China Merchants Bank says it’s “challenging” to achieve Q1 earnings growth

The bank is bracing for a margin squeeze and guided for tepid fee income.

China Merchants Bank (CMB) has warned that it will be “challenging” to achieve positive earnings growth in Q1.

The bank is bracing for a margin squeeze and guided for tepid fee income.

CMB’s management expects the industry to continue to face declining loan yields in 2024 due to a lack of credit demand which will lead to pricing competition, and a 25 basis point loan prime rate (LPR) cut in February. 

The bank expects net interest margin (NIM) pressure to be most severe in Q1. However, it also suggested that NIM will likely bottom by the end-2024.

ALSO READ: Hong Kong’s wealthy plan to spend HK$870,000 in 2024 travels

“Given the current challenging environment, we believe that CMB will continue to optimise its asset allocation by promoting steady loan growth and increasing the allocation of bond investments in light of interest rate trends and lower reserve requirement ratio after several cuts,” UOB Kay Hian analyst Kenny Lim Yong Hui said.

“Management hinted that it will be challenging for CMB to maintain positive earnings growth in Q1 2024 as the impact of several policies last year will be fully reflected in this quarter,” Lim added.

The bank’s net fee income declined by 10.8% in 2023 due to regulatory guidance on fee rate cut and sluggish wealth management business. Total assets under management (AUM) from retail customers exceeded RMB13t with a 9.8% YoY growth.