China Merchants Bank Issuer Summary

Report date: 2026-05-20
Issuer: China Merchants Bank Co., Ltd.
Ticker: CHINAM
Sector: China banking
Primary credit focus: Issuer credit, senior debt, and risk differentiation across Tier 2 / AT1 / preference shares

1. Business Snapshot and Recent Developments

China Merchants Bank Co., Ltd. is a nationwide commercial bank in mainland China. It is not one of the big four state-owned banks, but among China’s joint-stock commercial banks it has one of the strongest retail banking and wealth management franchises. The starting point for credit analysis is to view CMB not as a “policy bank” or a “government-guaranteed bank”, but as a large commercial bank with a strong low-cost deposit base, personal customers, cards, wealth management, and corporate relationships. As of end-2025, the bank had total assets of RMB13.1tn, loans of RMB7.3tn, customer deposits of RMB9.8tn, 224 million personal customers, 3.62 million corporate customers, and retail AUM of more than RMB17tn. Its 2025 annual report states that CMB ranked eighth globally by Tier 1 capital in The Banker’s Top 1,000 World Banks 2025, tenth globally by brand value in Brand Finance’s Banking 500 2025, and 193rd in the Fortune Global 500 2025. These external rankings are not central to the credit analysis, but they are useful supporting evidence that CMB is not merely a regional bank, but a large-scale bank recognised by international investors. At the same time, its ownership structure, policy role, and strength of implicit support differ from those of the big four state-owned banks, so its banking franchise should not be conflated with government support expectations.

The most important pillar supporting CMB’s credit profile is the combination of deposits and retail wealth management. Deposits are the foundation of a bank’s repayment and refinancing capacity. In CMB’s case, customer deposits at end-2025 substantially exceeded loans. The simple loan-to-deposit ratio was about 74%, meaning that loan growth is not structurally dependent entirely on wholesale market funding. In addition, through wealth management, custody, asset management, cards, and retail loans, CMB’s customer touchpoints are not limited to loans and deposits. This means that even when margins decline, the bank may have scope to use fee income and balance-related revenues as partial offsets.

However, it would be risky to view CMB simply as a high-growth, high-profitability retail bank. Its 2025 ROAE was 13.44%, still high within China’s banking sector, but NIM declined from 1.98% in 2024 to 1.87% in 2025 and further to 1.83% in 1Q 2026. Net operating income was broadly flat in 2025, and net profit increased only modestly. In other words, the credit question has shifted from “credit quality naturally improves because growth is strong” to “to what extent can high profitability and the deposit franchise absorb low interest rates, property-sector stress, retail credit risk, and RWA growth?”

The latest developments visible from full-year 2025 and 1Q 2026 show strengths and constraints progressing at the same time. Net profit attributable to shareholders of the parent company was RMB150.2bn in 2025 and RMB37.9bn in 1Q 2026, so earnings remain high. The NPL ratio was 0.94% at end-2025, a small improvement from 0.95% at end-2024. Provision coverage was also substantial at 391.79%. On the other hand, the CET1 ratio declined from 14.86% at end-2024 to 14.16% at end-2025 and 14.13% at end-March 2026. The total capital adequacy ratio also declined from 19.05% at end-2024 to 18.24% at end-2025 and 17.76% at end-March 2026. The absolute level of capital ratios remains strong, but the direction is not improving, and needs to be assessed together with RWA growth, redemption of capital securities, dividends, and sluggish earnings growth.

Property risk also cannot be reduced to a simplistic statement that “China property stress makes the bank risky”, but it cannot be ignored. The company-basis real estate-related credit risk exposure declined year on year at end-2025 and declined further at end-March 2026. This is clearly positive. However, the NPL ratio for loans to the real estate development industry at end-2025 was 4.78% on a group basis and 4.64% on a company basis, far above the group-wide NPL ratio of 0.94%. Therefore, balance reduction is positive, but the quality, collateral, recovery prospects, and refinancing capacity of borrowers in the remaining book remain monitoring items.

Retail credit also has two sides. CMB’s retail franchise is its greatest strength, but the retail loan NPL ratio was 1.06% at end-2025, up from end-2024. The NPL ratio was 1.22% for micro and small enterprise loans and 1.74% for credit card loans, clearly higher than the 0.51% NPL ratio for residential mortgages. Consumer credit, cards, and loans to micro and small enterprises are sensitive to household income, employment, consumption, property prices, and regulation. CMB’s retail business, which is its strength, can also become a source of credit costs in an economic slowdown.

