CM Bank (HK: 03968) shares are down 5% on the back of the results announcement. The main message of which seems to be that competition is compressing interest margins in the Chinese market. Given that banks live off the net interest margin - this is what pays for everything - that's clearly not going to be good both for CM Bank and for Minaliand banks more generally.
We should note that this is CM Bank - China Merchants Bank. This is not Canadian Imperial, which trades on the TSE as the ticker CM. Don't get confused between the two, entirely different banks trading in entirely different markets.
Those results are here and the highlights are:
CM Bank results from CM Bank
Leading to this share price performance:
CM Bank share price from Hong Kong Stock Exchange
This is a 5 month low for the blue chip stock and trade was heavy, up at 22 million shares.
There are good points here. While operating income is down net profits are up. One explanation for that is that they've paid attention to reducing costs. But we should always be wary of banks and their profits - how much is put into loan reserves is a major determinant of net profit. And given that loan reserves are a judgement call by management that can vary according to what they would like profits to be.
But the larger point has to be that the Chinese banking cycle is clearly very different from the English speaking world at present. We're all in a rising interest rate environment, something that's good for that net interest margin. After a decade and more of compression margins are increasing. This isn't happening in China - far from it, competition is compressing those margins. Given that difference in cycles we may or may not want to be in either set of banks - allocations should probably change on this information at least.