China Citic Bank Earnings: Margin Pressure Less Than at Peers, Retail Bank Reports Solid Growth

China Citic Bank’s 2023 results were in line, with year-on-year net profit growth softening to 8% from 9% in the first half. We retain our fair value estimate of CNY 5.20 per A share/HKD 5.70 per H share. Citic outperformed joint-stock bank peers in net interest margin performance and earnings growth in 2023 owing to strong retail lending growth and stable credit quality after a four-year derisking campaign to clean up risky assets in its corporate banking segment. Unlike retail-heavy Ping An Bank, which proactively scaled down its high-yield but risky consumption and personal business loan books in 2023, Citic reported double-digit growth in these two loan categories. Though we expect the derisked corporate loan book will continue to support Citic’s asset quality in 2024, we are concerned that such strong retail loan growth may pressures its retail loan quality should the credit cycle further deteriorate in 2024.