Goldman Sachs: First quarter performance of CMB mixed, maintains "buy" rating

Goldman Sachs released a report stating that in the first quarter, the pre-provision operating profit and net profit of China Merchants Bank decreased by 4% and 2% respectively year-on-year, falling short of the bank's expectations. The performance was mainly impacted by a 4 basis point higher-than-expected decline in net interest margin and a 19% lower-than-expected investment income. Bank loans increased by 5% year-on-year, lower than the system loan growth of 7.4%. Loan provisions increased by 86% quarterly, while non-loan asset provisions decreased by 72% quarterly. The growth rate of non-performing loans exceeded the loan growth, indicating a slight increase in the formation rate of non-performing loans and challenges in asset quality. The bank believes that China Merchants Bank's performance in the first quarter was mixed, showing discipline in a possible downward cycle, such as slowing loan growth and increasing provisions for loans. However, the lower-than-expected loan growth in the first quarter suggests that loan growth will accelerate in the coming months, while the impact of tariff policies may weaken credit demand, thus deteriorating asset quality. Quarterly earnings per share declined by 2% year-on-year, and the bank needs to increase the dividend payout ratio to maintain a stable full-year dividend per share. The bank maintains a "buy" rating on China Merchants Bank, based on the bank's ability to improve shareholder returns and the potential recovery in consumer finance. The target price for H-shares is 47.62 Hong Kong dollars.