In Q4 last year, China Merchants Bank reported a net profit of 35.207 billion yuan, with a quarter-on-quarter decrease of 3 basis points in net interest margin, and plans to distribute a dividend of 2 yuan per share | Financial Report Insights

Against the backdrop of a complex and ever-changing external macroeconomic environment, China Merchants Bank achieved steady growth in 2024. The net interest yield (net interest margin) in the fourth quarter of 2024 decreased by 3 basis points quarter-on-quarter to 1.94%, with net profit for 2024 increasing by 1.22% year-on-year, and the net interest margin at 1.98%, down 17 basis points year-on-year.

On Tuesday evening, China Merchants Bank released its financial report for the fourth quarter and the entire year of 2024. Specifically:

Operating income: The operating income for the fourth quarter was 84.779 billion yuan, with total operating income for 2024 at 337.488 billion yuan, a slight decrease of 0.48% year-on-year;

Net profit attributable to shareholders: The net profit for the fourth quarter was 35.207 billion yuan, a decrease of approximately 8.42% quarter-on-quarter; the annual net profit attributable to shareholders was 148.391 billion yuan, an increase of 1.22% year-on-year;

Net cash flow: The fourth quarter net cash flow was 159.79 billion yuan, a decrease of 19.263 billion yuan compared to the third quarter;

Scale breakthrough: Total assets exceeded 12 trillion yuan, growing by 10.19%; customer deposits exceeded 9 trillion yuan, growing by 11.54%;

Asset quality remained stable: The non-performing loan ratio was 0.95%, unchanged from the previous year; the provision coverage ratio was 411.98%, maintaining a good level;

Accelerated digital transformation: Investment in information technology was 13.350 billion yuan, accounting for 4.37% of operating income, and the first open-source financial model with 100 billion parameters in the domestic banking industry was released;

China Merchants Bank pointed out in the report that the main reasons for the decline in net interest margin are as follows:

On the asset side, first, due to the reduction in the interest rates of existing housing loans from the previous year, the decline in the Loan Prime Rate (LPR), and insufficient effective credit demand, the pricing of newly issued loans continued to decline, leading to a further decrease in the average yield on loans; second, the central market interest rate continued to decline, driving down the yields of market-based assets such as bond investments, interbank lending, and bill discounting.

On the liability side, the growth of low-cost demand deposits faced pressure, and the trend of deposit termization continued, which somewhat weakened the effect of the market-based reduction in deposit rates, maintaining a relatively rigid cost of liabilities.

In addition, the company plans to distribute a cash dividend of 2 yuan per share (tax included). The board of directors decided to distribute cash dividends of no less than 30% of the net profit attributable to shareholders of 142.81 billion yuan. The total cash dividend to be distributed is approximately 50.440 billion yuan (tax included).

Balanced Development of the "Four Major Segments"

In 2024, China Merchants Bank achieved operating income of 337.488 billion yuan, a slight decrease of 0.48% year-on-year. Among them:

• Net interest income: 211.277 billion yuan, a year-on-year decrease of 1.58%, accounting for 62.60% of total income
• Non-interest net income: CNY 126.211 billion, a year-on-year increase of 1.41%, accounting for 37.40% of total income.

Among them, net fee and commission income was CNY 72.094 billion, a year-on-year decrease of 14.28%; other net income was CNY 54.117 billion, a year-on-year increase of 34.13%, mainly due to increased bond investment income.

From a business perspective, China Merchants Bank's "retail-oriented, balanced and coordinated development of four major sectors" pattern is becoming clearer. Retail finance contributed 58.32% of revenue, with net interest income increasing by 8.64% year-on-year, fully playing the role of a "ballast stone"; the total number of retail customers reached 210 million, managing nearly CNY 15 trillion in total retail customer assets (AUM).

In terms of corporate financial services, the total number of customers was 3.1664 million, an increase of 12.26% compared to the end of the previous year; the total loan amount was CNY 2,590.409 billion, an increase of 11.58% compared to the end of the previous year; the total customer financing amount (FPA) balance was CNY 6,223.199 billion.

Strategic Focus Shift: From "Online China Merchants Bank" to "Smart China Merchants Bank"

China Merchants Bank is accelerating its transformation from "Online China Merchants Bank" to "Smart China Merchants Bank." During the reporting period, the bank invested CNY 13.350 billion in information technology, accounting for 4.37% of revenue, with R&D personnel reaching 10,900.

In terms of AI applications, China Merchants Bank launched the first open-source financial large model with 100 billion parameters in the domestic banking industry, named "Yi Zhao," building a digital foundation of "cloud + AI + middle platform," with over 120 application scenarios for large models across the bank.

It is noteworthy that China Merchants Bank has deeply integrated AI technology into business scenarios such as customer service, risk management, and operational management. The AI smart assistant "Xiao Zhao" has upgraded from a preset service-oriented wealth assistant to a "listening and speaking" banking assistant.

The monthly active users of the China Merchants Bank App and the Palm Life App reached 123 million, while the number of monthly active customers in wholesale online channels reached 1.9494 million, showing significant results in digital transformation.

Refined Management Under Net Interest Margin Pressure

The main challenge facing China Merchants Bank is the continuous narrowing of the net interest margin. During the reporting period, the net interest margin was 1.98%, a year-on-year decrease of 17 basis points. This was mainly influenced by three factors: first, the continuous decline in loan pricing; second, the downward trend of the market interest rate center; third, the continuation of the trend towards time deposits. In the fourth quarter, the net interest margin has dropped to 1.94%, a decrease of 3 basis points quarter-on-quarter, and the downward pressure on the net interest margin is expected to continue in the short term.

Looking ahead to 2025, China Merchants Bank will continue to practice the dynamic balanced development concept of "quality, efficiency, and scale," focusing on advancing four areas of work:

First, accelerate digital transformation, empowering business development with financial technology represented by large models; second, continue to consolidate retail financial characteristics, further enhancing asset management and wealth management capabilities; third, strengthen risk management, especially in key areas such as real estate and local government debt; fourth, optimize the asset-liability structure to cope with the interest rate decline cycle