China Merchants Bank Earnings: 13.5% Increase in Dividends per Share Is a Major Surprise; Results Were in Line

We retain our fair value estimate on China Merchants Bank, or CMB, at HKD 48 per H share (CNY 45 per A share) after the in-line results, with shareholders' net profits increasing 6.2%, despite total revenue declining 1.4% from 2022. Net interest margin, or NIM, is also in line, contracting 25 basis points to 2.15% from 2022. The positive came from a surprise 13.5% rise in dividends per share, or DPS, that saw dividend payout rise to 35%, up from 33% in 2022, sending the H-share price up 4%. We believe this suggests bank leadership's confidence in its long-term growth and above-peer return on equity. This will mark 10 years of dividend progression, with compound annual growth rate at 12.2%.