Company Reports

We will discontinue analyst coverage of China Minsheng Bank on or about Nov. 30, 2025.

China Minsheng Bank saw first-half revenue rise 7.8% year on year. However, net profit declined by 4.9%, mainly due to a 26.7% surge in credit impairment costs.

China will reinstate a 6% value-added tax on interest income from treasury bills, local government bonds, and financial institution notes issued after Aug. 8. These had been exempt since 2016.

We update our cost of equity assumptions for China Minsheng Bank to reflect a combination of recent industry developments, including weaker-than-expected year-to-date loan growth, a modest May interest rate cut, and policies to curb pricing competition among banks.

China Minsheng Banking Corp.'s credit quality has gradually improved after years of restructuring but has remained under pressure amid slowing economic growth. The bank once led in China’s micro- and small-enterprise financing market. The fragility of small private enterprises has translated into a painful business restructuring for CMBC over the past few years. This multiyear restructuring and derisking has decreased the nonperforming loan ratio and lowered the bad-debt formation rate.

China Minsheng Banking Corporation's credit quality has gradually improved after years of restructuring, but has remained under pressure amid slowing economic growth. The bank once led in China’s micro- and small-enterprise financing market. The fragility of small private enterprises has translated into a painful business restructuring for CMBC over the past few years. CMBC's multiyear restructuring and derisking have declined the nonperforming loan ratio and lowered the bad debt formation rate.

China Minsheng Banking's first-quarter revenue grew by 7.4%, while net profit declined by 5.1% year on year.

China Minsheng Banking Corporation's credit risk has gradually improved after years of restructuring. The bank once led in China’s micro- and small-enterprise financing market. The fragility of small private enterprises has translated into a painful business restructuring for CMBC over the past few years. CMBC's multiyear restructuring and derisking have declined the nonperforming loan ratio and lowered the bad debt formation rate.

We maintain our fair value estimates for China Citic Bank, China Industrial Bank, or CIB, and China Minsheng Bank at HKD 5.90, CNY 18.50, and HKD 3.60, respectively, following their in-line 2024 results. With 5.5% to 6.5% dividend yields and trading at 0.5 times book value for Citic and CIB and 0.3 times book value for Minsheng, we think these banks are fairly valued after their average 10% year-to-date share price gain. Citic and CIB reported positive surprises, with dividend per share increasing 9% and 2%, respectively, outpacing their net profit growth of 2% and flat. However, Minsheng’s dividend per share contracted by 11%, slightly more than its 10% net profit decline. We expect the payout ratio to remain above 30% in 2025, as encouraged by the regulator, and the earnings outlook to stay positive.

We maintain our fair value estimates for six Chinese banks—Bank of Communications, or BOCOM, Postal Savings Bank of China, or PSBC, China Minsheng Bank, or Minsheng, China Industrial Bank, or CIB, Ping An Bank, or PAB, and Bank of Ningbo, or BONB.

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.

We retain fair value estimates for Bank of Communications, or BoCom, at HKD 6.0, China Merchants Bank, or CMB, at HKD 48, China Citic Bank, or Citic, at HKD 5.7, and China Minsheng Bank, or CMBC, at HKD 3.6 per H share. For Bank of Ningbo, or BONB, the FVE is CNY 27 per A share. The banks' interim results aligned with our expectations for net profit growth ranging from flat to low single digits in 2024. H shares of these banks appear undervalued, trading between 0.2 times-0.7 times 2024 book value, with attractive dividend yields of 6.5%-8.5%, except for BONB, with 3% dividend yield in A stock market. Despite weak net interest margin, or NIM, for CMB, we favor it due to its superior return on equity, steady dividends, and upside potential if consumer sentiment in China recovers.

Driven by improved investor sentiment for China banks with stable dividend payments and a historic property rescue package introduced in May, the Hang Seng Mainland Banks Index rallied over 20% in the second quarter. But it pulled back sharply on profit-taking and investors’ concerns that the easing measures were not sufficient to turn around struggling property sales. H-shares of most China banks remain undervalued, with 2024 price/book modestly increasing to 0.2-0.5 times. Dividend yields remain attractive at 6%-8%. With A-share counterparts trading at a 35% premium to H-shares on average, we expect the regulators’ push for higher and more regular dividend payouts, as well as the expansion of eligible exchange-traded funds on Stock Connect, should gradually narrow the valuation gap for Chinese dual-listed banks. Amid sluggish economic growth in China with no major recovery in property sales and consumer spending anticipated in 2024, we prefer defensive state-owned banks, including China Construction Bank, or CCB, and Industrial and Commercial Bank of China, or ICBC, and leading retail-focused bank China Merchants Bank for stable dividends, strong capital returns, and better earnings visibility.

