JPMorgan has released a research report stating that China Merchants Bank's (03968) recovery in net interest income and strong wealth management momentum have not translated into robust profit growth. The bank already trades at a premium compared to its peers. In the absence of clear commitments from management regarding growth prospects or total returns, short-term stock price momentum is expected to remain weak, potentially underperforming industry competitors. The firm maintains an "Overweight" rating with a target price of HKD 62. In the first quarter, China Merchants Bank's revenue increased by 4% year-on-year, while net profit grew by 2%. Revenue was 2% higher than the bank's expectations, but net profit was 1% lower. Revenue growth was driven by an acceleration in net interest income, reaching the fastest pace since the first quarter of 2023, along with strong wealth management fees. Assets under management (AUM) for retail clients grew by 4.5% quarter-on-quarter, with non-deposit AUM increasing by 5.4% quarter-on-quarter, outpacing the growth of retail deposits. However, non-wealth management fees contracted by 3% year-on-year, and provision expenses were 13% higher than expected, offsetting the revenue growth.
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