OCBC Investment Research
25 June 2025
China CITIC Bank: Stable Yields and Resilient Performance Amid China’s Shifting Banking Landscape
Investment Overview: Stable Dividend, Solid Fundamentals, and Attractive Valuation
China CITIC Bank (CNCB), one of China’s largest commercial banks, stands out in the current market for its combination of stable earnings, robust dividend yields, and improving asset quality. As Chinese banks become increasingly attractive in a low-rate environment, CNCB’s strategic deleveraging and prudent risk management have positioned it as a compelling defensive play for yield-seeking investors.
Key Investment Highlights
- Attractive Dividend Yield: CNCB offers a projected dividend yield of 4.2% in 2025, making it a favored pick among income investors as Chinese government bond rates remain subdued (10-year CGB at 1.6–1.7%).
- Steady Operating Trends: 1Q25 results saw earnings rise 1.7% year-on-year, with net interest income up 2.1% YoY and fee income rebounding strongly.
- Improving Asset Quality: The non-performing loan (NPL) ratio remains steady at 1.16%, with credit costs declining and robust NPL coverage at 207%.
- Valuation: Trading at just 0.6x forward price-to-book with a fair value estimate of CNY 9.20, the shares offer a blend of value and yield.
Dividend Yield and Valuation: A Defensive Play in a Low-Rate World
The demand for high-yield, defensive stocks is intensifying as long-term rates in China stay low. With the 10-year Chinese government bond yielding just 1.6–1.7%, CNCB and other state-owned banks are trading at yield spreads of over 250 basis points above sovereign bonds. Even if spreads compress to historic lows (155bps), yields for quality SOE banks would still be compelling.
Among its peers, CNCB is differentiated by:
- Consistent dividend yield (4.2% in 2025).
- Stable forward price-to-book multiple (0.6x) and implied valuation upside.
- Lower risk of dilution compared to some peers, such as CCB and ICBC, due to relatively strong capital positions.
The fair value is set at CNY 9.20, reflecting a 0.6x forward P/B multiple and a sustainable 4% dividend yield, with an expected yield spread of around 220bps over the 10Y CGB.
Operating Performance: Modest Growth, Resilient Margins
Recent results underscore CNCB’s ability to deliver steady performance in a challenging environment:
- 1Q25 Earnings: Up 1.7% YoY; net interest margin (NIM) at 1.65%, down 4bps QoQ due to LPR cuts and lower loan pricing.
- Net Interest Income: 2.1% YoY growth, despite a 2.8% QoQ decline as loan repricing took hold.
- Fee Income: Up 0.7% YoY (a strong +24% QoQ recovery), reversing a -4% YoY decline in FY24.
- Loan Growth: Loans expanded 5.1% YoY (2.6% QoQ); management targets CNY 350 billion in new loans for the year (6% YoY growth), with a focus on corporate, green, high-tech, and quality real estate lending.
- Margin Outlook: NIM expected to decline by 10–15bps YoY in 2025, but deposit rate cuts will help buffer margin pressure.
Asset Quality: Stable NPLs and Lower Credit Costs
CNCB has made significant strides in managing legacy bad debts and improving asset quality:
- NPL Ratio: Stable at 1.16% in 1Q25.
- Credit Cost: Estimated to decline from 95bps in 2024 to 90bps in 1Q25, down 22bps YoY to 0.99%.
- NPL Coverage: Remains robust at 207%.
- Capital Position: CET1 ratio dipped 27bps QoQ to 9.5% in 1Q25 due to front-loaded RWA growth, despite convertible bond conversion.
Continued focus on cleaning up asset quality sets the stage for further credit cost reductions and supports future earnings growth.
ESG and Corporate Governance: Leading Improvements and Risk Management
CNCB is making notable progress in ESG, governance, and employee development:
- Corporate Governance: The board is now majority independent, with fully independent pay and audit committees, enhancing oversight and investor protection.
- Green Finance: About 54% of the commercial loan book is low in environmental intensity, and CNCB actively promotes sustainability-linked products.
- Consumer Protection: CNCB leads peers in adopting consumer financial safety best practices, with board oversight of internal product reviews to safeguard consumer interests.
- Workforce Development: The bank partners with universities for staff training and faces ongoing challenges in talent retention and recruitment.
