Period   2Q12/1H12

The 1H12 PAT of RM2,120.4m was within the consensus' forecast (50%) and that of ours (47%). 

Dividends  The group declared an interim net dividend of 5 sen/share.

2Q12's net interest income enjoyed a heartening growth rate at +7.3% QoQ and 12.4% YoY to RM1,864.8m. QoQ, the net interest margin expanded by 9bps to 3.13% on better asset-liability management while the loan-todeposit ratio hit a high of 98.8%. The +5.0% QoQ loans growth also contributed to the encouraging net interest income growth. That said, the 14.5% YoY loan growth (excluding bad bank) came ahead of our forecast of 11% and within the management's guidance of 13%-14%. Stronger corporate and business loans growth from the region was the key driver of the outperformance here. 

2Q12 non-interest income was at RM1,137m (-3.7% QoQ,), which was strong as well as a result of robust investment gains from the volatile forex market, the shift of the yield curve in debt capital markets and the strong contribution from the wholesale banking's PBT of RM773m, which was up +19.5% from 1Q's RM645m). The PBT of RM101m from Investment was -39.8% lower due to higher realised fixed income gains in 1Q12.  The total RM875m PBT contributed by these two segments was higher by 7.4% QoQ, benefitting from the synergies derived from 'CIMB 2.0' reorganisation.

The net impaired ratio was at a historical low of 20bps with a 82% allowance coverage. The annualised credit charge was below the management's target 0f 30bps. 

CIMB Niaga meanwhile contributed RM487m to the group PBT, making up a 33% share.  In summary, the achieved 16.0% ROE was within our expectation.

Outlook  During the briefing, management remains positive on the 2012 outlook as well as in achieving its key KPI targets. 

Despite a slower consumer banking prospect in the region, the group foresees strong ECM pipelines (including IPOs) as well as strong demand from corporate lending and corporate bond in the region to drive its earnings in 2H2012.

Meanwhile, we are positive on the group's recent acquisition strategies and believe that CIMB is poised for a rerating as the group is now of the biggest proxies to ride the ASEAN region resurgence where the region's economic  growth  is  expected  to  remain  resilient  over  the next 2-3 years.  

Maintaining our FY12-13E PAT estimates of RM4,495m- RM4,740m for CIMB.

Rating  MAINTAIN OUTPERFORM

Our  OUTPERFORM  rating  on  CIMB  is  maintained  as  the current share price offers a 19% upside potential to our revised TP of RM9.40.

Valuation   We have raised our target price to RM9.40 (from RM8.50 previously) being 2.3 FY13 PBV (a mid point between 3-year PBV average of 2.2x and its +1SD level of 2.4x) as we foresee an upside risk to our earning forecasts for 2H2012.

Risks  Tighter lending rules and a margin squeeze.