China Merchants Bank Co., Ltd. Q2 FY2026 earnings call

• Strategic Focus on 'Extensive Wealth Management':

  • CMB is doubling down on its core strength of wealth management, aiming to enhance customer fulfillment through asset allocation services rather than just product sales.
  • Retail AUM reached a record high of over CNY 18 trillion, with non-deposit assets driving 85% of growth.
  • The bank emphasizes a 'customer-centric' philosophy, leveraging its large client base (231 million retail customers) to deepen relationships and cross-sell services.

• Balanced Asset Growth and Quality Control:

  • Total loans grew by 2.69%, with corporate loans outpacing retail loans (corporate up 9.08%, retail down 1.11% from year-end).
  • Management explicitly stated they are not blindly pursuing scale expansion, especially in retail credit, due to risk concerns and insufficient demand.
  • Priority is placed on asset quality, profitability, and scale balance. The bank is optimizing loan structure towards green, manufacturing, and agriculture sectors.

• Digital Transformation and AI Integration:

  • AI is being deeply integrated into operations, contributing 13.8 million equivalent working hours in efficiency gains.
  • Specific applications include AI assistants for relationship managers (increasing effective outreach by 14.65%) and AI-driven due diligence reports for small businesses (reducing service time from 36 hours to ~2.7 hours).
  • The bank maintains a commitment to invest no less than 3.5% of operating income into IT, as per its Articles of Association.

• International Development Strategy:

  • Adopting a '1+1+5' model: Head office + Hong Kong hub + 5 regional hubs (New York, Sydney, Luxembourg, Singapore, etc.).
  • Focus on serving Chinese enterprises going global and foreign enterprises in China, leveraging cross-border finance strengths.
  • No plans to expand physical outlets globally to match state-owned banks; instead, focusing on capacity building in key regions and digital connectivity.

• Risk Management and Asset Quality:

  • Overall NPL ratio remained stable at 0.94%. Allowance coverage ratio is high at 385.1%.
  • Corporate NPL ratio improved to 0.78%, but real estate sector remains a key risk area (NPL ratio 4.47%).
  • Retail NPL ratio increased slightly to 1.16%, driven by consumer loans and credit cards, reflecting broader economic pressures on household balance sheets.
  • Management is tightening underwriting standards and focusing on early identification and disposal of risks.

The transcript does not provide a breakdown of financial performance by specific product segments (e.g., Retail vs. Corporate) in terms of absolute revenue contribution percentages for each distinct segment. However, it provides aggregate group performance and key sub-segment metrics:

• Overall Group Performance:

  • Net Operating Income: CNY 178.135 billion (up 4.83% YoY).
  • Net Profit Attributable to Shareholders: CNY 76.445 billion (up 2.02% YoY).
  • Net Interest Income: CNY 112.02 billion (up 5.6%).
  • Net Noninterest Income: CNY 66.11 billion (up 3.56%), representing 37.11% of total net operating income.
  • Cost-to-Income Ratio: 29.7% (down 0.41 percentage points YoY).

• Retail Finance Sub-Segment Highlights:

  • Net Operating Income accounted for 54.35% of the total.
  • Retail AUM: Exceeded CNY 18 trillion (up 7.96% YoY).
  • Retail Loans: CNY 3.61 trillion (down 1.11% from year-end 2025).

• Corporate Finance Sub-Segment Highlights:

  • Total Corporate Loans: CNY 3.5 trillion (up 9.08%).
  • Average Daily Balance of Corporate Deposits: CNY 5,230 billion (up 6.1%).

• Subsidiaries (Financial Performance):

  • CMB Wing Lung Bank: Net profit HKD 4.73 billion (up 55.88%).
  • CMB International Capital: Net profit HKD 3.07 billion (up 124.14%).
  • CMB Financial Leasing: Net profit CNY 1.63 billion (down 42.44% YoY).
  • CMB Wealth Management: Net profit CNY 1.51 billion (up 10.92%).
  • China Merchants Fund: Net profit CNY 802 million.
  • CIGNA & CMAM: Net profit CNY 62 million (down 12.68% YoY).

