Goldman Sachs maintains a "buy" rating on China Merchants Bank (03968) with a slightly lowered target price of HK$53.53.

Goldman Sachs released a research report stating that it maintains a "buy" rating for China Merchants Bank (03968), with a slight adjustment to the profit forecasts for pre-provision earnings and net profit for the years 2026 to 2028, each decreased by about 1%. The target price for H shares has been slightly reduced to HK$53.53, and the target price for A shares of China Merchants Bank (600036.SH) has been slightly reduced to RMB 54.87. The bank expects that stabilization of net interest margin and recovery of credit growth will drive a rebound in net interest income for China Merchants Bank, and wealth management business will lead to better fee income growth. The superior asset quality and sufficient existing provisions provide space for the decline in credit costs. The report stated that company management expected China Merchants Bank's revenue growth to stabilize and trend upwards in 2026 during the performance conference call for 2025. This is mainly due to the continuous reduction in the narrowing of net interest margin (expected to stabilize in the second half of 2026) and continuous improvement in fee income growth. The bank reiterated its view that China Merchants Bank's profit growth in 2026 will outperform the four major state-owned banks. Management mentioned that the increase in the non-performing loan formation rate in the fourth quarter of 2025 was mainly due to a one-time exposure to real estate risks, but the impact was limited due to sufficient provisions in the real estate industry. Looking ahead to 2026, the trend in corporate asset quality is positive, while retail asset quality will still be under pressure, but overall risks are manageable, and credit costs are expected to decrease to support better profit growth. In addition, the decrease in the core Tier 1 capital adequacy ratio is mainly due to the introduction of mid-term dividends and the impact of bond market fluctuations. Future risk-weighted asset growth is expected to be between 9% and 10%, and the payout ratio is expected to remain stable.