China Merchants Bank Reports Net Profit of 116.476 Billion Yuan for First Three Quarters, Up 2.38% YoY
nashnova research
China Merchants Bank (03968.HK) reported RMB 116.5 billion in net profit for the first nine months of 2026, up 2.38% year-on-year, while revenue grew a faster 5.37% — the gap signals rising cost or provisioning pressure eating into earnings.
Revenue up 5.37% — how much actually reached the bottom line?
Net operating income hit RMB 264.8 billion, up 5.37% YoY; net profit attributable to shareholders was RMB 116.5 billion, up only 2.38%.
This means → for every extra yuan of revenue, less than half translated into profit growth — costs or loan-loss provisions absorbed the rest.
Basic EPS came in at RMB 4.57. Profit growth trailed revenue growth by nearly 3 percentage points, a sign that earnings quality deserves more scrutiny than the headline number suggests.
Interest income vs. fee income — which engine is pulling harder?
Net interest income reached RMB 169.4 billion, up 5.83% — the main revenue driver.
Non-interest income totalled RMB 95.4 billion, up 4.54%. Both legs grew, but lending-driven income outpaced fees.
In plain terms = the traditional business of lending and earning a spread delivered the bigger lift; wealth-management and service fees grew too, just a step behind.
How much did the balance sheet expand, and where did the money come from?
Total group assets stood at RMB 13.76 trillion, up 5.28% from year-end; total loans reached RMB 7.45 trillion, up 2.69%.
Customer deposits grew to RMB 10.26 trillion, up 4.30%; total liabilities hit RMB 12.37 trillion, up 4.92%.
This means → deposits grew faster (4.30%) than loans (2.69%) — the bank is pulling in more money but lending it out more cautiously.
The NPL ratio held steady — so why worry?
The non-performing loan ratio — the share of loans in trouble — stayed at 0.94%, flat versus year-end. On the surface, stable.
But the absolute NPL balance rose RMB 1.86 billion to RMB 70.07 billion. The ratio stayed flat only because the total loan book also expanded, diluting the percentage.
This reflects a situation where asset quality is not genuinely improving — scale growth is masking rising bad debts. How long that balance holds is the key question ahead.
The provision buffer is thinning — is the cushion still thick enough?
The provision coverage ratio — reserves set aside for bad loans as a share of NPLs — stood at 389.39%, down 2.40 percentage points from year-end.
The loan-provision ratio was 3.66%, down 0.02pp; annualised credit cost rose to 0.72%, up 0.05pp YoY.
In plain terms = the safety cushion is still substantial — nearly RMB 3.9 in reserves behind every RMB 1 of bad debt — but it is getting thinner, and the cost of topping it up is climbing. That is part of why profit growth lagged revenue growth.
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