CM BANK-H (3968 HK) demonstrates strong asset management capabilities, which are expected to enhance its profitability. The bank's fourth-quarter 2025 results met expectations, supported by a recovery in fee and commission income that offset increased loan loss provisions. Loan and deposit growth for 2026 is projected at 6-7%, with a narrowing net interest margin decline and stable asset quality anticipated.
Fourth-quarter 2025 performance aligned with forecasts. CM BANK reported adjusted net profits of RMB 32.1 billion for the quarter and RMB 143.9 billion for the full year 2025, representing year-on-year increases of 1.5% and 0.7%, respectively. This performance was primarily driven by a rebound in fee and commission revenue, which counterbalanced the rise in provisions for loan losses. Quarterly revenue grew by 1.4% year-on-year, mainly due to a 2.9% increase in net interest income fueled by 5.4% loan growth, which mitigated the impact of an 8 basis point contraction in the net interest margin. Additionally, net fee and commission income surged 16.3%, supported by growth in wealth and asset management fees, partially offsetting a decline in other income caused by falling fair values of bond and fund investments.
The net interest margin increased quarter-on-quarter, marking the first rise after 11 consecutive quarters of decline, while asset quality remained stable. Key operational metrics for CM BANK in Q4 2025 include: 1) The net interest margin rose by 3 basis points to 1.86%, as a decrease in deposit costs (down 8 basis points QoQ) outweighed a 4 basis point drop in loan yields; 2) Effective cost control lowered the cost-to-income ratio to 41.9% (compared to 42.2% in Q4 2024); 3) Asset quality was steady, with the non-performing loan ratio relatively flat at 0.94%, maintaining an industry-leading position, although the NPL coverage ratio decreased to 392%. The dividend payout ratio for 2025 was maintained at 35.3%, and management expressed confidence in sustaining this level for 2026.
A modest improvement is forecast for 2026. CM BANK anticipates total loan and deposit growth of approximately 6-7%. Although the net interest margin is expected to continue its downward trend due to lower asset yields from loan repricing in the first half and limited room for further deposit cost reductions, the pace of decline is projected to narrow compared to 2025 (which saw an 11 basis point year-on-year drop). The company expects fee and commission income to grow year-on-year, driven by robust wealth management operations and controlled declines in credit card fees. With continued improvement in corporate loan quality and easing pressure on retail loan quality, overall asset quality is forecast to remain stable in 2026.
Risks include greater-than-expected net interest margin pressure, weaker fee and commission income, and a slower-than-anticipated recovery in asset quality.
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