China Merchants Bank's bloated retail loan book shields against trade conflict

Retail loans accounted for half of total lending as of end-December.

The new loans extended by China Merchants Bank (CMB) is expected to remain skewed toward retail lending for the second half of 2018 in a move that would provide the bank with a level of protection against escalating trade tensions, according to UOB Kay Hian.

CMB’s retail loans exceed corporate loans with the former accounting for 50.1% of total loans as of end-December.

This comes as the bank is working to reduce its exposure to medium and small-sized corporates in the export sector which are more vulnerable in the US-China trade war and beefing up its retail segment.

Loans to large-sized enterprises increased 10.7% HoH whilst loans to SMEs contracted 10.9% HoH.

On the other hand, credit card overdraft is expected to pick-up in tandem with seasonally stronger consumer spending in H2 2018 as CMB is expected to step up disbursement of micro-finance loans to support growth in the real economy.

“Management also expects a slight increase in volume for residential mortgages,” Jonathan Koh, UOB analyst said in a statement.