The main recent indicators are as follows. 1Q 2026 figures are either quarter-end or quarter-to-date figures and should not be compared mechanically with full-year figures.

The point to take from this table is not that CMB has become a weak bank. On the contrary, among large mainland Chinese banks, CMB remains relatively strong in profitability, deposits, provisioning, and liquidity. However, the direction of the credit view has shifted from a phase in which earnings growth naturally thickens capital headroom to a phase in which a strong base absorbs low interest rates and credit costs. Issuer credit for senior debt remains sufficiently strong, but for loss-absorbing securities such as Tier 2, AT1, and preference shares, the direction of capital ratios, regulation, calls, and sustainability of earnings power need to be examined more closely.

2. Industry Position and Franchise Strength

In China’s banking sector, credit profiles differ materially across large state-owned banks, policy banks, joint-stock commercial banks, city commercial banks, and rural commercial banks. CMB is not one of the big four state-owned banks, but it has a top-tier franchise among joint-stock commercial banks. External rankings cited in the 2025 annual report show that CMB ranked eighth globally by Tier 1 capital in The Banker’s Top 1,000 World Banks 2025, tenth globally by brand value in Brand Finance’s Banking 500 2025, and 193rd in the Fortune Global 500 2025. The rankings themselves should not be overused as the basis for credit judgement, but they do show that CMB has the scale to be recognised domestically and internationally as a major bank. The bank’s real strength lies less in simple asset scale than in its ability to operate personal customers, low-cost deposits, wealth management, cards, and corporate relationships as an integrated franchise. This differentiates it from banks that accumulate large volumes of lending to local governments and state-owned enterprises, or banks heavily dependent on regional property exposure.

CMB’s first strength is its retail customer base. At end-2025, it had 224 million personal customers and more than RMB17tn of retail AUM, giving it customer touchpoints across deposits, payments, investments, cards, residential mortgages, and micro and small enterprise loans. In bank credit, the customer count itself matters less than how it translates into deposit stickiness, fee income, risk selection, and funding costs. In CMB’s case, this retail franchise is linked to low-cost deposits and wealth management fees, supporting relative profitability even when NIM is declining.

The second strength is its corporate customer base and payments / cash management platform. At end-2025, CMB had 3.62 million corporate customers, and its wholesale finance segment generated profit before tax of RMB85.4bn during the year. Corporate deposits, payments, trade finance, supply chains, and asset custody contribute to revenue diversification, but they also bring cyclical sensitivity to property, local government-related borrowers, infrastructure, manufacturing, and private enterprises.

The third strength is relatively high profitability. ROAE of 13.44% and ROAA of 1.19% in 2025 are high for a large Chinese bank. In an environment where low interest rates, property and LGFV risks, consumer credit, and fee regulation overlap, the remaining capacity to absorb losses through earnings is important for senior issuer credit.

At the same time, there are limits to CMB’s positioning. Compared with the large state-owned banks, the degree of government policy support, low-cost large-scale corporate and public-sector deposits, and systemic implicit support is not the same. CMB is an important bank within China’s banking system, but it does not have an explicit government guarantee. Even if rating agencies incorporate some degree of government support, that should be distinguished from the bank’s standalone credit strength as a systemic support expectation.

The broader Chinese banking-sector environment also does not fully shield CMB’s strengths. A low-rate environment pressures NIM, while mortgage repricing reduces asset yields. Property-sector adjustment affects not only loans to developers, but also collateral values, household wealth, consumer credit, and the fiscal capacity of local government-related borrowers. LGFV and local government-related debt restructuring can weigh on banking-sector profitability and asset quality for an extended period, even where direct exposures are not visible. CMB is a strong bank within the sector, but it is not immune to sector-wide earnings pressure.

In one phrase, CMB’s industry-specific profile is that it is “a bank that is not as policy-oriented or support-driven as the big four state-owned banks, but has a particularly strong retail, wealth management, and deposit franchise among joint-stock banks.” Investors need to assess not only the support expectations for the Chinese banking system as a whole, but also whether CMB’s own profitability, asset quality, capital, and liquidity can withstand low interest rates and property / consumer credit pressure.

