CMBC’s Assets Cleanup Making Progress Despite Lingering Challenges in Credit Quality

No-moat China Minsheng Bank Corporation's, or CMBC's, 2021 results reflected higher-than-peer pressure on net interest margin, or NIM, as the bank continues to struggle derisking its loan book amid rising economic headwinds. Given the results were largely in line, we retain our fair value estimate at CNY 4.00 per A-share and HKD 4.50 per H-share. Total revenue and net profits both reported better growth from the levels of the first three quarters. The former contracted 8.7%, a modest improvement from the 8.9% decline for the first three quarters. Positively, net profit growth was positive at 0.21%, versus the 4.9% decline for the first three quarters. The reforms initiated by new management, who came on board in 2021, have been progressing well. The new management team clearly set out key strategic goals for its five-year reforms by 2025. The first stage of the reforms are from 2021 to 2022, focused on the cleanup of asset risks and lowering funding costs. As a result, year-on-year growth in loans and deposits slowed to 5% and 1.5% respectively during the restructuring in 2021.