The group's  full-yearFY11 earnings were in line with our estimates. The commendable ROE of 17.8% in 4QFY12 sets the stage for a morepromising 2012 outlook. Management has also turned more optimistic in light ofthe improved NIMs outlook, stronger deal pipeline and resilient asset quality.We believe that there is scope for earnings to beat  consensus' relatively conservative earnings growth forecast of 2% for FY12. Maintain BUY, at an unchanged FV of RM8.05(2.2x P/BV, 16.3% ROE). 

In line. Thegroup's FY11  full-year  earnings were  largely within our and consensusestimates,  representing 104% and 102%of  the respective full-yearestimates.  There was a promising uptickin 4QFY11 ROE to 17.8% vs 3Q11's 16.3% and 16.4% for fullyear FY11. Althoughthere was an exceptional gain of RM250m from the deconsolidation of CIMB Aviva,the one-off gain was to a certain extent offset by a oneoff spike in  the collective allowance to raise its domestic consumer loans' loss given default(LGD) computation to 100%. Offsetting both exceptional gains and loss infers onlya marginal exceptional gain of RM45m and as such, a large portion of the robust 17.8% ROE achieved in 4QFY12 was indeed derived from coreoperating performance. In 4Q12, pre-provision core operating earnings grew  6.0% q-o-q and 9.6% y-o-y. On a full-yearcomparison, pre-operating provision was flat y-o-y while earnings expanded 8.0%y-o-y on the back of a 19.7% y-o-y decline in provisions.

Costcontainment,  strong traction in domesticdeposits  the bright spots. Management'sefforts to rein in overhead costs in FY11 have certainly paid off, with overalloverhead costs remaining flat in FY11 compared to FY10, despite a slight uptickin total income growth. More importantly the group displayed promising domesticretail deposit growth, with the  overallCASA growth of 25.8% y-o-y and 15.7% y-o-y respectively providing  ample liquidity to drive loans growthwhen  the economic environment improves.

Management moreoptimistic  on  2012. Despite the still challenging economic environment, management points toa  potentially better outlook in 2012with the following expectations: i) improved net interest margins (NIMs), ii)stronger deal pipeline, and iii) the resilient Indonesian consumption growth story to remain intact. Thesewere essentially the same drivers that we highlighted in our recent  report upgrading  CIMB. Although loansgrowth is likely to moderate in 2012 to the low teens vs the 14.3% growth in2011, the focus on profitability and improved yield management will boost netinterest income growth compared with the 1.1% pace in 2011.

Source: OSK188