3. Segment Assessment

When assessing CMB’s segments, retail finance should be treated not merely as a segment with a large earnings contribution, but as the core of the bank’s overall credit strength. In 2025, the retail finance segment generated net operating income of RMB191.0bn and profit before tax of RMB90.7bn, accounting for 50.66% of profit before tax and 56.63% of net operating income. This means that retail is not only CMB’s flagship business, but also creates nearly half or more of the bank’s earnings-based loss absorption capacity.

The 2025 segment mix is as follows.

The strength of retail finance lies in its ability to combine retail AUM of more than RMB17tn with deposits, payments, cards, and residential mortgages. This can support fee income, deposit stickiness, and low funding costs. However, it is not risk-free stable income. At end-2025, the card loan NPL ratio of 1.74% and micro and small enterprise loan NPL ratio of 1.22% were higher than the group-wide ratio of 0.94%, and retail credit can become a source of credit costs if the economy slows or household income weakens.

Wholesale finance is the segment that makes CMB a universal commercial bank rather than a pure retail bank. Corporate deposits, corporate lending, payments, supply chains, trade finance, and asset custody contribute to revenue diversification, but corporate lending includes cyclical sensitivity to property, LGFVs, local government finances, and private enterprises. Other businesses and subsidiaries are smaller in scale, but through CMB Wing Lung Bank, CMB International, asset management, leasing, and overseas operations, they raise issues around jurisdiction, foreign-currency liquidity, and parent support. For bondholders, it is important to distinguish whether the obligation is at the CMB parent, a branch, or a subsidiary.

Retail AUM and wealth management products show the strength of customer access and fee income, but they differ from lending assets where losses are absorbed by the bank’s own capital. If product losses or sales responsibility arise, even if legally off balance sheet, they could transmit to bank credit through reputational risk and customer protection.

In summary, CMB is a bank where retail finance supports the credit floor, wholesale finance adds scale and corporate deposits, and subsidiaries and overseas businesses broaden its product and regional scope. Its greatest strength is having deposits and customer touchpoints in both retail and wholesale. The main point of caution is that retail credit risk and corporate property / local government-related risk could deteriorate at the same time through different economic channels.

4. Financial Profile and Analysis

CMB’s financial profile is strong within China’s banking sector. However, credit analysis needs to distinguish between “a strong bank” and “a bank whose direction is improving.” The 2025 and 1Q 2026 figures show that CMB maintains high earnings, a stable NPL ratio, substantial provisions, and strong liquidity. At the same time, NIM compression, lower ROAA and ROAE, declining capital ratios, and deterioration in retail loan asset quality constrain upward credit momentum.

On earnings, 2025 net operating income was RMB337.3bn, broadly flat versus RMB337.1bn in 2024. Net profit attributable to shareholders of the parent company was RMB150.2bn, up only 1.21% year on year. This indicates that CMB is maintaining earnings, but the bank as a whole is not growing meaningfully. Protecting earnings while NIM declined from 1.98% to 1.87% is positive, but if NIM compression continues, the focus will be how much can be offset by fees, cost control, and containment of credit costs.

The same pattern continued in 1Q 2026. Net operating income was RMB87.0bn and net profit attributable to shareholders of the parent company was RMB37.9bn, so earnings remained high. However, NIM declined further to 1.83%. Given China’s interest rate environment, mortgage repricing, lower LPRs, and sticky deposit costs, NIM compression should be treated not as temporary noise but as a structural sector-wide earnings pressure.

On asset quality, the headline NPL ratio is stable. The NPL ratio was 0.94% at end-2025 and remained 0.94% at end-March 2026. Provision coverage declined from 391.79% to 387.76% at end-March 2026, but remains thick. This is an important support for issuer credit. A bank with an NPL ratio below 1% and substantial provisions has room to absorb near-term asset deterioration through earnings and provisions.

However, the headline NPL ratio alone is not enough to assess CMB’s risk. The special mention loan ratio was 1.43% at end-2025, so potential risk before NPL formation needs to be monitored. The retail loan NPL ratio rose to 1.06%, while micro and small enterprise loans and card loans exceeded the group average. The NPL ratio for the real estate development industry is even higher. In other words, even while the overall NPL ratio is stable, the underlying risk is concentrated in retail credit and property.