• Loan Growth: Management indicated that loan growth will likely remain around 5% in the second half of the year, consistent with H1 performance. This is below the previously mentioned target of 7%, due to insufficient credit demand and proactive risk management.
• Net Interest Margin (NIM): The decline in NIM is expected to slow down and stabilize. Management stated that the 'most difficult time' for NIM decline has passed. They aim to narrow the decline, maintain industry-leading status, and strive for stability, though further pressure exists due to asset repricing and lower yields.
• Dividend Policy: The interim dividend payout ratio will be maintained at 35%. Management emphasized balancing capital adequacy, RWA growth, and shareholder returns, with no indication of an immediate increase in the payout ratio despite peer increases.
• Asset Quality: No explicit quantitative guidance on NPL ratios was provided, but management expressed confidence in maintaining stable and controllable asset quality through stricter risk controls and enhanced provisioning.

• Retail Credit Risk: Rising NPLs in retail loans (1.16%) and credit cards (1.9%) pose significant pressure. Drivers include household deleveraging, reduced willingness/ability to repay, and joint debt risks in consumer loans.
• Real Estate Sector: Although improving, corporate real estate NPLs remain elevated at 4.47%. Market divergence and poor asset quality among weaker developers continue to be a concern.
• Interest Rate Environment: Low interest rates and LPR repricing compress net interest margins. Insufficient credit demand forces competitive pricing on the asset side.
• Operational and Strategic Risks: Failure to effectively leverage AI or maintain technology leadership could hinder efficiency gains. Over-reliance on retail banking makes the bank more vulnerable to consumer sentiment shifts compared to peers with larger corporate bases.
• Capital Adequacy: While strong, rapid RWA growth and potential need for capital buffers against rising retail risks require careful management of endogenous capital generation and external financing.

Q: President Wang discussed his new role and the challenges facing CMB. How do you view the sustainability of the H1 growth momentum and what are the primary headwinds? / A: President Wang emphasized responsibility to investors and staff. He identified low interest rates, shrinking credit demand, and household deleveraging as major headwinds. Specifically, CMB faces unique pressure due to its >50% retail loan portfolio and limited room for liability cost cuts compared to peers. Despite these challenges, he reaffirmed commitment to long-term quality growth, extensive wealth management, and leveraging the bank's full-license capabilities to serve the real economy and tech sector.

Q: Analyst asked about retail banking strategy to avoid price wars and improve exclusivity. What metrics track this progress? / A: Ms. Wang explained the shift to 'people plus AI agents' for service delivery, offering one-on-one RM support plus expert teams for wealthy clients. Key metrics include the number of customers holding wealth management products, MAU, and AUM structure. She highlighted that Golden Sunflower customer growth has been strong (CAGR 13.26% over 3 years) and that integrated service capacity across deposits, loans, and payments drives loyalty beyond simple product pricing.

Q: Regarding loan growth, why is it slowing below the previous 7% target, and how is the portfolio being rebalanced? / A: Mr. Wang confirmed H1 loan growth was ~5% and expects it to remain there. The slowdown is due to weak credit demand and proactive risk management, particularly in retail loans where quality is prioritized over scale. Corporate loans are growing faster (13% in some segments) while retail loans are stabilizing. The bank is avoiding blind expansion, focusing instead on key industries and maintaining asset quality amidst cyclical adjustments.

Q: What is the outlook for NIM and the impact of large-denomination CDs? / A: Mr. Peng stated NIM is still declining but the pace is narrowing, with the worst phase likely passed. Deposit repricing is mostly complete, easing liability cost pressure. Large-denomination CDs have limited impact on NIM due to their small volume and low cost; CMB does not rely on them for liquidity. The bank aims to stabilize NIM by optimizing asset structure and prioritizing deposit quality over volume.

Q: How does CMB manage synergy across business lines and subsidiaries, and what are the tangible benefits? / A: Mr. Peng outlined five factors: dual-attribution reward mechanisms, performance-driven incentives for synergy, mature collaboration models (e.g., investment banking + private banking), internalized corporate culture, and organizational enablers like a bank-wide synergy committee. These mechanisms ensure that different units collaborate effectively, maximizing resource efficiency and providing comprehensive solutions to clients, which drives fee income and cross-selling opportunities.