China Merchants Bank Co. Ltd.

NIM will continue to be squeezed due to lower loan pricings. But this could be counterbalanced by lower credit costs with the release of the bank's excess provisions. CMB's reported NIM was down 25 basis points (bps) and its expected credit loss was down 34 bps year on year in 2023. They continued to decline 27 bps and 20 bps year on year respectively in the first quarter of 2024. Prolonged property sector weakness and emerging LGFV risks will weigh on CMB's asset quality. However, the bank's ample provision buffer and well-diversified loan portfolio should help mitigate the pressure. CMB also has reasonable collateral coverage and greater exposure to higher-tier cities, where collateral values are more resilient. In 2023, CMB's

...China Merchants Bank Co. Ltd.'s (CMB) earnings should remain resilient despite fee rate cuts and tightening interest margins. This will support capitalization. We project the bank's risk-adjusted capital (RAC) ratio at 8.3%-8.5% over 2024-2026 on the back of a return on average assets (ROAA) of about 1.3%. CMB's reported ROAA was 1.39% in 2023, well above the sector average of 0.70%. NIM will continue to be squeezed due to lower loan pricings. But this could be counterbalanced by lower credit costs with the release of the bank's excess provisions. CMB's reported NIM was down 25 basis points (bps) and its expected credit loss was down 34 bps year on year in 2023. They continued to decline 27 bps and 20 bps year on year respectively in the first quarter of 2024....

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