By Jiahui Huang

China Merchants Bank's shares were higher after the Chinese lender surprised with a boost in its dividend ratio while annual earnings came in largely as expected.

The bank's Hong Kong-listed shares were 5.2% higher at HK$31.55 Hong Kong dollars (US$4.03) Tuesday, making it the top gainer among Hang Seng Index constituents. Its Shanghai-listed shares were up 3.5%.

China Merchants Bank posted annual results late Monday that were in line with preliminary numbers released in January, with profit rising 6.2% even as annual net operating income fell for the first time since 2009. The topline came in 1.6% lower partly due to a drop in non-interest income. China's aggressive cuts on loan prime rate in 2023 and weak overall real loan demand pressured the bank's non-interest income.

The bank also boosted its dividend payout ratio to 35% of net profits, up from 33% in 2021 and 2022.

Citi analysts called that move "a pleasant surprise," saying in a research note that it took dividend yields for A-shares and H-shares to 6.3% and 7.1%, respectively, and made the yield on A-shares fourth highest among China-listed banks it covers.

Citi kept a buy rating on the stock and a HK$35.52 target price, adding that continued property asset improvement was another bright spot, with non-performing loan ratio falling in the second half of the year.

UOB Kay Hian research analyst Kenny Lim said the bank's lower topline was within expectations given industry-wide net-interest margin compression and lower fee income. "We believe CMB's revenue downside pressure [will] persist given the prolonged margin squeeze," Lim said.

Nomura analysts said the bank's fourth quarter operating income came up short of their estimates, but they kept their buy rating, saying they still prefer the stock, supported by its high return on equity and the bank's ability to enhance internal capital.

Write to Jiahui Huang at

(END) Dow Jones Newswires

03-26-24 0016ET