<Earnings first take> China Merchants Bank (3968 HK) FY23 preliminary results in line with expectation
What’s new:
CMB (3968 HK) announced its FY23 preliminary results on Jan 19 after market closing. Net income to shareholders increased by 6.2% y-o-y to Rmb 146.6bn, which is in line with market consensus.
- Revenue dropped by 1.6% y-o-y to Rmb 339bn. Non-interest revenue declined by 1.65% y-o-y to Rmb 124bn, accounting for 36.7% of total revenue
- Gross loan was up by 7.56% y-o-y to Rmb 6.5tr. Deposits was up by 8.22% y-o-y to Rmb 8.16tr. Loan to deposit ratio dropped from 80.3% by the end of FY22 to 79.8% by the end of FY23
- NPL ratio was down by 1bp y-o-y and q-o-q to 0.95%. NPL coverage ratio dropped from 450.79% by the end of FY22 to 437.70% by the end of FY23
- ROE showed 84bps y-o-y drop to 16.22%
Our view:
- CMB’s FY23 revenue and profit growth is in line with market expectation. NPL in FY23 was largely stable, as the company reported a lower new NPL formation ratio in property sector in 3Q23.
- Looking ahead, we expect there will be still some pressure in its revenue and earnings growth in FY24F, due to 1) capital market activities remains weak in China and the cut in bancassurance fee will negatively impact its fee income; 2) further NIM pressure from loosening monetary policy and existing mortgage rate cut; and 3) property and LGFV remain as the key sectors to watch for risks
- Despite undemanding H-share valuation of c.0.6x FY24F P/B, we maintain cautious on CMB’s performance in the current China economy cycle. TP and ratings under review.