Looking at loan asset quality by product makes the credit focus clearer.

The most important point from this table is that CMB’s credit risk is not confined to one area. Loans to the real estate development industry have a clearly high NPL ratio and can easily become a near-term source of credit costs. Meanwhile, card, micro and small enterprise, and consumer loans can deteriorate broadly when the economy or household income is weak. Residential mortgages remain stable for now, but falling property prices and mortgage repricing affect both earnings and asset quality.

On capital, CMB is strong in terms of level, but the direction requires attention. At end-2025, the CET1 ratio was 14.16% and the total capital adequacy ratio was 18.24%, giving the bank sufficient headroom. At end-March 2026, the CET1 ratio was 14.13% and the total capital adequacy ratio was 17.76%, which does not indicate immediate capital stress. However, the decline from end-2024 is clear. Company disclosure shows that group RWA under the Advanced Measurement Approach increased 9.50% from RMB6.9tn at end-2024 to RMB7.5tn at end-2025, exceeding the 4.35% increase in CET1 capital. The company explained that capital ratios at all tiers declined due to steady RWA growth, as well as the 2025 interim dividend and a decline in other comprehensive income. In 1Q 2026 as well, CET1 capital increased but the ratio edged down, making it natural to read this as continued denominator pressure from RWA growth.

A decline in capital ratios does not immediately imply credit concern for senior debt. Given CMB’s profitability and deposit base, issuer credit remains sufficiently strong. However, for capital securities such as AT1 and preference shares, capital ratio levels, call decisions, regulatory loss absorption, and distributable earnings matter more. The redemption of domestic preference shares in April 2026 should also be viewed by investors in the context of capital structure and regulatory headroom.

Liquidity is strong. The average LCR was 175.51% in 4Q 2025 and 177.89% in 1Q 2026, well above the regulatory minimum. The end-March 2026 LCR was also 187.29%. Customer deposits substantially exceed loans, and the deposit-led funding structure is the most important support for senior credit. However, foreign-currency liquidity, branch- and subsidiary-level liquidity, maturity profile of wholesale debt, and details of the NSFR have not been sufficiently verified in this report. These items need additional review for individual foreign-currency bond investments.

Overall, CMB is a strong bank from an issuer credit perspective. Based on public financials, its levels of earnings, deposits, NPLs, provisioning, capital, and liquidity provide evidence that supports assessment of senior credit as investment-grade-equivalent bank credit. However, this is the fundamental assessment in this report and is not a rating determination based on review of the latest primary reports from S&P Global, Moody’s, and Fitch. Directionally, NIM compression, lower ROE, declining capital ratios, and asset quality in cards, micro and small enterprise loans, and property require attention. Current credit strength is strong, but this is more a phase of absorbing multiple headwinds with a strong base than a phase of improvement.

5. Structural Considerations for Bondholders

For CMB bond investors, the first step is to identify which legal entity and which ranking of obligation they are analysing. The issuer credit of China Merchants Bank Co., Ltd. is not the same as the issuer, branch, subsidiary, subordination ranking, or loss-absorption terms of an individual bond. Even where the group name is the same, the risk meaning differs across senior debt issued by the CMB parent, bonds issued by Hong Kong or overseas branches, Tier 2, AT1, perpetuals, preference shares, and subsidiary debt.

This report focuses on issuer credit and has not reviewed all individual bond offering circulars. Therefore, before investing in an individual bond, investors need to check the issuer, governing law, whether it is a branch or parent obligation, whether there is a guarantee, subordination, loss-absorption terms, call features, interest cancellation, triggers, tax treatment, and ranking in liquidation. With this limitation made explicit, the issuer-credit structure can be summarised as follows.

A broad view of bonds and capital securities is set out below.

From an issuer credit perspective, CMB’s senior debt is supported by the group’s overall deposit franchise, profitability, capital, liquidity, and systemic importance. CMB’s status as a large Chinese commercial bank with customer deposits and capital market access is an important support for senior bondholders. From a banking regulatory perspective as well, the orderly operation of a large commercial bank is important to policy, and regulatory action is more likely to be expected under extreme stress.

