We expect 1Q22 earnings to grow 13.2% YoY
China Merchants Bank (CMB) will release its 1Q22 financial statements on April 22. We estimate its revenue rose 9.3% YoY and net profit attributable to shareholders grew 13.2% YoY in 1Q22. We think its assets increased steadily, net interest margin (NIM) remained higher than many banks, and revenue growth slowed as the wealth management (WM) business was under pressure. That said, we think its earnings steadily rose thanks to a lower cost to income ratio (CIR) and decreased credit costs. We believe its earnings growth was slow in 1Q22, and will likely accelerate in following quarters. Looking ahead, we expect its WM business to improve and ROE to keep rising in 2022. We suggest watching the increased investment value of CMB in the long term, driven by the execution of its WM strategy.
　　Trends to watch
　　Volume and price stable; net interest income to maintain double-digit growth.
　　Growth of intermediary business revenue slows due to fluctuations in WM business.
　　We see potential for reducing business and credit costs.
　　We estimate earnings grew 13.2% YoY in 1Q22.
　　Financials and valuation
　　We keep our earnings forecasts unchanged. CMB A-shares are trading at 1.4x 2022e and 1.3x 2023e P/B, and 8.5x 2022e and 7.4x 2023e P/E. CMB H-shares are trading at 1.6x 2022e and 1.4x 2023e P/B, and 9.3x 2022e and 8.1x 2023e P/E. We maintain our target prices at Rmb82.51 for A-shares (2.5x 2022e and 2.3x 2023e P/B, 15.0x 2022e and 13.0x 2023e P/E), and at HK$98.85 for H-shares (2.6x 2022e and 2.3x 2023e P/B, 15.5x 2022e and 13.4x 2023e P/E). Our TPs offer 76.2% upside for A-shares and 65.4% upside for H-shares. Maintain OUTPERFORM ratings.
　　Risks
　　Unexpected deterioration in macroeconomic environment; lower-than-expected WM investment; failure to execute strategies.