China Joint-Stock Bank Earnings: NIMs Recover on Lower Funding Cost for Citic and Minsheng

We maintain our fair value estimates for China Citic Bank and China Minsheng Bank at HKD 5.7 and 3.6 per H share respectively, as their results align with our full-year net profit of 1% growth and a 9% decline respectively for 2024. Both banks' H shares remain undervalued, trading at a 12% discount to our fair values, with valuations at 0.4 times and 0.2 times 2024 book and dividend yields of 5% and 6%, respectively. Although Citic and Minsheng led their peers in NIM recovery, we are cautious about their ability to keep up this outperformance in 2025. Their NIM gains largely stem from above-peer exposure to corporate demand deposits, aided by regulatory restrictions on high-interest deposit gathering since April 2024.