However, support expectations are not an explicit guarantee. CMB’s debt should not be treated like direct Chinese government debt or government-guaranteed debt. Even where government support is incorporated into ratings, that is a separate element from standalone credit strength. Investors in AT1 and Tier 2 in particular need to consider the possibility that the securities absorb losses even if the issuer remains a going concern. Bank senior issuer credit and capital securities credit move in the same direction, but they are not at the same level.

Structural complexity is not as significant as at a global G-SIB-style financial holding company, but the existence of subsidiaries, branches, and overseas operations cannot be ignored. CMB Wing Lung Bank, CMB International, overseas branches, and asset management, leasing, and custody-related entities each involve different regulatory jurisdictions, fund transfer, liquidity, and support expectations. An issuer report focuses mainly on consolidated credit, but for individual bonds the legal entity should always be verified.

The main practical structural point is not to view senior debt and junior securities in the same way. Senior debt takes CMB’s bank credit and the strength of deposits, liquidity, and capital. Tier 2 and AT1 function as part of the capital buffer supporting CMB’s credit strength, and investors can experience pain earlier when the bank weakens. CMB’s current capital ratios are strong, but the downward direction since 2025 matters more for lower-ranking securities.

6. Capital Structure, Liquidity and Funding

CMB’s funding structure is the strongest support for senior issuer credit. Customer deposits were RMB9.8tn at end-2025 and nearly RMB10.0tn at end-March 2026, substantially exceeding loans. The simple loan-to-deposit ratio was about 73.8% at end-2025 and about 74.9% at end-March 2026. This indicates that the bank is not excessively funding loan growth through wholesale market funding.

Deposit quality needs to be assessed not only by the total amount, but also by retail deposits, corporate deposits, demand deposits, time deposits, and deposit costs. CMB has a deep retail customer franchise and an ability to combine personal deposits with AUM, so deposit stickiness is likely to be a credit strength. On the other hand, in China’s banking sector, the shift of deposits into time deposits, deposit rate competition, fund movement between deposits and wealth management products, and volatility in corporate deposits affect funding costs. Even if deposits are growing, higher costs reduce NIM. CMB’s NIM compression shows that deposit cost management is important, not just asset yields.

Short-term liquidity is strong. The average LCR was 175.51% in 4Q 2025, with an end-period LCR of 200.03%. The average LCR was 177.89% in 1Q 2026, with an end-period LCR of 187.29%. LCR measures resilience to short-term liquidity stress, and these levels are strong. For senior bondholders, this indicates that short-term funding stress is not the central scenario.

However, a high LCR alone does not eliminate all liquidity risks. Foreign-currency liabilities, liquidity at overseas branches, maturity concentration, wholesale market debt, collateral pledging, and regulatory constraints on liquidity transfer cannot be understood from the aggregate LCR alone. This report has not sufficiently verified the details of NSFR, currency-by-currency maturity profile, foreign-currency liquidity, or unused committed lines. These need to be checked additionally for individual foreign-currency bond investments.

In the capital structure, CET1, AT1, Tier 2, preference shares, and perpetual capital instruments should be distinguished. At end-2025, the CET1 ratio was 14.16%, the Tier 1 ratio was 16.51%, and the total capital adequacy ratio was 18.24%. At end-March 2026, they were 14.13%, 16.05%, and 17.76%, respectively. According to the 1Q 2026 report, the minimum requirements applicable to CMB were a total capital adequacy ratio of 11.25%, a Tier 1 ratio of 9.25%, a CET1 ratio of 8.25%, and a leverage ratio of 4.375%. The end-March 2026 ratios were well above these levels. Therefore, headroom above regulatory minimums is clearly present, but the ratios have declined since end-2024. This means the balance among loan growth and RWA growth, capital securities redemption, retained earnings, and dividends needs to be assessed.

Accurate assessment of regulatory capital headroom requires checking the domestic systemically important bank buffer, additional capital requirements, internal management targets, and stress test results applicable to CMB. This report has not verified those details. Therefore, while the capital ratio levels can be assessed as “sufficient”, the precise degree of regulatory headroom remains an unverified item.

