Analysis of China Merchants Bank (600036.SH), a Hot Stock: Investment Opportunities Highlighted by High Dividend Value and Bullish Institutional Outlook

China Merchants Bank (600036.SH) has become a hot stock due to a combination of multiple factors. First, although A-shares started 2026 on a bullish note, the banking sector moved downward against the trend. As of January 19, the banking index had fallen for 4 consecutive days, with a 5-day return of -3.49%[4]. Against the backdrop of capital flowing to high-elasticity growth sectors, the banking sector experienced periodic capital outflows. As a high-dividend target, China Merchants Bank’s dividend yield of over 7.5% is particularly attractive to capital seeking stable returns in a low-interest rate environment[1].

Second, on January 16, 2026, China Merchants Bank’s first interim dividend was officially implemented, with a proposed pre-tax cash dividend of approximately RMB 25.548 billion. The 35.02% payout ratio demonstrates its emphasis on shareholder returns[5]. Notably, since November 2023, the dividend yield of China Merchants Bank’s A-shares has surpassed that of the Big Four Banks, a change that further highlights its high-dividend attribute[2].

Third, at the close of trading on January 14, 2026, the number of sell orders at the best ask price for China Merchants Bank reached 1.6402 million lots, equivalent to approximately RMB 6.57 billion. This phenomenon of large sell-side orders appeared in multiple leading stocks on the same day, triggering extensive market discussions and attention[6]. Such abnormal trading behavior often signals position adjustments by institutional investors or periodic changes in market sentiment.

Institutions show a clear bullish bias towards China Merchants Bank. Among 28 analysts covering the stock, 26 have given a “Buy” rating, while only 2 recommend “Sell”, forming an overall consensus of “Strong Buy”[1]. Leading institutions including CICC maintain an “Outperform” rating, with target prices of RMB 58.35 for A-shares and HKD 60.49 for H-shares[2][3].

From the perspective of institutional holdings, the characteristics of heavy positions held by the “national team” and increased holdings by foreign capital are evident. Insurance capital such as Ping An Life has intensively acquired stakes, reflecting recognition of China Merchants Bank’s investment value by long-term institutional investors[5]. Insurance capital typically prefers high-dividend, stable-dividend, and low-volatility targets, and China Merchants Bank’s characteristics perfectly align with this investment logic.

The recent pressure on the banking sector is an important context for understanding the popularity of China Merchants Bank. On one hand, the continuous decline in government bond yields has compressed banks’ net interest margin (NIM) space; on the other hand, the trend of deposits migrating to the stock market has put pressure on banks’ liability side[4]. However, institutions remain optimistic about the long-term investment value of the banking sector, believing that the revaluation of systemic risks and demand for RMB asset allocation may become catalysts for valuation repair[4].

Intra-sector differentiation within the banking sector also deserves attention. As a leading retail bank, China Merchants Bank maintains a leading edge in wealth management and digitalization, forming differentiated competition with traditional large state-owned banks. Against the backdrop of a market style that favors growth stocks, this differentiated positioning is both an advantage and a source of pressure for valuation discounts.

CICC’s research provides an important perspective on the valuation repair potential. Static calculations show that if the dividend yield of China Merchants Bank’s A-shares drops to the level of the Big Four Banks, the corresponding share price has an upside potential of about 25%[2]. This calculation is based on the following logic: currently, China Merchants Bank’s dividend yield is about 0.5 percentage points higher than that of the Big Four Banks. Against the backdrop of the continuation of the low-interest rate narrative and the rapid decline in dividend yields of traditional high-dividend targets, China Merchants Bank’s high-dividend attribute is expected to be gradually recognized by A-share investors[2].

Looking at historical data, there is a valuation gap between China Merchants Bank’s A-shares and H-shares, with H-shares usually enjoying a certain premium. With the deepening of the Stock Connect mechanism and the improvement of the institutionalization level of the A-share market, this valuation gap is expected to gradually narrow, providing potential trading opportunities for A-share investors.

The proportion of China Merchants Bank’s retail business dropped from 53.64% in 2021 to 51.80% in the third quarter of 2025, while the non-performing loan (NPL) ratio of retail loans rose from 0.81% at the end of 2021 to 1.05% in the third quarter of 2025[5]. This structural change reflects pressure in the consumer credit sector, but it is worth noting that the number of retail customers and the total retail assets under management (AUM) of China Merchants Bank have continued to grow. In the first half of 2025, retail financial income accounted for 57.16% of total income, and AUM exceeded RMB 16 trillion[7].

This phenomenon of “declining proportion but growing absolute scale” indicates that China Merchants Bank still maintains a competitive advantage in the retail banking sector, and the increase in NPL ratio is more of an industry-wide issue rather than a company-specific risk. Against the backdrop of economic recovery, the retail business is expected to stabilize and rebound.

