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

AI Capital Optimization: How Can It Enhance Long-Term Shareholder Value at China Merchants Bank?

Produced by | Zhongfang.com

Reviewed by | Li Xiaoyan

On March 13, “Retail King” China Merchants Bank (600036.SH) announced its plan to fully redeem the 27.5 billion yuan of domestic preferred shares “Zhaoyin You 1,” issued in 2017, by April 15, 2026. This move has received approval from the China Banking and Insurance Regulatory Commission. As a benchmark among domestic joint-stock banks, this significant redemption, combined with the steady signals from the 2025 earnings report and the improvement of its 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. In the context of profit pressures in the banking industry and refined capital management, China Merchants Bank’s series of actions focus on cost efficiency and long-term value enhancement, providing a vibrant example for high-quality industry development.

The preferred shares to be redeemed, “Zhaoyin You 1,” were issued in December 2017, with an issuance of 275 million shares, raising 27.5 billion yuan, and a coupon rate of 4.81%. Under current market interest rate declines and the continuous reduction of bank financing costs, this dividend rate is relatively high, representing a fixed financial burden. Calculations show that full redemption could reduce the bank’s annual preferred share dividend payments 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 move for China Merchants Bank to proactively optimize its capital structure and improve capital efficiency. Preferred shares, as a Tier 1 capital instrument, supplement capital but also impose ongoing dividend pressures. Currently, the bank’s capital strength is robust, and its operating cash flow is ample. Redeeming high-cost preferred shares does not rely on external financing and will not affect normal lending and business operations. It also signals 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 industry’s mainstream trend of “redeeming old debt for new, reducing costs and increasing efficiency.” This not only alleviates long-term financial burdens but also optimizes capital return metrics, laying a foundation for ROE recovery and valuation growth. This move is not just a financial optimization but also a direct reflection of the bank’s commitment to shareholder value and refined management.

On January 23, China Merchants Bank released its 2025 performance report. Amid slow macroeconomic recovery and increased financial market volatility, the bank delivered a stable yet progressive performance. Total operating income reached 337.532 billion yuan, a slight increase of 0.01% year-over-year; net profit attributable to the parent was 150.181 billion yuan, up 1.21%, achieving dual growth in revenue and profit, ending a period of continuous revenue decline, with signs of an operational turning point.

Regarding income structure, net interest income remains the core support. In 2025, net interest income was 215.593 billion yuan, up 2.04% year-over-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, which reduced bond and fund investment returns—common industry issues rather than individual operational weaknesses.

In terms of asset quality and scale expansion, China Merchants Bank continues to perform well. As of the end of 2025, 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, up 7.56% year-over-year, with steady and orderly growth providing ample room for future business expansion.

Objectively, China Merchants Bank’s revenue grew by only 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. On the positive side, this reflects the bank’s rational choice to adjust its operating pace and respond to external environment changes. With bond markets expected to recover in 2026, non-interest income has room for rebound. Coupled with profit gains from the preferred share redemption, the bank’s revenue growth is expected to break out of the “micro-increase” dilemma and resume steady upward momentum.

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

As a leader in retail banking, China Merchants Bank adheres to a “self-operated + partnership” model for internet loans: on one hand, its core “Lightning Loan” product relies on big data and risk control models to provide high-quality, fully digital, efficient financing services to individual customers; on the other hand, through compliant cooperation with 17 institutions, it expands its inclusive finance coverage, combining the bank’s capital and risk control advantages with partners’ scene and customer acquisition strengths to precisely serve small micro-business owners and consumer finance needs.

All 17 partner institutions are industry-leading, well-qualified, and compliant risk controllers, aligning with regulatory requirements for internet lending and credit assistance. Under the industry’s accelerated regulation of internet lending, China Merchants Bank’s careful selection of partners, optimized processes, and strengthened risk control loop not only maintains risk bottom lines but also enhances service efficiency and coverage of retail credit, further consolidating its “Retail King” competitive edge.

Overall, China Merchants Bank’s recent preferred stock 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; its 2025 performance demonstrates strong operational resilience, with high-quality assets and steady scale growth; and its 17 internet loan partners solidify its digital retail and inclusive finance foundation.

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 controls, and a large retail customer base, China Merchants Bank has strong cyclical resilience. Long-term, with ongoing capital structure optimization, market recovery, and digital business expansion, the bank’s profitability and growth momentum are expected to further improve.

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