Market access reinforces CMB’s credit strength. The bank is a large institution capable of issuing debt and capital securities domestically and internationally, with high market recognition as a group. However, market access is influenced by ratings, regulation, geopolitics, views on the Chinese banking sector as a whole, and the US dollar funding environment. Because CMB’s deposit base is strong, dependence on wholesale funding is limited, but for foreign-currency bonds and junior securities, deterioration in market conditions directly affects spreads and call expectations.

The conclusion on capital and liquidity is clearly positive for senior credit. A large deposit base, low loan-to-deposit ratio, high LCR, and sufficient CET1 ratio support issuer credit. However, for junior securities and long-term credit direction, capital ratio decline, NIM compression, RWA growth, redemption of capital securities, foreign-currency liquidity, and individual maturity profiles need to be monitored continuously.

7. Rating Agency View

Rating agency views are useful as guideposts for assessing CMB’s issuer credit, but this report has not reviewed all of the latest primary international rating reports. Therefore, this rating section separates confirmed public information, old information or information that is not suitable as a continuing rating reference, and unverified items.

This limitation does not make credit judgement itself impossible. CMB’s official financials, capital, liquidity, and asset quality alone allow the framework of issuer credit to be assessed. However, the rating level, security-class-specific notching, incorporation of government support, BCA or standalone credit assessment, downgrade triggers, and AT1 / Tier 2 rating logic should always be confirmed before investing in individual bonds.

In this report’s analysis, the rating confirmation should focus on the following points. First, the strong retail and deposit franchise, profitability, asset quality, provisioning, capital, and liquidity. Second, risks for China’s banking sector as a whole, including low interest rates, property, LGFVs, consumer credit, and policy-driven earnings pressure. Third, systemic importance and government support expectations. Fourth, for junior securities, loss-absorption ranking and potential regulatory treatment.

The credit view in this report does not rely on unverified rating agency reports. Senior credit as viewed from public financials is strong, but the latest issuer rating, senior debt rating, Tier 2 / AT1 rating, outlook, and government support assessment should be confirmed before relative value and security-specific investment decisions. High domestic ratings or domestic-scale ratings should not be mechanically equated with high international investment-grade ratings.

8. Credit Positioning

CMB is naturally positioned between China’s large state-owned banks and other joint-stock banks. It does not have the same degree of policy support, scale, or government relationship as the big four state-owned banks, but it is stronger than typical small and mid-sized banks or weaker joint-stock banks in terms of retail franchise, profitability, asset quality, deposits, provisioning, and liquidity. That said, CMB is not immune to the low interest rates, property, LGFV, consumer credit, and policy-driven fee and rate pressure affecting China’s banking sector.

A simplified fundamental positioning is as follows. Because audited 2025 peer figures on the same basis have not all been reacquired, this section is limited to CMB’s verified figures and qualitative comparison.

Live spreads, CDS, bond prices, OAS, and same-maturity bond comparisons have not been checked in this report. Therefore, this report does not make buy, sell, hold, cheap, or rich judgements. From a fundamental relative positioning perspective, CMB’s senior credit can be placed near the top of China’s joint-stock banks. For Tier 2 and AT1, however, investors must check not only issuer strength, but also security ranking, calls, regulation, capital ratios, investor base, and liquidity.

The practical positioning in this report is to classify CMB as a “strong large Chinese bank credit” for senior debt, and as “bank capital securities where the issuer is strong, but low interest rates, capital ratio decline, property, and consumer credit need to be priced in” for junior securities. Separating issuer credit from security-specific risk is particularly important in investment decisions on CMB.

9. Key Credit Strengths and Constraints

CMB’s credit profile has clear supports and constraints. The supports are retail and wealth management, low-cost deposits, high profitability, thick provisions, high liquidity, and sufficient regulatory capital. The constraints are NIM compression, property, retail credit, declining capital ratios, lack of explicit government support, and unverified individual bond structures.

The main credit strengths are as follows.

The main constraints are as follows.

Combining these strengths and constraints, CMB is an issuer that is “a strong bank, but with insufficient evidence to pre-emptively price in credit improvement.” Profitability, deposits, provisions, and liquidity are strong. At the same time, NIM compression, retail credit, property, and declining capital ratios cannot be ignored at present. Senior credit is strong, but junior securities still leave issues that warrant a risk premium.

