China Minsheng Bank Earnings: Revenue Pressure Is Less Than Peers'

We retain our fair value estimate for China Minsheng Bank, or CMBC, at CNY 3.30 per A-share (HKD 3.60 per H-share) following 2023 results. Year-on-year contraction in total revenue narrowed to 1.2% versus a 2% in the first three quarters on recovery in trading income from a low base, leading to better-than-expected net profit growth at 1.6% versus a 0.6% decline in the first three quarters. In 2023, CMBC saw less-than-peer revenue pressure and credit quality improvement, in contrast to peers that reported deteriorating retail credit quality. Net interest margin, or NIM, declined 14 basis points from 2022, but the 2-basis-point contraction from mid-2023 was milder than peers. Besides its lower mortgage exposure, we believe the mild NIM compression was attributable to tuning down asset growth while increasing allocation to higher-yield credit card and small and micro enterprise, or SME, loans. Corporate loans slid 0.7% and retail loans increased 0.7% from mid-2023. We expect this strategy will enable CMBC to deliver less than peer NIM declines in 2024.