China Merchants Bank Earnings: Unchanged Dividend Payout, Rising Retail Loan Risks Trigger Selling

We maintain our HKD 50/CNY 47 fair value estimate for China Merchants Bank. The shares fell 5.5% on March 26 after the earnings release but remain fairly valued, in our view. We think the lack of an increase in the bank’s dividend payout and growing retail loan risks may have somewhat disappointed investors, However, CMB is up 21% year to date and is the top-performing China bank that we cover, so some selling may not be too surprising. We would wait for a more attractive entry point before buying.