"King of Retail" China Merchants Bank releases Q1 report: Net interest income increases, investment contribution stabilizes the situation

On the evening of April 29, China Merchants Bank, known as the "King of Retail," disclosed its Q1 2025 financial report.

The quarterly report shows that the bank exhibited the operational characteristics of a retail king during the quarter. In terms of the most important net interest income, the bank achieved a relatively valuable positive growth compared to its peers.

At the same time, affected by market fluctuations, the bank's non-interest income faced some pressure. Among these, the contribution from investment income remained prominent, while the fair value changes were significantly under pressure, leading to slight adjustments in revenue and net profit.

However, in terms of asset quality and investment return indicators, China Merchants Bank still ranks among the top in the entire banking sector.

The annualized average return on average assets (ROAA) attributable to shareholders of China Merchants Bank and the annualized average return on equity (ROAE) attributable to common shareholders of China Merchants Bank were 1.21% and 14.13%, respectively. These two indicators reflecting operational efficiency are significantly higher than those of peers with similar or larger scales.

Revenue and Net Profit Basically Stable

From January to March 2025, facing significant challenges in the operating environment, China Merchants Bank achieved operating income of 83.751 billion yuan and net profit attributable to the bank's shareholders of 37.286 billion yuan, showing a slight year-on-year decline.

Among these, net interest income reached 52.996 billion yuan, a year-on-year increase of 1.92%; non-interest net income was 30.755 billion yuan, a year-on-year decrease of 10.64%.

Additionally, the annualized average return on average assets (ROAA) attributable to shareholders of China Merchants Bank and the annualized average return on equity (ROAE) attributable to common shareholders of China Merchants Bank were 1.21% and 14.13%, respectively, down 0.14 percentage points and 1.95 percentage points year-on-year.

Significant Effect of Volume Supplementing Price

How did China Merchants Bank achieve positive growth in net interest income?

The answer lies in the management of interest rate spreads and the continuous increase in deposit and loan scales.

In terms of the "price" of interest income, as previously anticipated by the management, the downward trend of China Merchants Bank's net interest margin has significantly slowed.

From January to March 2025, the net interest margin of China Merchants Bank was 1.82%, and the net interest yield was 1.91%, down 8 basis points and 11 basis points year-on-year, and down 1 basis point and 3 basis points quarter-on-quarter, respectively. This figure is relatively prominent among peers.

This is largely related to the bank's continuous efforts to seize the opportunities of interest rate marketization adjustments to steadily improve deposit costs, partially offsetting the impact of declining asset yields.

In terms of "volume," by the end of the first quarter, China Merchants Bank's retail loans amounted to 3.66 trillion yuan, an increase of 13.953 billion yuan compared to the end of the previous year, with a growth rate of 0.38%. This is mainly due to the gradual recovery of household consumption in the first quarter, adhering to the principle of prudent stability, and further enhancing the comprehensive service level for retail customers to promote the stable operation of retail loans; The company's loans amounted to 3.05 trillion yuan, an increase of 185.971 billion yuan compared to the end of the previous year, with a growth rate of 6.49%. This is mainly due to the continuous improvement of the organizational capability of high-quality corporate assets and the ongoing enhancement of service quality and efficiency for the real economy.

With the joint efforts of volume and price, China Merchants Bank's net interest income has also increased year-on-year.

Decline in Bond and Fund Investments Affects Non-Interest Income

From January to March 2025, China Merchants Bank achieved a non-interest net income of 30.755 billion yuan, with its proportion in operating income adjusted to 36.72%.

In the non-interest net income, net fee and commission income was 19.696 billion yuan, and other net income was 11.059 billion yuan, both of which have been adjusted downwards. It is reported that this is mainly due to the impact of rising market interest rates, leading to a decline in the fair value of bond and fund investments.

Asset Quality Remains Stable

The asset quality indicators that reflect China Merchants Bank's management capability remain at a good level.

As of the end of the first quarter, China Merchants Bank's total assets were 12.53 trillion yuan, an increase of 3.11% compared to the end of the previous year; total loans and advances were 7.13 trillion yuan, an increase of 3.44%; total liabilities were 11.28 trillion yuan, an increase of 3.27%; and total customer deposits were 9.32 billion yuan, an increase of 2.45%.

During the same period, the non-performing loan balance of China Merchants Bank was 66.743 billion yuan, an increase of 1.133 billion yuan compared to the end of the previous year; the non-performing loan ratio was 0.94%, a decrease of 0.01 percentage points compared to the end of the previous year; the group's provision coverage ratio was 410.03%, a decrease of 1.95 percentage points compared to the end of the previous year; and the loan provision ratio was 3.84%, a decrease of 0.08 percentage points compared to the end of the previous year, indicating stable asset quality.

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