China Merchants Bank’s investment in digital transformation deserves attention. In 2024, its investment in information technology reached RMB 13.35 billion, accounting for 4.37% of its revenue, and the replacement rate of AI customer service reached 92%[7]. This continuous technology investment not only improves operational efficiency but also enhances customer stickiness and service experience. In the wave of digitalization in the banking industry, China Merchants Bank’s first-mover advantage is expected to be transformed into a long-term competitive barrier.

The wealth management business is an important achievement of China Merchants Bank’s digital transformation. In 2025, “Great Wealth Management Income” increased by 5.45% year-on-year, hitting a three-year high[7]. The growth of this business not only contributes stable non-interest income but also reduces dependence on net interest margins, enhancing the counter-cyclical capability of the profit model.

: China Merchants Bank’s net interest margin dropped from 2.40% in 2022 to 1.87% in the first three quarters of 2025, a decrease of 53 basis points[8]. Net interest margin is a core profitability indicator for banks, and continuous narrowing directly compresses profit margins. Although this trend is industry-wide, China Merchants Bank needs to optimize its business structure and liability costs to hedge against this pressure.

: The increase in NPL ratios of credit cards and micro-loans reflects the weakness of the consumer economy. The NPL ratio of retail loans rose from 0.81% at the end of 2021 to 1.05% in the third quarter of 2025[5]. Although the absolute level is still low in the industry, the upward trend deserves attention.

: Downward economic pressure affects asset quality and loan demand, which is a common risk faced by bank stocks. The progress of government debt resolution and the situation of consumption recovery will be key observation variables.

: The recent share price has continued to pull back from the high at the beginning of the year, with the 52-week low being RMB 38.68. If this support level is broken, it may face greater adjustment pressure[1].

: In a low-interest rate environment, a dividend yield of over 7.5% is significantly attractive. For investors pursuing stable cash flow, the current valuation level provides a good allocation opportunity.

: The RSI indicator stands at 28.39, entering the oversold zone. Historically, similar situations have often been accompanied by technical rebounds[1]. There may be short-term trading opportunities.

: The 2025 annual report will be released on March 28, 2026[1]. If the performance exceeds expectations, it may become a catalyst for valuation repair.

: The phenomenon of large sell-side orders may signal position adjustments by institutional investors. If institutions continue to buy in the follow-up, it will provide support for the share price.

A comprehensive assessment shows that the risks of China Merchants Bank mainly come from the macro environment and industry cycle, while the opportunities come from its own competitive advantages and valuation repair potential. From the perspective of risk-return ratio, the current valuation level has fully priced in pessimistic expectations, with relatively limited downside risks and considerable upside potential. It is recommended that investors appropriately allocate China Merchants Bank as a “ballast” in their portfolios based on their own risk preferences and investment objectives.

Indicator	Value	Evaluation
Current Price	~RMB 38.71	Close to 52-week low
P/E Ratio (TTM)	6.82x	At historical low
P/B Ratio	0.83x	Below par value (1x)
Dividend Yield (TTM)	7.51%-7.82%	Attractive
Average Target Price	RMB 53.13	Implies 37% upside potential
RSI (14)	28.39	Oversold zone
Analyst Ratings	26/28 Buy	Strong Buy consensus
Non-Performing Loan Ratio	0.93%	Low in the industry
Provision Coverage Ratio	410.93%	Strong risk resistance capability

: RMB 38.68 (52-week low, strong support), RMB 38 (psychological support at integer level)[1]

: RMB 40 (integer level), RMB 42-43 (previous consolidation platform), RMB 45-48 (52-week high range)[1]

: Release of 2025 annual report (key catalyst)[1]. Investors should pay attention to changes in net interest margin, performance of the retail business, and continuity of the dividend policy.

China Merchants Bank’s appearance on the hot stock list reflects market attention to the “expectation gap” formed by its high-dividend value, bullish institutional sentiment, and continuous decline in share price. From a fundamental perspective, the company has a stable leading position in retail banking and wealth management, continues to promote digital transformation, and maintains industry-leading asset quality and provision levels. From a valuation perspective, the current P/E ratio of 6.82x and P/B ratio of 0.83x are at historical lows, and a dividend yield of over 7.5% is attractive.

For investors pursuing stable returns, China Merchants Bank can be allocated as a “ballast” in the portfolio, with attention paid to its long-term dividend returns. For growth-oriented investors, it should be noted that under the current market style, bank stocks have limited short-term elasticity, and annual report performance exceeding expectations may be a key variable catalyzing valuation repair.

: This report is for informational purposes only and does not constitute investment advice. Investors should make independent judgments based on their own circumstances and pay attention to risk control.