Financial Highlights and Key Ratios
| Year |
2024 |
2025E |
2026E |
| Net Interest Income (CNY bn) |
146.7 |
141.8 |
145.0 |
| Pre-Provision Profits (CNY bn) |
141.3 |
134.3 |
137.3 |
| Distributable Profits (CNY bn) |
63.8 |
34.8 |
65.7 |
| EPS (CNY) |
1.2 |
1.2 |
1.2 |
| DPS (CNY) |
0.4 |
0.4 |
0.4 |
| ROAA (%) |
0.7 |
0.7 |
0.6 |
| ROAE (%) |
9.9 |
9.1 |
8.7 |
| Net Interest Margin (%) |
1.8 |
1.6 |
1.6 |
| NPL Ratio (%) |
1.2 |
1.2 |
1.2 |
| Core Tier-1 Ratio (%) |
9.7 |
9.9 |
10.1 |
Peer Comparison: How CNCB Stacks Up Against Major Chinese Banks
| Company |
P/E 2025E |
P/E 2026E |
P/B 2025E |
P/B 2026E |
Div Yield 2025E (%) |
Div Yield 2026E (%) |
ROE 2025E (%) |
ROE 2026E (%) |
| China CITIC Bank (601998 CH) |
7.1 |
6.9 |
0.6 |
0.6 |
4.2 |
4.4 |
9.4 |
9.2 |
| Agricultural Bank of China (601288 CH) |
7.7 |
7.5 |
0.8 |
0.7 |
4.0 |
4.2 |
9.9 |
9.5 |
| Bank of China (601988 CH) |
7.6 |
7.6 |
0.7 |
0.6 |
4.1 |
4.2 |
8.9 |
8.5 |
| China Construction Bank (601939 CH) |
7.3 |
7.1 |
0.7 |
0.7 |
4.2 |
4.2 |
10.0 |
9.6 |
Company Overview: China CITIC Bank at a Glance
China CITIC Bank, established in 1987, is the seventh-largest commercial bank in China and a key subsidiary of CITIC Group, a sprawling conglomerate with interests in financial services, IT, energy, and heavy industry. CNCB delivers a mix of corporate and personal banking services, with a strategic focus on China’s fastest-growing provinces and cities. In 2024, net revenue rose to CNY 215.7 billion, with net interest income at CNY 146.7 billion and non-interest income at CNY 69.0 billion.
Financial Performance Snapshot
| Year |
2020 |
2021 |
2022 |
2023 |
2024 |
| Net Revenue (CNY m) |
188,504 |
186,920 |
207,924 |
207,582 |
215,708 |
| Net Interest Income (CNY m) |
150,515 |
147,896 |
150,647 |
143,539 |
146,679 |
| Non-Interest Income (CNY m) |
37,989 |
39,024 |
57,277 |
64,043 |
69,029 |
| Net Income to Common (CNY m) |
45,970 |
52,631 |
57,315 |
62,228 |
63,788 |
| Basic EPS (CNY) |
0.9 |
1.1 |
1.2 |
1.3 |
1.2 |
| Return on Common Equity (%) |
10.2 |
10.8 |
10.9 |
10.1 |
8.9 |
| Return on Assets (%) |
0.7 |
0.7 |
0.7 |
0.8 |
0.7 |
| Net Income Margin (%) |
26.0 |
29.8 |
29.9 |
32.3 |
31.8 |
Catalysts and Risks
Potential Catalysts:
- Faster-than-expected economic growth, boosting loan demand and pricing power.
- Lower-than-expected NPL formation, supporting asset quality.
- Stronger recovery in fee income streams.
Key Risks:
- Lower loan coverage ratio versus peers.
- Greater-than-expected compression of net interest margin.
- Regulatory tightening, particularly affecting wealth management product exposure.
Conclusion: A Compelling Option for Yield-Hunting Investors
China CITIC Bank’s blend of stable earnings, attractive dividends, and improving asset quality make it a solid choice for investors seeking yield and defensive exposure within China’s financial sector. While capital ratios remain an area to watch, the bank’s operational resilience, corporate governance upgrades, and positioning for long-term growth provide a compelling outlook. Investors should monitor both economic and regulatory developments as these will shape the sector’s yield and risk dynamics going forward.
Disclaimer
This article is for information purposes only and does not constitute investment advice. Please consult a qualified financial adviser before making investment decisions.