China Merchants Bank, or CMB, and China Minsheng Bank, or CMBC, reported a deeper year-on-year decline in first-quarter revenue of 5% and 7% versus the 2% and 1% decline in 2023. China Citic Bank’s results were stronger than expected, with revenue increasing 5% year on year, driven by stronger-than-expected growth in fee and investment income, which benefited from falling interest rates. The net profit trend weakened further, with net profit contracting 2% and 6% for CMB and CMBC, respectively, and increasing 0.4% for Citic, year on year.

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.

China Minsheng Banking Corp.'s credit risk has showed gradual improvement after years of restructuring. The bank was once a leader in China’s micro- and small-enterprise, or MSE, financing market. The fragility of small private enterprises translated to a painful business restructuring for CMBC over the past few years. CMBC's multiyear restructuring and derisking translated to declines in the nonperforming loan ratio and lower bad debt formation rate.

Bank of China, or BOC, China Minsheng Bank, or CMBC, and Bank of Ningbo, or BONB’s cumulative nine-month net profit growths were largely in line. We maintain our fair value estimates of HKD 3.5 per H share (CNY 3.1 per A share) for BOC, HKD 3.6 per H share (CNY 3.3 per A share) for CMBC, and CNY 32 per A share for BONB. The first nine-month results reflect less net interest margin, or NIM, pressures than peers, which contracted 13, 14, and 10 basis points, respectively, for BOC, CMBC, and BONB. BOC’s NIM performance was slightly stronger than expected, only declining 3 basis points from the first half’s level. We suspect this was mainly attributable to the rising NIM trend as seen in its subsidiary, BOC Hong Kong, which reported a 36-basis-point year-on-year increase for the first nine months, with third-quarter NIM further increased 10 basis points from the second quarter. We expect BOC Hong Kong’s favorable NIM trend to continue to buffer against downward pressures in BOC’s domestic RMB business in 2023 and the first half of 2024. But the benefit should taper off from second quarter of 2024 onward on higher base, rising deposit competition, and falling rates if the Fed starts cutting rates.

China Minsheng Banking Corp's, or CMBC’s, first-half revenue and net profits declined 3.6% and 3.5% year on year. The bank was unable to keep positive first-quarter 2023 momentum into the second quarter. Overall, we think the underlying trends were anticipated, and we retain our fair value estimate for CMBC at CNY 3.30 per A-share and HKD 3.60 per H-share. CMBC H-shares are trading at a sharp discount to A-shares as mainland China investors are anticipating a strong recovery off a low base with CMBC completing its three-year asset clean-up and restructuring in 2022, but we expect this rebound is likely to be muted as mounting industrywide challenges indicates higher-than-peer revenue pressure for CMBC. While we continue to see H-shares as undervalued, we think the below-peers asset quality and loan growth will continue to weigh on its share price in the near term.

Large Chinese banks will release 2023 interim results in late August. We expect that stabilized loan yields after the first-quarter loan repricing, mild consumption recovery, a favorable base effect, and a generally benign credit quality outlook supported by government policies will translate to improved second-quarter growth in both revenue and net profits compared with the first quarter. We expect second-quarter net profit growth to increase by 2 or 5 percentage points to 4% to 9% for six state-owned enterprises from the first quarter’s level, primarily driven by higher revenue growth and lower credit costs.

The Hang Seng Mainland Banks Index has declined 11% from its recent peak in early May. We attribute the decline to increasing concerns about downward pressure on banks’ net interest margins, or NIMs, and growing risks related to debts of local government financing vehicles, or LGFVs, amid a weak economic recovery and struggling land sales. We believe SOE banks have smaller exposures to LGFV debt and that their credit quality is better than peers given strong bargaining power to implement prudent borrower selection. Monetary and fiscal easing and the government’s strong support for troubled regional banks also limit systemic risks, in our view. That said, we believe the ongoing LGFV loan restructuring is likely to weigh on banks’ NIMs and the classification of restructured loans as special-mentioned loans will also increase provision expenses for banks. We maintain our fair value estimates for Chinese banks as we already factored in a NIM reduction of 10-25 basis points this year and expect credit costs to trend in line with our existing forecasts.