10. Downside Scenarios and Monitoring Triggers

CMB’s downside is less about an acute liquidity crisis and more about a scenario in which earnings pressure and asset quality deterioration persist for several years, gradually eroding the strength of capital ratios. Given the deposit base and LCR, short-term funding stress is not the central scenario. However, bank credit is not determined by short-term liquidity alone. If NIM, credit costs, capital, regulation, and investor sentiment deteriorate at the same time, the assessment of senior credit would also weaken, while junior securities would be affected more severely.

There are six main deterioration paths. Continued NIM compression would weaken internal capital generation, while a prolonged high NPL ratio in loans to the real estate development industry would leave a provisioning burden. In card, micro and small enterprise, and consumer loans, weak employment, income, and consumption can appear quickly in delinquencies. LGFV / local government-related exposure and off-balance-sheet products remain sector-wide potential risks even where detailed balances are unverified. In addition, if RWA growth, higher credit costs, dividends, and capital securities redemptions occur at the same time, capital headroom would narrow. For foreign-currency bonds and branch-issued bonds, China sovereign risk, geopolitics, and the US dollar funding environment can transmit to market valuation.

The main monitoring items are as follows.

There is also upside. If NIM compression stops, card, micro and small enterprise, and property NPLs stabilise, the CET1 ratio is maintained in the 14% range, and retail AUM and deposits continue to grow, CMB’s high profitability and retail franchise are likely to be re-rated positively. In that case, senior credit would maintain a relatively strong position among Chinese joint-stock banks. As of May 2026, however, it is still too early to say that the direction of NIM and capital ratios has turned toward improvement.

11. Credit View and Monitoring Focus

Based on public financials and issuer fundamentals, the current credit strength is at a level where senior issuer credit can reasonably be assessed as investment-grade-equivalent bank credit. This is the analytical positioning in this report and is not a rating determination based on review of the latest primary reports from S&P Global, Moody’s, and Fitch. Supported by retail and wealth management, deposits, profitability, provisions, liquidity, and sufficient regulatory capital, CMB has a top-tier issuer credit profile among Chinese joint-stock banks. The direction of credit quality is closer to stable, but not improving. The bank is currently absorbing NIM compression, declining capital ratios, and property / retail credit risks with a strong base. The probability of rapid near-term credit deterioration is not high, but if NIM compression, deterioration in cards, micro and small enterprise loans, and property, and CET1 decline occur simultaneously, the current headroom would need to be reassessed.

This credit strength is supported by deposit-led funding, retail AUM, personal and corporate customer franchises, high profitability, thick provisions, and high LCR. In bank credit, the key is not avoiding losses entirely, but having stable funding and earnings sufficient to absorb losses. CMB is strong in this respect. The end-2025 NPL ratio of 0.94%, provision coverage of 391.79%, CET1 ratio of 14.16%, and high LCR show sufficient defences for senior bondholders.

The main constraint, however, is earnings pressure from the low-rate environment and changes in the composition of risk. NIM declined to 1.83% in 1Q 2026, while ROAA and ROAE are lower than before. The NPL ratio for loans to the real estate development industry is higher than the overall ratio, and card and micro and small enterprise loans are high within retail. Even if the overall NPL ratio is low, the sources of credit costs are visible. If these deteriorate at the same time, CMB’s earnings and capital headroom would gradually be eroded.

By security class, senior debt and junior securities should be clearly separated. Senior debt is supported by CMB’s strong issuer credit, deposits, liquidity, and capital. By contrast, Tier 2, AT1, perpetuals, and preference shares are backed by the strength of the issuer, but are more directly affected by capital ratios, regulation, loss absorption, calls, coupon cancellation, and individual terms. In addition, for foreign-currency bonds and branch-issued bonds, the strength of the renminbi deposit base should not be read directly into foreign-currency liquidity; currency-specific liquidity, maturity profiles, and branch / subsidiary fund transfer constraints need to be verified. CMB’s CET1 ratio is strong but declining, so this direction cannot be ignored for junior securities.

Government support requires a distinction between expectation and guarantee. CMB is an important large bank in China’s banking system, and regulatory action is more likely to be expected under extreme stress. However, its debt is neither sovereign debt nor explicitly government-guaranteed debt. Even if rating agencies incorporate a degree of support, investors need to verify the issuer’s own profitability, asset quality, capital, and liquidity.

