18 April 2019
China Merchants Bank will consider spinning off some businesses depending on the market environment, says CEO Tian Huiyu. Photo: EJ Insight
China Merchants Bank will consider spinning off some businesses depending on the market environment, says CEO Tian Huiyu. Photo: EJ Insight

CMB to consider hiving off wealth management, credit card units

China Merchants Bank (CMB, 03968.HK), the mainland’s sixth largest commercial lender by assets, said it will consider spinning off businesses such as wealth management and credit card operations.

Any spin-off initiative “will depend on the environment outside and investors’ interest,” chief executive Tian Huiyu said at a post-results media briefing in Hong Kong Thursday.

In other comments, Tian said he expects China’s banking sector to see a rise in non-performing loans (NPLs) amid the nation’s slowing economy.

“The economy is still in a downtrend, and banks’ non-performing loans will certainly be on the rise,” he said.

However, he stressed that NPL levels of CMB are well under control as of now.

Even if the China’s GDP growth rate falls to 6.5 percent and the consumer price index falls to 1.3 percent, the NPL formation rate is still within a comfortable range of 3 percent, Tian said.

CMB’s net profit rose 8.1 percent to 55.9 billion yuan for the year ended December 2014, with the bank’s core tier-1 capital adequacy ratio up 0.08 percentage point at 9.12 percent.

But the NPL ratio was up by 0.28 percentage point to 1.11 percent, while the net interest margin (NIM) went down by 0.3 percentage point to 2.52 percent.

Chinese banks may find their NIMs get squeezed further this year as the central bank is likely to announce further rate cuts in a bid to boost liquidity in the market, CMB’s chief financial officer Li Hao said at the same briefing. 

Also, as more funds are parked in wealth management products, there could be a decline in savings deposits, adding to the pressure on the NIM, he said.

CMB is using more fixed-interest rate loans and hedging against interest rate risk to counter the possible adverse impact of interest rate liberalization, he said.

Li Jianhong, chairman of CMB, signaled that the bank will seek a securities license once the policy gets the green light from regulatory authorities.

“It’s a trend to see banks engage in multiple businesses… I believe the reform pace in this regard will speed up. We are actively studying the possibilities,” he said.

The China Securities Regulatory Commission said earlier this month that it was considering allowing banks to apply for securities licenses. It however did not give any definite timetable.

CMB shares closed at HK$18.74 in Hong Kong Thursday, up 1.3 percent from the previous session. In early trading Friday, they were down 1.39 percent at HK$18.48. 

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EJ Insight reporter

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