China Merchants sees 40pc growth in profit

PUBLISHED : Thursday, 29 March, 2012, 12:00am
UPDATED : Thursday, 29 March, 2012, 12:00am


China Merchants Bank (CMB), the mainland's sixth-largest lender by market value, yesterday reported a 40 per cent profit growth last year, benefiting from a high net interest margin.

But the lender is under pressure to rev up its share placement plan since it is required to replenish capital to meet the stringent regulatory requirements likely to come into effect on July 1.

CMB's net profits last year hit 36.13 billion yuan (HK$44.37), compared with 25.77 billion yuan a year earlier. Revenue climbed 34.7 per cent to 96.2 billion yuan.

The annual results met the forecast by analysts and beat the 29 per cent profit rise reported yesterday by its bigger rival Bank of Communications (Bocom).

'Not all is good news for China Merchants Bank because the annual report showed it has to boost capital as soon as possible,' said Orient Securities analyst Jin Lin. 'A tougher capital requirement is imminent and the bank has to speed up its fund-raising.'

CMB's core capital ratio stood at 8.22 per cent at the end of 2011.

The China Banking Regulatory Commission is tipped to raise the core capital ratio, also known as tier-1 capital ratio - a measure of a bank's core capital including stock and cash reserves - for mid-size banks to 8.5 per cent from the current 4 per cent from July 1, according to bankers.

Mainland banks have been a source of concern following an 18 trillion yuan lending spree between 2009 and 2010. The banking regulator, fearing a wave of bad loans, is urging mainland lenders to replenish capital.

Last year, CMB received regulatory approval to place 4.74 billion shares in Hong Kong and Shanghai, expecting to net a combined 35 billion yuan. However, it will have to follow in the steps of BoCom and China Minsheng Banking Corp in the new round of refinancing.

BoCom announced in mid-March that it had placed 56.6 billion yuan of additional shares with a clutch of investors including HSBC Holdings and the mainland's national pension fund. HSBC already owns 19 per cent of BoCom.

CMB raked in interest income of 76.3 billion yuan last year, up 33.7 per cent from 2010. Its net interest margin rose 38 basis points to 2.94 per cent.


The amount in US dollars mainland banks have raised globally through equity and bond issues since 2005, Dealogic says