The conditions for an improving credit view would be a halt in NIM compression, peak-out in retail credit and property-related NPLs, maintenance or improvement of the CET1 ratio in the 14% range, and sustained high levels of LCR and deposits. In particular, if NPLs in cards, micro and small enterprise loans, and real estate development loans stabilise, and special mention loans and overdue loans do not increase, CMB’s high profitability would be easier to re-rate. Conversely, if NIM compression, higher credit costs, CET1 decline, and deterioration in the foreign-currency funding environment coincide, senior credit may remain resilient, but junior securities and market valuation are likely to deteriorate.

The conclusion of this report is that CMB should be positioned as a “top-tier Chinese joint-stock bank credit with a strong retail and deposit franchise.” Senior debt has a strong issuer-credit foundation. For junior securities, however, the strength of the issuer name alone is not enough; earnings power under low interest rates, the direction of capital ratios, property and consumer credit, and individual terms should be reflected in required return. This report does not make a relative value judgement because live spreads have not been checked, but the central fundamental question is how long CMB can continue to absorb low interest rates and credit risk with its high profitability and deposit franchise.

12. Short Summary & Conclusion

China Merchants Bank is a large Chinese joint-stock commercial bank with strengths in retail finance, wealth management, and low-cost deposits. Its senior issuer credit is supported by high profitability, thick provisions, and strong liquidity. At the same time, NIM compression, the downward direction of capital ratios, NPLs in loans to real estate developers, and retail credit risk in card and micro and small enterprise loans constrain the ability to anticipate credit improvement. Senior debt can be treated as strong bank credit, but for junior securities such as Tier 2 and AT1, capital ratios, loss-absorption ranking, calls, and individual terms need to be checked separately.

13. Sources

Company and primary sources

• China Merchants Bank Co., Ltd., Annual Report 2025, H share announcement package, dated March 27, 2026. Used to verify full-year 2025 total assets, loans, deposits, net operating income, earnings, NIM, ROAA, ROAE, asset quality, provisions, capital ratios, LCR, segments, retail AUM, customer numbers, and real estate-related exposure.
  https://www.rns-pdf.londonstockexchange.com/rns/5151Z_1-2026-4-7.pdf
• China Merchants Bank Co., Ltd., First Quarterly Report of 2026, dated April 28, 2026. Used to verify end-March 2026 total assets, loans, deposits, 1Q earnings, NIM, NPLs, provisions, capital ratios, LCR, domestic preference share redemption, and 1Q real estate-related exposure.
  https://s3gw.cmbimg.com/lb5001-cmbweb-prd-1255000097/CIOAMananger/20260428/b501769b-919b-4bb6-81b0-27bd0b1a971e.pdf

Rating and external sources

• CSPI Ratings, "CSPI Ratings Affirms and Withdraws A+ Rating on China Merchants Bank Co., Ltd.", March 27, 2026. Used to confirm the rating action and that it should not be treated as a continuing rating because it was withdrawn.
  https://www.cspi-ratings.com/rating-actions/rating/CSPI-Ratings-Affirms-and-Withdraws-A-Rating-on-China-Merchants-Bank-Co-Ltd.html
• Fitch Ratings public release reproduced by MarketScreener, "Fitch Affirms China Merchants Bank at A-; Outlook Negative", August 20, 2024. Used as supporting confirmation of the Fitch rating. However, because it is not the latest primary report as of May 2026, it is not used as a central basis in the body of this report.
  https://www.marketscreener.com/quote/stock/CHINA-MERCHANTS-BANK-CO-L-6495751/news/Fitch-Affirms-China-Merchants-Bank-at-A-Outlook-Negative-47690556/
• S&P Global Ratings, "Ratings Component Scores For The Top 200 Banks Globally", April 2026. Used to confirm the location of CMB’s inclusion in the global major bank rating component list. The original text of the detailed individual rating report has not been verified.
  https://www.spglobal.com/ratings/en/regulatory/article/ratings-component-scores-for-the-top-200-banks-globally-april-2026-s101679547

Internal working materials referenced

• Internal writing plan, structured metrics file, source registry, issuer notes, and compressed knowledge snapshot were used for drafting discipline and future continuity. They are not public source documents.

Unverified / Pending items