Period     3Q12/9M12

Actual vs. Expectations     The 9M12 PAT of RM3,263.2m was within the consensus' forecast (76%) and that of ours (72%).

Dividends     No dividend was declared.

Key Result Highlights    The 3Q12 net interest income saw a moderating growth rate at +1.1% QoQ and 13.4% YoY to RM1,885.7m. QoQ, the net interest margin narrowed by 4bps to 3.08 % while the loan-to-deposit ratio was also lower at 86.9%. The +0.5% QoQ loans growth also contributed to the flat net interest income growth. That said, the 9.8% YoY loan growth came below our forecast of 11% and the management's guidance of 13%-14%. The moderating loans growth numbers were mainly deflated by the IDR/RM depreciation.

The 3Q12 non-interest income was strong at RM1,294.0m (+13.8% QoQ), thanks to robust investment gains from the volatile forex market, the shift of the yield curve in the debt capital markets and the strong contribution from its wholesale banking segment's PBT of RM822m, which was up +6.5% from 2Q's RM773m. The PBT of RM124m from Investment was also +21.1% higher. The total RM946m in PBT contributed by these two segments was higher by 8.2% QoQ, continuing the benefit of the synergies derived from the group's 'CIMB 2.0' reorganisation.

The net impaired ratio was at a historical low of 18bps with a 84% allowance coverage. The annualised credit charge was below the management's target 0f 30bps.

Despite a strong top line growth, the higher than expected cost of RM2,007m, upped 8.7% QoQ, mitigated the positive impact on the bottom line. During the quarter, the group booked in a RM30m-RM40m one-off integration cost as 50% of the RBS franchise came on board in 3Q.

The achieved 16.3% ROE was within our expectations.

Outlook     During the briefing to analysts, management said it remained positive on the 4Q12 outlook as well as in achieving its key KPI targets despite the continuous slower consumer banking prospect in the region.

The key positive highlight from the briefing was that the cash proceeds from its stake sales in Aviva would likely go to rewarding shareholders. The group is targeting to complete the sale of Aviva by 1Q13 and is highly likely to offer a one-off Dividend Reinvestment Plan to investors as part of its capital management plan. This will also enable the group to comply with BNM's new consolidated supervision and capital framework.

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. We expect the region's economic growth to remain resilient over the next 2-3 years.

Change to Forecasts    Maintaining our FY12-13E PAT estimates of RM4,511.4m- RM4,820.1m for CIMB.

Rating    MAINTAIN OUTPERFORM

Our OUTPERFORM rating on CIMB is maintained.

Valuation     We are maintaining our target price at RM8.20 being 2.0x the FY13 book value.

Risks    Tighter lending rules and a margin squeeze.

Source: Kenanga