China Merchants Bank (3968.HK): Earnings Call Addresses Three Key Questions; Reiterating Better Profit Growth View; Buy CMB-A
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Goldman Sachs reaffirms its Buy rating on China Merchants Bank, with a particular preference for the A-shares, following an earnings call where management addressed three pivotal questions regarding 2026 revenue trends, asset quality, and capital adequacy. Fourth-quarter 2025 results aligned with expectations, with both PPOP and NPAT growing 3% year-over-year. Management guided toward stable, gradually improving revenue growth in 2026, supported by a narrowing net interest margin decline that is expected to stabilize by the second half of the year. Although 2026 NIM still faces downward pressure from the May 2025 LPR cut repricing, wealth management fee income should recover, and robust asset quality with sufficient provisions may allow for lower credit costs, enabling stronger profit growth than the big four state-owned banks. Core Tier 1 capital adequacy declined due to interim dividends and bond market volatility impacting other comprehensive income. Future risk-weighted asset growth is projected at 9%–10%. Goldman Sachs trimmed its 2026–2028 PPOP and NPAT estimates by approximately 1% to reflect near-term NIM and credit card fee headwinds. Based on unchanged 2027 valuation multiples, the A-share target price is RMB 54.87, offering 39.0% upside, while the H-share target is HKD 53.53. Goldman's 2026 revenue and profit forecasts exceed Bloomberg consensus by 1% and 2%, respectively.