Company Reports

Citic Bank's second-quarter net profit grew 3%, driven by 4% growth in interest income despite a 3% decline in noninterest income. The interim dividend rose 8% to CNY 0.20 per share, with the payout ratio increasing to 32% from 30%.

Corporate banking remains China Citic Bank's flagship franchise, anchored by a robust SOE customer base leveraging its parent Citic Group—one of China's largest state conglomerates spanning finance, real estate, infrastructure, energy, and manufacturing. Serving nearly 700,000 corporate clients, the bank specializes in trade finance, cash management, and custody services.

The Hang Seng Mainland Banks Index has outperformed the broader market by 9% year to date in 2026 despite a sharp deceleration in industry loan growth.

Corporate banking remains China Citic Bank's flagship franchise, anchored by a robust SOE customer base leveraging its parent Citic Group—one of China's largest state conglomerates spanning finance, real estate, infrastructure, energy, and manufacturing. Serving nearly 700,000 corporate clients, the bank specializes in trade finance, cash management, and custody services.

China Citic Bank's first-quarter revenue rose 5% year over year, with interest income and fee income increasing 2% and 7%, respectively. Net profit grew 3%, despite a 12% rise in provisioning expense.

Corporate banking remains China Citic Bank's flagship franchise, anchored by a robust SOE customer base leveraging its parent Citic Group—one of China's largest state conglomerates spanning finance, real estate, infrastructure, energy, and manufacturing. Serving nearly 700,000 corporate clients, the bank specializes in trade finance, cash management, and custody services.

Lower credit costs and operating expenses offset a 0.5% year-on-year decline in China Citic Bank's revenue, leading to 3% growth in 2025 net profit. Dividend per share rose 7% on higher payout ratio to 31.75% from 30.5% in 2025.

Industrial and Commercial Bank of China held an Investor Day on Nov. 26, highlighting recent trends in net interest margin, or NIM, demand from corporate and inclusive finance sectors, and potential in the overseas banking segment.

China Citic Bank's interim revenue declined by 3% year on year. However, net profit increased by 2.8%, thanks to a significant reduction in credit costs and well-contained expenses in the period. A 2% rise in the interim dividend was proposed.

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 Citic 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.

Corporate banking is China Citic Bank's flagship business, which boasts a solid customer base of large-scale state-owned enterprises. This is underpinned by its strong connection with its parent China Citic Group, one of the largest SOE conglomerates, with businesses covering financial, real estate, infrastructure, energy, resources, manufacturing, and construction. Serving nearly 700,000 corporate customers, the bank specializes in trade finance, cash management, and custodian services.

Corporate banking is China Citic Bank's flagship business, which boasts a solid customer base of large-scale state-owned enterprises. This is underpinned by its strong connection with its parent China Citic Group, one of the largest SOE conglomerates, with businesses covering financial, real estate, infrastructure, energy, resources, manufacturing, and construction. Serving nearly 700,000 corporate customers, the bank specializes in trade finance, cash management, and custodian services.

China Citic Bank's first-quarter revenue fell 3.7% year on year, but net profit increased by 1.7%.

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 raise our fair value estimates for select China banks after revisiting key model assumptions. Recent industry developments indicate improved prospects for net interest margins, or NIMs, and corporate credit quality. Our respective fair values for Industrial and Commercial Bank of China, or ICBC, China Construction Bank, or CCB, Agricultural Bank of China, or ABC, Bank of China, or BOC, China Merchants Bank, or CMB, and China Citic Bank, or CITIC, rise by 4% to 15%, to HKD 6.1, HKD 7.6, HKD 4.8, HKD 4, HKD 50, and HKD 6.2.

Corporate banking is China Citic Bank's flagship business, which boasts a solid customer base of large-scale state-owned enterprises. This is underpinned by its strong connection with its parent China Citic Group, one of the largest SOE conglomerates, with businesses covering financial, real estate, infrastructure, energy, resources, manufacturing, and construction. Serving nearly 700,000 corporate customers, the bank specializes in trade finance, cash management, and custodian services.

Corporate banking is China Citic Bank's flagship business, which boasts a solid customer base of large-scale state-owned enterprises. This is underpinned by its strong connection with its parent China Citic Group, one of the largest SOE conglomerates, with businesses covering financial, real estate, infrastructure, energy, resources, manufacturing, and construction. Serving nearly 700,000 corporate customers, the bank specializes in trade finance, cash management, and custodian services.

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.