CM BANK(03968) 华兴证券·2024-11-05 07:30Investment Rating - The report maintains a "Buy" rating for China Merchants Bank-H (3968 HK) with a target price of HK38.00 [1][5]. Core Views - The bank's 3Q24 earnings met expectations, benefiting from effective cost control that offset declines in interest and commission income. The adjusted net profit for 3Q24 was RMB 38.4 billion, a year-on-year increase of 0.8% [6][10]. - Revenue growth continues to slow, with a year-on-year decline of 2.6%, primarily due to a 14 basis point decrease in net interest margin, which offset a 4.7% increase in loans [6][12]. - The bank's asset quality showed relative improvement, with a non-performing loan ratio stable at 0.94% and a high coverage ratio of 432.2% [7][14]. - The outlook for 4Q24 and 2025 suggests a continued decline in net interest margin, although the pace of decline is expected to slow. Credit demand is anticipated to recover in 2025 [8][12]. Summary by Sections Earnings Performance - In 3Q24, adjusted net profit was RMB 38.4 billion, with a year-to-date adjusted net profit of RMB 111.2 billion, flat year-on-year [6][10]. - The bank's total revenue for 3Q24 was RMB 79.1 billion, down 2.6% year-on-year, driven by a decrease in net interest income and commission income [13]. Financial Metrics - The bank's cost-to-income ratio improved to 32.6%, down from 34.3% in 2Q24, indicating better cost management [7][14]. - The core Tier 1 capital ratio increased by 87 basis points to 14.73%, reflecting strengthened capital levels [7][14]. Future Outlook - The bank expects a decline in net interest margin in 4Q24, but the decrease is projected to be less severe than in 2024. Loan growth is expected to exceed 2024 levels, particularly in retail loans [8][12]. - The bank's ability to generate positive growth in commission income in 2025 will depend on regulatory decisions regarding fee reductions [8][12].