Impact of Rent Yield-Loan Rate Gap on Banks and Real Estate Firms: CM Bank vs Vanke A

1. Rent Yield Approaching Loan Rate: Subtle Differentiation in Impact on Banks and Real Estate Firms

• When the rent yield is only 2.37% while loan rates range from 2.5% to 3%, coupled with stagnant housing price growth, the cash flow yield of pure rental assets is no longer significantly attractive. This means investors’ expectations for real estate must rely more on asset appreciation or policy stimulus, which suppresses developers’ profit margins in the short term. Vanke A is still in a loss-making state (Metrics show TTM EPS -5.01, P/E reflected as -0.99), so its future financing and pre-sale pace still need to rely on policy support and asset de-stocking speed [0].
• In contrast, large city commercial banks like China Merchants Bank benefit from stable real estate expectations—significant room for housing prices to fall is considered limited, which helps reduce default and impairment risks of real estate-related loans. China Merchants Bank still maintains a low valuation (P/E 7.07, P/B 0.81) and ROE of 12.09% currently, indicating its asset quality and profitability remain attractive. If real estate enterprises fulfill their debt-servicing capacity and housing demand stops declining, its loan portfolio will gain higher stability [0].

2. Narrowing Housing Price Decline Is Not Enough to Confirm Industry Inflection Point, but Signals Support for a Bottom

• Narrowing decline in new housing prices means marginal demand is recovering, especially in third- and fourth-tier cities amid inventory replenishment and policy stimulus. However, to confirm the “investment inflection point has arrived”, we still need to pay attention to transaction volume, recovery of the land market, and sustainability of profit growth—currently, core leaders like Vanke A are still in a profit retracement phase, with volatility (annualized over 50%) far higher than the banking sector, indicating the market still has doubts about its future cash flow [0].
• If real estate enterprises’ sales/pre-sales recover and inventory digestion accelerates next, banks’ provision pressure for real estate loans will further reduce, and risk premiums will decline. Conversely, if demand recovery falls short of expectations or financing is marginally tightened, the “yield gap” where rent yield approaches loan rate will expose the structural yield insufficiency of real estate assets, further dragging down real estate enterprises’ valuations and affecting interbank loan risks. Therefore, we need to continuously track the sales side and policy support strength to determine whether the industry has truly entered an inflection point.

3. Stock Performance and Risk Comparison Support Industry Differentiation Strategy

• Since 2024, China Merchants Bank has significantly outperformed Vanke A: China Merchants Bank has risen by +51% year-to-date, while Vanke A has fallen by about 51%; the latter’s high volatility (current 20-day annualized volatility of about 53%) reflects the market’s high doubts about its profit recovery, while China Merchants Bank’s volatility is relatively moderate (14.8%), making it more suitable for allocation in the scenario of “real estate recovery but still needing screening” [0].
• For investors, against the backdrop of narrowing yields, it is recommended to take a portfolio of
  core banks + selected leading real estate enterprises
  : Banks have opportunities for valuation repair due to low valuations and stable interest spreads; for real estate enterprises, we need to focus on those with steady sales, controllable leverage, and improved cash flow (such as targets with high-quality assets and reasonable cash-to-short-debt matching).
• Currently, the real estate sector has achieved a slight positive performance in the overall market (the U.S. real estate sector rose by 0.52% on December 16), reflecting that overseas markets are still digesting cyclical adjustments; although it cannot be directly compared with A-shares, it indicates that “risk assets are gradually looking for a bottom” [0].

4. Chart Description

• The chart [China Merchants Bank vs Vanke A Stock Price/Performance/Trading Volume/Volatility Comparison] shows the stock price trends, year-to-date relative performance, 20-day average volume, and annualized volatility of the two companies since 2024. It reflects that China Merchants Bank’s stock price has risen steadily, its relative performance has continued to improve, with stable trading volume and low volatility; Vanke A’s stock price has declined with increasing trading volume under high volatility (see chart, source: Gilin AI Brokerage API [0]). This chart helps understand why investors currently have higher confidence in bank stocks while remaining cautious about real estate enterprises.

5. Strategy Recommendations

• China Merchants Bank
  : Under the condition that the marginal real estate risk no longer expands, we can pay attention to asset quality improvement and loan type distribution; if future policies further release “stable real estate” signals, the recovery of industry customer demand will continue to support its interest spread and net profit.
• Vanke A
  : Need to closely monitor sales/collection pace and debt structure; at the current valuation level (market value of only about 0.29 trillion yuan) and negative profit, it is recommended to focus on event-driven long positions (such as asset sales, policy support, or third-quarter report recovery) and control positions to deal with volatility.
• If the real estate de-stocking process accelerates, loan rates remain low, and rents rise gradually to narrow the yield gap, we can gradually increase allocation to selected high-quality real estate enterprises; otherwise, we still need to use low-valued bank stocks as a “safety margin” tool to undertake real estate recovery expectations.

: The X-axis is the trading days from 2024-01-02 to 2025-12-16; the Y-axis includes stock price (RMB), year-to-date relative performance percentage, trading volume (20-day moving average, logarithmic scale), and annualized volatility (20-day rolling). The chart clearly compares that China Merchants Bank has stable performance and low volatility, while Vanke A is under pressure, verifying the necessity of current strategy differentiation.

[0] Gilin API Data