $45 to $41 given a lower sustainable ROE.

Source: AAStocks Financial News

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Brokers│Views

CICC│WM biz affected by mkt volatility; cuts 2022-23 turnover, earnings forecasts

JPMorgan│mgmt probe likely has minimal impact on CMB's fundamentals

Morgan Stanley│strong retail network conducive to healthy profit growth

CLSA│QoQ result dented by capital mkt weakness, higher asset risk

Goldman Sachs│result still solid

Nomura│1Q NP rise basically in line; ex-governor probe adds uncertainty

UBS│investors concerned about CMB's mgmt shuffle

Citigroup│1Q result mixed; handling fee, NPL rise weak

CCB International│1Q biz running as expected

Daiwa│loan growth eases amid plague; deposit rise, NIM resilient

HSBC Global Research│credit card, consumption loan, WM growth momentum wanes, asset quality worsens

BofA Securities│1Q earnings growth misses; downside pressure on shr price

Macquarie│1Q earnings growth misses; asset quality may worsen further

Related News: Nomura Chops CM BANK (03968.HK) TP to $75.78, Rating Buy

Source: AAStocks Financial News

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China Merchants Bank (3968 HK)
1Q22: Results In Line; Expect Substantial Volatility Before New President Is Appointed

CMB’s net profit climbed 12.5% yoy, with NIM continuing to be affected by the macro
environment.

Although the NPL ratio climbed 3bp, the impact from the property sector
was lessened as CMB's property sector exposure decreased by 3bp qoq of total assets.

There will not be any changes for now as the interim president will not make any
changes.

Maintain BUY on CMB with a target price of HK$82.90.

Source: UOBKH

https://research.uobkayhian.com/content ... f2527af84f

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China Merchants Bank – 1Q22: Results in line; expect substantial volatility before new president is appointed.
(3968 HK/BUY/HK$46.70/Target: HK$82.90)

CMB’s net profit climbed 12.5% yoy, with NIM continuing to be affected by the macro environment.

Although the NPL ratio climbed 3bp, the impact from the property sector was lessened as CMB's property sector exposure decreased by 3bp qoq of total assets.

There will not be any changes for now as the interim president will not make any changes. Maintain BUY on CMB with a target price of HK$82.90.

Source: DBS

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Moving to stricter NPL recognition standards

Stricter NPL recognition standards saw 1Q22 NPL recognition ratio rise to a
record high of 171% of loans that are >90 days overdue (Fig 3).

1Q22 group NPL ratio rose 3bp qoq, although the NPL ratio was flat qoq, due
to stricter regulatory classification about leasing NPLs.

1Q22 net profit growth was 12.5% yoy, with 1Q22 ROE falling yoy due in part
to seasonality (1Q ROE has fallen in eight of the past ten years (Fig 2)).

Reiterate Add rating. Still top China bank pick. TP unchanged at HK$84.1.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 4733F4C89A

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CM BANK Chair Miao Jianmin: Co. Governance Unaffected by President Change

Miao Jianmin, Chairman of both China Merchants Group and CM BANK (03968.HK) convened a panel discussion at the group's headquarters yesterday (26 April), according to the official website.

At which, Miao stressed the intact corporate governance of CM BANK despite the change of President, adding the Board will provide unwavering support for the bank.

Related News - Macquarie Lowers CM BANK (03968.HK) TP to $41, Rating Underperform

Source: AAStocks Financial News

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BNP Paribas: CMB Undervalued by Mkt, Still Sector Top Pick with Strong Fundamentals Intact

BNP Paribas said in its report that the bank's 1Q22 results reflected the repercussions of market turmoil and pandemic control of China. Yet, the broker deemed the bank's fundamentals as still strong.

BNP Paribas reiterated the rating on CM BANK at Buy, and lowered its fair value estimate to $70 from $72 to factor in slower fee income growth assumption in 2022.

The company's revenue and shareholders' net profit growth were expected to ease to 8.5% and 12.5% YoY.

Related News - CLSA Axes CM BANK (03968.HK) TP to $84, Rating Buy

In the broker's view, CMB's H shares were greatly undervalued, trading at below 1.2 times forward P/B.

Nonetheless, the bank is still the top pick of the broker for Chinese banks. BNP Paribas assumed that the headwinds including weakening credit demands and fading fee income growth are temporary.

Source: AAStocks Financial News

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JPM Drops CM BANK (03968.HK) TP to $80, Rating Overweight

JPMorgan maintained CM BANK (03968.HK) at Overweight and cut its target price from $81 to $80 following its ex-dividend date, with unchanged earnings estimates.

The lender's 2021 retail deposits were significantly above its peers' average level.

Profit contribution from retail business had been rising constantly.

Its PPoP/average assets was the highest among fellows, providing an earnings buffer in the future.

Source: AAStocks Financial News

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China Merchants Bank
Time to address misconceptions

CMB’s >10% share price fall creates a buying opportunity. We think investors are focused on the wrong metrics in assessing impact of mortgage defaults.

We estimate a negligible (1.8%) impact of projected mortgage defaults on\FY22F net profit, even before the offsetting via sizable provisioning buffers.

This is based on what we see as a worst-case assumption (20%) of defaults by both developers and mortgagees and assumes no government support.

We also take comfort from low long-term mortgage loss rates across Asiapac.

CMB remains our top pick with an Add call and unchanged HK$84.1 TP.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 3BA0F32BD4