Broker: OCBC Investment Research
Date of Report: 4 June 2025

China CITIC Bank: Stable Performance, High Dividend Yield, and ESG Leadership Position the Bank for Growth in 2025

Investment Highlights: Steady Earnings, Attractive Yield, and Strong Risk Controls

China CITIC Bank (CNCB), one of China’s largest commercial banks, continues to demonstrate resilience and growth against a backdrop of evolving economic conditions and regulatory changes. With a robust dividend yield, ongoing improvements in asset quality, and a commitment to ESG practices, CNCB stands out as a defensive choice for yield-seeking investors and those seeking stability in the Chinese financial sector.

Operational Trends: Solid Growth and Strategic Loan Expansion

In 1Q25, CNCB reported a 1.7% year-on-year (YoY) increase in earnings, signaling steady operational momentum.
Net interest margin (NIM) declined 4 basis points quarter-on-quarter (QoQ) to 1.65%, reflecting the impact of prior loan prime rate (LPR) cuts and lower rates on new loans.
Net interest income (NII) fell 2.8% QoQ but increased 2.1% YoY, while net fee income rebounded, improving from -4.0% YoY in FY24 to +0.7% YoY (+24% QoQ) in 1Q25.
Loan growth remained robust at 5.1% YoY (2.6% QoQ) in 1Q25, with management targeting CNY350 billion in new loan origination for the year, implying 6% YoY growth. The primary focus will be on corporate lending, particularly to green projects, high-tech sectors, and select quality real estate developments.
Recent higher-than-expected deposit rate cuts are expected to offset modest NIM pressure from further LPR reductions. Management anticipates a NIM decline of 10-15bps YoY in 2025.

Asset Quality: Stable Non-Performing Loan Ratios and Improved Credit Cost

The non-performing loan (NPL) ratio held steady at 1.16% QoQ.
Credit cost edged down from around 95bps in 2024 to approximately 90bps in 1Q25, representing a 22bps YoY drop to 0.99%.
NPL coverage decreased slightly by 2.3ppt QoQ to 207%.
The common equity Tier-1 (CET1) ratio slipped 27bps QoQ to 9.5% at the end of 1Q25, despite the completion of a convertible bond conversion. This decline was mainly driven by front-loaded risk-weighted asset growth.

Dividend Yield and Valuation: Defensive Play with Attractive Returns

Chinese banks, including CNCB, are benefiting from a low interest rate environment and policy support for long-term capital inflows from state-owned insurers and mutual funds.
The yield spread of A-share state-owned enterprise (SOE) banks over the 10Y Chinese government bond (CGB) remains attractive at 270bps. Even if the spread compresses to 155bps (close to -1 standard deviation from the historical average), the dividend yield for A-share SOE banks could decline to around 3.2%.
CNCB is trading at 0.55x forward price-to-book (P/B) and offers a 4.4% dividend yield for 2025.
Fair value estimate for CNCB is adjusted to CNY8.95, reflecting a 0.65x forward P/B and a projected 4.1% 2025 dividend yield.

Peer Comparison: Key Metrics Across Chinese Banks

ESG and Corporate Governance: Leading on Sustainability and Consumer Protection

CNCB has enhanced its corporate governance, now featuring a majority-independent board and fully independent pay and audit committees, strengthening investor protection.
The environmental intensity of CNCB’s loan book is low, with green finance initiatives representing about 54% of commercial loans in FY2023.
The bank offers sustainability-linked products and demonstrates leadership in consumer financial safety practices, with board-level oversight of internal product reviews to prevent mis-selling.
CNCB invests in workforce management, partnering with universities for staff training and development, helping to address recruitment and retention challenges.

Financial Performance: Key Income and Profitability Metrics

Key Ratios and Projections

• Net interest margin (NIM): 1.8% (2024), 1.6% (2025E), 1.6% (2026E)
• Non-performing loan (NPL) ratio: 1.2% (2024-2026E)
• Core Tier-1 ratio: 9.7% (2024), 9.9% (2025E), 10.1% (2026E)
• Return on average assets (ROAA): 0.7% (2024-2025E), 0.6% (2026E)
• Return on average equity (ROAE): 9.9% (2024), 9.1% (2025E), 8.7% (2026E)
• Earnings per share (EPS): 1.2 (2024-2026E)
• Dividend per share (DPS): 0.4 (2024-2026E)

Company Overview: CNCB’s Market Position and Focus

China CITIC Bank is the seventh-largest commercial bank in China, founded in 1987 and a key arm of CITIC Group.
The bank has a pronounced presence in China’s fastest-growing provinces and cities, offering a diversified suite of corporate and personal banking services.

Potential Catalysts and Risks for Investors

Catalysts:

• Stronger-than-expected economic growth improving loan pricing power
• Lower-than-expected non-performing loan formation
• Faster recovery in fee-based income

Risks:

• Lower-than-peer loan coverage ratios
• Larger-than-anticipated NIM compression
• Higher vulnerability to regulatory tightening, especially due to significant wealth management exposure

Conclusion: CNCB Well-Positioned for Yield and Stability

With prudent risk management, a high dividend yield, and ongoing progress in ESG and governance, China CITIC Bank continues to attract attention as a stable and defensive choice within the Chinese banking sector. Investors seeking quality yield, stable earnings, and exposure to China’s green finance growth story may find CNCB a compelling addition to their portfolios.