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China Merchants Bank Chief Steps Down

Our senior analyst Iris Tan talks about the impacts of the management change.

Kate Lin 21 April, 2022 | 14:49
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Kate Lin: Welcome to Morningstar. In a surprise move, the board of China Merchants Bank (03968) voted to remove Tian Huiyu from his current role as president of the bank. The bank's Hong Kong listing fell as much as 15% after the announcement. We have Iris Tan, senior equity analyst at Morningstar, to tell us the aftermath of the people change.

Iris, we want to know if this move rocks the fundamental of China Merchants Bank.

Iris Tan: Hi, Kate. We don't believe the management change alone will greatly impact the bank's fundamentals. The market is concerned that the unexpected move may have an unfavorable effect on CMB's strategic planning and weaken its competitive advantages. But we believe CMB's business culture and the prudent underwriting are unlikely to be significantly impacted. This has been evidenced by the changes of three former presidents in the past. CMB is one of few Chinese banks which is really known for a stable senior management team, and it only had three presidents over the past 35 years since establishment in 1987. And the bank shows a high level of strategic consistency despite the changes of management teams in the past. We believe their high standard corporate governance, prudent underwriting and customer-focused strategy are firmly embedded.

Lin: So, from a broader angle, do you see any implications of this announcement on the Chinese banking sector?

Tan: Yeah. The government has increased efforts to battle corruptions in the financial sector, especially their links to the debt-ridden property sector over the past few years. There have been over 80 and 70 senior officers in the financial sector under investigation in 2020 and 2021, including those over at the financial regulatory bodies, insurance, asset management companies, trusts and security firms. We think this reflected that the regulator is very cautious of systemic risk, especially during current economic downturn and the property sector deleveraging.

Lin: Thank you for your time, Iris. For Morningstar, I'm Kate Lin.

 

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Kate Lin

Kate Lin  is a Data Journalist for Morningstar Asia, and is based in Hong Kong

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