In "Major Banks," China International Capital Corporation: The high dividend attribute of China Merchants Bank is expected to be gradually recognized by A-share investors

CICC published a report stating that starting from November 2023, the dividend yield of China Merchants Bank (600036.SH.HK) in A-shares will surpass that of the four major banks, while the dividend yield of China Merchants Bank (03968.HK) in H-shares will continue to be lower than that of the four major banks, which may be due to insufficient pricing brought about by a differentiated investor structure.

In the low-interest-rate era, the bank believes that China Merchants Bank not only has business growth potential but also possesses a high dividend capability. A-shares are significantly undervalued, mainly due to the revenue stability brought by a diversified business structure; low liability costs, a high-quality customer base, and professional risk control capabilities lead to more robust and predictable credit costs.

Therefore, against the backdrop of a continued low-interest-rate narrative and the rapid decline in dividend yields of traditional high-dividend targets, the bank believes that the high dividend attributes of China Merchants Bank are expected to be gradually recognized by A-share investors. A static calculation shows that if the A-share dividend yield declines to the level of the four major banks, it corresponds to an approximate 25% increase in stock price.

CICC maintains its profit forecast for China Merchants Bank and keeps the target prices for A and H shares unchanged at RMB 58.35 and HKD 60.49, respectively. The rating remains "outperform the industry."