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<Research>Citi Prefers CMB in ST; Buying Opportunity May Present if 6 Key CN Banks Overcorrect
Recommend 40 Positive 71 Negative 37 |
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In 4Q24, the majority of Chinese banks covered by Citi, excluding Ping An Bank (000001.SZ) and MINSHENG BANK (01988.HK), posted impressive net profit growth. Among them, CM BANK (03968.HK) manifested the strongest YoY PPOP growth at 13.8%, while Changshu Bank (601128.SH) was the weakest, declining 10.9% YoY. In terms of profit growth, CQRC BANK (03618.HK) led with a 27.2% YoY hike, while Ping An Bank trailed behind with a 29.9% YoY drop. The 4Q24 results of most covered banks aligned with expectations, with ABC (01288.HK), Industrial Bank (601166.SH), and CQRC BANK beating, whereas Ping An Bank and MINSHENG BANK fell short. Citi expressed a short-term preference for CMB, noting that capital restructuring among the six major Chinese banks could lead to equity dilution ranging from 4% to 17%, aligning their dividend yields with CMB’s A-shares and H-shares at 4.6% and 4.7%, respectively. In the absence of national service risks, CMB could attract capital rotation and outperform the broader market. However, Citi added that if the share prices of the six major banks overcorrect, pushing their dividend yields to attractive levels, a buying opportunity may present. The broker anticipated that the stock prices of these major banks will remain underpinned by several factors: (1) the national team may purchase large-cap A-share bank stocks with significant index weightings to stabilize market indices; (2) large state-owned insurers/ mutual funds are required to invest 30% of “new premiums” in A-shares or increase A-share holdings by over 10% annually, which could inject more than RMB1 trillion into the A-share market, benefiting banks with high index weightings; and (3) unlisted insurers, upon adopting IFRS 9 standards (by January 2026), may increase investments in high-dividend-yield bank stocks as assets classified as fair value through other comprehensive income (FVOCI). AAStocks Financial News |
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