Citibank: China CITIC Bank (00998) achieved impressive results in the third quarter, benefiting from cost efficiency improvements, profit growth trends superior to management guidance

The Zhitong Finance App learned that Citibank (00998) released a research report saying that the third quarter results of China CITIC Bank (00998) benefited significantly from improved cost efficiency, leading management guidance in profit growth; the bank maintained a “buy” rating, with a target price of HK$9.78.

According to the bank, China CITIC Bank's operating profit before provision for the first nine months increased 7.2% year over year to 117.7 billion yuan, and profit increased 3.6% year over year to 55.3 billion yuan, equivalent to 76% of the market forecast for the full year 2026. Operating profit before provision for the third quarter increased 10.4% year on year (4.7% year on year compared to the second quarter), benefiting from strong transaction earnings performance at a low base and improved cost efficiency; profit for the third quarter increased 4.6% year over year (compared to the second quarter, up 3.2% year on year), and the slow growth rate was mainly due to rising credit costs. The return on assets and return on equity for the third quarter were the same year on year and fell 8 basis points, respectively, to 0.68% and 9.4%, respectively.

In terms of positive factors, the bank indicated that loan growth in the third quarter was resilient, falling 0.8% quarterly and rising 3.7% year on year; deposits rose 1.3% quarterly and 4.3% year on year; and the loan to deposit ratio fell 1.9 percentage points to 93.3% from quarter to quarter. In the third quarter, transaction revenue increased 56.9% year on year, accounting for 13.4% of revenue; the cost to revenue ratio fell 4.2 percentage points year on year to 29.4%, and operating expenses fell 9.2% year on year.

In terms of negative factors, the bank estimates that net interest spreads fell 7 basis points to 1.56% quarterly; commission revenue fell 6.4% year on year in the third quarter; the non-performing loan ratio rose 0.1 basis points to 1.15% from quarter to quarter, credit costs were 1.19% (up 14 basis points year over year), and the non-performing loan provision coverage rate was 201.9%.

The bank believes that the increase in operating profit before provision for the third quarter was higher than the bank's expectations, and profit growth was generally in line with market expectations. Looking ahead, the bank believes that China CITIC Bank has high visibility and can outperform management's guidance of profit growth of about 3% in 2026 (up 3.6% year over year in the first nine months). Furthermore, if Changjiang Storage Technology Holdings is likely to go public in the fourth quarter of 2026, there may be additional room for profit growth due to China CITIC Bank holding about 4% to 5% of pre-listing shares.