Citi: CITIC BANK (00998) Delivers Solid Q3 Results Benefiting from Improved Cost Efficiency; Profit Growth Trend Outperforms Management Guidance

Citi issued a research report stating that CITIC BANK (00998) delivered solid third-quarter results benefiting from improved cost efficiency, with its profit growth trend outperforming management guidance; the bank maintains a "Buy" rating with a target price of HK$9.78. The bank noted that CITIC BANK's pre-provision operating profit for the first nine months rose 7.2% year-on-year to RMB117.7 billion, while profit grew 3.6% year-on-year to RMB55.3 billion, equivalent to 76% of full-year 2026 market consensus. Third-quarter pre-provision operating profit grew 10.4% year-on-year (versus 4.7% year-on-year growth in the second quarter), benefiting from strong trading gains off a low base and improved cost efficiency; third-quarter profit grew 4.6% year-on-year (versus 3.2% year-on-year growth in the second quarter), with the slower pace mainly due to higher credit costs. Third-quarter return on assets was flat year-on-year and return on equity fell 8 basis points year-on-year, to 0.68% and 9.4%, respectively. On positive factors, the bank noted that third-quarter loan growth was resilient, down 0.8% quarter-on-quarter and up 3.7% year-on-year; deposits rose 1.3% quarter-on-quarter and 4.3% year-on-year, with the loan-to-deposit ratio down 1.9 percentage points quarter-on-quarter to 93.3%. Third-quarter trading gains rose 56.9% year-on-year, accounting for 13.4% of revenue; the cost-to-income ratio fell 4.2 percentage points year-on-year to 29.4%, with operating expenses down 9.2% year-on-year. On negative factors, the bank estimated that net interest margin fell 7 basis points quarter-on-quarter to 1.56%; third-quarter fee income fell 6.4% year-on-year; the non-performing loan ratio rose 0.1 basis point quarter-on-quarter to 1.15%, credit costs were 1.19% (up 14 basis points year-on-year), and the non-performing loan provision coverage ratio was 201.9%. The bank believes that third-quarter pre-provision operating profit growth was above its expectations, while profit growth was broadly in line with market consensus. Looking ahead, the bank believes CITIC BANK has high visibility to outperform management's guidance of approximately 3% profit growth for 2026 (up 3.6% year-on-year in the first nine months). In addition, a potential listing of Yangtze Memory Technologies Holdings in the fourth quarter of 2026 could bring additional room for profit upgrades, as CITIC BANK holds approximately 4% to 5% pre-IPO equity.