Save 1.3 Billion Annually! CMB Makes Major Move to Redeem 27.5 Billion Preferred Shares, Direct Profit Boost?

Listing | China Visitor Network

Review | Li Xiaoyan

On March 13, China Merchants Bank (600036.SH), known as the “Retail King,” announced its plan to fully redeem the 27.5 billion yuan domestic preferred shares “Zhaoyin You 1,” issued in 2017, by April 15, 2026. This move has received approval from the State Administration of Financial Supervision and Administration. As a benchmark among domestic joint-stock banks, this significant redemption of preferred shares, combined with the steady signals from the 2025 performance forecast and the improvement of the internet loan cooperation matrix, demonstrates the bank’s proactive efforts to optimize its capital structure, maintain its retail core business, and deepen digital inclusive finance with strategic resilience and operational toughness. Amid industry profit pressures and refined capital management, China Merchants Bank’s series of actions focus on cost reduction and efficiency enhancement while aiming for long-term value growth, providing a vibrant example for high-quality industry development.

The preferred shares targeted for redemption, “Zhaoyin You 1,” were issued in December 2017, with an issuance of 275 million shares and raising 27.5 billion yuan, with a coupon rate of 4.81%. In the current environment of declining market interest rates and continuously lowering bank financing costs, this dividend rate is relatively high, creating a rigid financial burden. Calculations show that full redemption could reduce the bank’s annual preferred share dividend expense by 1.323 billion yuan, directly increasing net profit and significantly improving returns for common shareholders.

From a capital management perspective, this redemption is a key measure for China Merchants Bank to proactively optimize its capital structure and improve capital efficiency. As an additional Tier 1 capital instrument, preferred shares supplement capital but also impose ongoing dividend pressures. Currently, the bank has strong capital strength and ample operating cash flow. Redeeming high-cost preferred shares does not rely on external financing and will not affect normal lending and business operations, reflecting management’s confidence in its capital adequacy and future prospects.

Compared to some banks in the market that passively respond to capital constraints, China Merchants Bank’s proactive redemption of high-yield preferred shares aligns with the current industry trend of “redeeming old for new and reducing costs for efficiency,” reducing long-term financial burdens and optimizing capital return metrics, laying a foundation for ROE recovery and valuation enhancement. This move is not only a financial optimization but also a direct reflection of the bank’s commitment to shareholder value and refined management.

On January 23, 2023, China Merchants Bank released its 2025 performance forecast, delivering a steady and quality-focused report amid slow macroeconomic recovery and increased financial market volatility. The bank achieved total operating income of 337.532 billion yuan, a slight increase of 0.01% year-on-year; net profit attributable to shareholders was 150.181 billion yuan, up 1.21%, marking both revenue and profit growth, ending previous consecutive declines and gradually revealing an operational turning point.

Regarding income structure, net interest income remains the core support. In 2025, net interest income reached 215.593 billion yuan, up 2.04% year-on-year, highlighting the bank’s core advantage as the “Retail King”: leveraging a large retail customer base and low-cost deposit gathering, combined with strict cost control and efficient asset operation. Despite industry-wide net interest margin compression, interest income maintained steady growth. Non-interest income declined by 3.38% mainly due to bond market fluctuations and the “siphoning effect” of A-share funds in 2025, leading to reduced bond and fund investment returns—an industry-wide issue rather than a shortcoming specific to the bank.

In terms of asset quality and scale expansion, China Merchants Bank continued to perform well. As of the end of 2025, the non-performing loan ratio was 0.94%, down 0.01 percentage points from the previous year, maintaining a high-quality level below 1% for multiple years. The loan loss reserve coverage ratio was 391.79%, slightly lower than the previous year but still far above regulatory requirements and industry averages, demonstrating strong risk mitigation capacity. Meanwhile, total assets exceeded 13 trillion yuan, reaching 13.07 trillion yuan, a 7.56% increase year-on-year, with steady and orderly growth providing ample room for future business expansion.

Objectively, China Merchants Bank’s revenue in 2025 grew only marginally by 0.01%, with short-term pressure on non-interest income and a moderate reduction in the loan loss reserve ratio to smooth profits—these are temporary operational challenges. However, from a positive perspective, this reflects the bank’s rational choice to actively adjust its operational pace in response to external changes. With the bond market expected to recover in 2026, non-interest income has room for recovery. Coupled with the profit increase from the preferred share redemption, the bank’s revenue growth is expected to break out of the “slight increase” dilemma and return to a steady upward trajectory.

In the wave of digital transformation in retail finance, China Merchants Bank continues to improve its internet loan business layout. Its official website shows that it has partnered with 17 internet loan institutions, including leading internet platforms, licensed consumer finance companies, and technology service providers, forming a compliant, orderly, and diversified digital inclusive finance ecosystem.

As a leader in retail banking, China Merchants Bank adheres to a “self-operated + partnership” development model for internet loans: on one hand, offering core products like “Lightning Loan” based on big data and risk control models to provide pure credit, online, high-efficiency financing services to quality individual customers; on the other hand, expanding inclusive finance coverage through compliant cooperation with 17 institutions, combining the bank’s capital and risk control advantages with partners’ scene and customer acquisition strengths to precisely serve small and micro enterprises and individual consumption needs.

All 17 cooperative institutions disclosed are high-quality, well-regulated entities in the industry, complying with regulatory requirements for internet lending and loan facilitation, reflecting the bank’s compliance-first and risk-control-oriented management philosophy. Amid the industry’s accelerated regulation of internet lending, China Merchants Bank has selected partners carefully, optimized business processes, and strengthened risk control loops, effectively maintaining risk bottom lines while improving service efficiency and coverage of retail credit, further consolidating its competitive edge as the “Retail King.”

Overall, China Merchants Bank’s recent preferred share redemption, performance, and business layout outline a clear development logic: refining capital management to reduce costs and increase efficiency; focusing on retail core business to strengthen the fundamental platform; and normalizing digital inclusive finance to expand growth space. Redeeming 27.5 billion yuan of high-yield preferred shares saves over 1.3 billion yuan annually in financial costs, directly boosting profitability; 2025 performance demonstrates strong operational resilience, with high-quality assets and steady scale expansion; and 17 internet loan partners solidify the foundation for digital retail and inclusive finance development.

In the short term, industry-wide pressures such as fluctuations in non-interest income and narrowing net interest margins remain. However, backed by low-cost liabilities, strict risk control systems, and a large retail customer base, China Merchants Bank has strong cyclical resilience. In the long term, with ongoing capital structure optimization, a recovering financial market, and expanding digital business, the bank’s profitability quality and growth momentum are expected to further improve.

As a benchmark for retail transformation in China’s banking industry, China Merchants Bank consistently responds to market changes with prudent management and innovative development. The recent redemption of preferred shares to optimize capital structure, combined with deep deployment in retail and digital inclusive finance, not only demonstrates the responsibility and commitment of a leading bank but also creates more sustainable value for ordinary shareholders and customers.