China Minsheng Bank: Near-term NIM stabilization, while retail risk and provisions remain key to earnings recovery

Overview

This report is a meeting memo prepared by Goldman Sachs after hosting the IR team of China Minsheng Bank at Asia Financials Corporate Day, covering NIM, loan and deposit structure, fee and investment income, asset quality, and the earnings and capital outlook. The core message is that the bank's near-term operating environment is stabilizing at the margin, with lower funding costs and loan mix optimization supporting NIM; however, medium-term earnings recovery still depends on resolving retail and real-estate-related risks and whether recurring non-interest income such as wealth management can offset volatility in capital markets income.

Core views

First, NIM is stable in the near term but increasingly dependent on the asset side over the medium to long term. The company said NIM has stabilized and is expected to remain around 1.43% for full-year 2026 relative to 1Q26, but the positive impact from lower deposit costs will weaken after 2027. Second, loan growth remains prudent, with the mix shifting toward higher-yield assets; the decline in loan balance in 2025 mainly reflected the proactive reduction of about Rmb 90bn in low-yield bills. Third, the stability of non-interest income mainly comes from settlement, custody, and wealth management, with recurring fees accounting for a relatively high share. Fourth, asset quality remains the most important constraint, with no broad-based improvement yet in retail risk, while credit card and business loan risks remain elevated. Fifth, the capital buffer is relatively adequate, with CET1 at 9.3%, but the turning point for ROE depends on the extent of resolution of real estate and retail risks.

Analysis framework

The report takes the form of a meeting memo, mainly summarizing the IR team's qualitative judgments on operating trends and financial metrics, and analyzing them by banking business line: liability-side funding cost, asset-side loan pricing and structure, sources of non-interest income, investment portfolio accounting classification, asset quality migration, provisions, and capital adequacy ratio. As the company is Not Covered, the report does not constitute a formal rating update and does not provide a target price.

Methodology notes

• Meeting memoAsia Financials Corporate Day Takeaways

  Summary of management/IR views

  The report explicitly states that, unless otherwise indicated, all comments are from the bank itself, so the conclusions should be understood as company-guided operating outlook rather than independent model forecasts from a full-coverage report.

• Bank fundamentals analysisNIM and balance sheet structure analysis

  Net interest margin is jointly determined by funding costs, asset yields, loan mix, and the competitive environment

  The report breaks NIM into liability-side deposit repricing and asset-side allocation to higher-yield loans, and emphasizes that after the liability-side tailwind weakens beyond 2027, asset-side competition and retail recovery will become more important.

• Risk analysisAsset quality and provisioning analysis

  NPL formation, provision expenses, and NPL coverage determine banks' earnings elasticity

  The report focuses on portfolios including real estate development loans, mortgages, business loans, credit cards, and consumer loans, and notes that NPL formation and provision expenses are expected to rise slightly year over year in 2026.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China Minsheng Bank H-shares (1988.HK)

  One of the securities covered by the report

  Strengths

  Near-term NIM stabilization, lower deposit costs, faster wealth management growth, and CET1 above the regulatory minimum.

  Weaknesses

  High pressure on retail asset quality, continued exposure of credit card and business loan risks, and earnings growth affected by provisions and volatility in capital markets income.

  Comparison

  The company said deposit cost declines are faster than peers, and there is no large-scale deposit maturity pressure in 2026 like some competitors; however, the NPL coverage ratio still only meets regulatory requirements, though the gap with peers has narrowed.

  Risks

  Elevated volatility in retail risk, slower-than-expected disposal of real estate loans, loss of liability-side support for NIM after 2027, and refinancing difficulty.

• China Minsheng Bank A-shares (600016.SS)

  A-share security of the same bank

  Strengths

  Shares the same fundamentals as the H-shares, with capital buffer and wealth management growth as positives.

  Weaknesses

  The turning point for earnings and ROE is still constrained by asset quality and the provisioning path.

  Comparison

  The disclosed A-share price is Rmb3.41 and the H-share price is HK$3.27; the report does not provide relative valuation or cross-market spread analysis.

  Risks

  Both A-shares and H-shares face the same bank-specific fundamental risks, while market valuation and liquidity conditions may differ.

Key data

• 2026 NIM outlookRemain stable versus about 1.43% in 1Q26The company expects full-year NIM to remain stable, with small quarter-to-quarter fluctuations.
• Annual maturing depositsAbout Rmb 400+bnThe company said the annual volume of maturing deposits is stable, which helps smooth downward repricing on the liability side.
• 2025 reduction in low-yield billsAbout Rmb 90bnThe slight decline in loan balance mainly came from proactive cuts to low-yield bills.
• Remaining core bill balanceAbout Rmb 100+bnThe company believes the remaining balance is relatively core, leaving limited room for further material decline.
• Mortgage loan portfolioMore than Rmb 500bnAbout 40%-50% of this consists of mortgages newly originated in 2024-2025, indicating a relatively young seasoning profile.
• Loan-to-deposit ratioAbout 102%-103%The company's focus is not simply to reduce the loan-to-deposit ratio, but to increase the share of loans in assets and reduce reliance on interbank funding.
• Growth in HNW client AUM and customer countAbout 20%Wealth management is viewed as an important growth engine in 2026.
• Equity investment portfolioAbout Rmb 20bnMeasured at market value, with relatively high unrealized gains in 2025 creating a high base.
• Trading book sizeAbout Rmb 300bnThe FVTPL account is relatively small.
• NPL coverage ratio140%-145%The company said this meets regulatory requirements and that the gap with peers has narrowed.
• CET19.3%Above the 7.75% regulatory minimum, implying limited near- to medium-term capital replenishment pressure.

Impact & implications

For investment judgment, the bank's near-term attractions are NIM stabilization, wealth management growth, and the capital buffer; however, valuation and ROE recovery still require monitoring of whether retail risk materially eases, whether high-risk real estate loans are fully resolved, and whether provisions continue to erode earnings. As this report is a Not Covered meeting memo, it should not be directly interpreted as a formal buy or sell recommendation from Goldman Sachs.

Risks

• Retail risk remains elevated, with continued exposure in credit card and business loan risk.
• NPL formation and provision expenses are expected to rise slightly year over year in 2026, which may constrain profit growth.
• Real estate development loans still require continued disposal and charge-offs.
• Support for NIM from lower deposit costs is expected to weaken after 2027.
• Volatility in capital market performance may limit the sustainability of strong growth in investment income contribution to revenue.
• The company views refinancing as relatively difficult due to dispersed ownership structure, relatively weaker shareholder support, and the current low valuation.

What to watch

• Whether full-year 2026 NIM can remain close to the roughly 1.43% level in 1Q26.
• After the loan mix tilts toward SMEs and retail customers, whether the yield uplift exceeds the additional credit risk.
• Whether NPL formation trends in credit cards, business loans, and mortgages show a clear inflection point.
• Whether roughly 20% growth in wealth management AUM and customer count can translate into stable fee income.
• Progress in disposing of and charging off high-risk real estate loans.
• Whether provision expenses stabilize after high growth in 1Q26.
• Whether CET1 remains consistently above regulatory requirements without the need for near- to medium-term capital replenishment.