What surprised us ABC reported FY12 NPAT of Rmb145bn, up 19% yoy and 99%/100% ofour/Reuters consensus FY12 estimates. Revenue/PPOP were largely in-line,while slightly better than we expected NII/provisions offset weaker feesgrowth. Key positives: 1) 4Q12 NIM rose 6bp qoq, driving NII to grow by4%/6% qoq /yoy, due to strong growth in high-margin retail loans, 1.4pprise in L/D ratio and 1% decline in interbank assets qoq. 2) NPL ratiodeclined 1bp qoq in 4Q12 with a mild annualized net formation rate of10bp in 2H12. Overdue loans (over 1 day) rose modestly hoh by RMB3bnwith a net formation rate of 16bp vs. 48bp in 1H12; 3) Balance sheet furtherstrengthened as LLR/ total loan ratio was up 13bp to 4.35% vs. 4.1% inFY11, vs. 1.3%/1.6% NPL ratios in FY12/FY11; 4) Tier I CAR/total CARreached 9.7%/12.6% as ABC decreased its off-balance sheet exposure by8%/12% hoh/yoy. Management emphasized during the analyst briefingthat ABC does not have capital raising pressure in the mid-term, and futurecapital need will be met mainly through internal capital generation (bookvalue grew 13% yoy excluding dividend) and potential issuance of noncoretier I capital instruments. Key negatives: Fees declined 13% qoq in4Q12 and FY12 fees was 5% lower than our estimate, mainly reflectingweaker agency and advisory fees, partly given the decline in off-balancesheet items as part of de-risking measures. What to do with the stock We retain our Buy ratings for ABC H/A-shares given its strong franchise,balance sheet, above-peer earnings growth and attractive 6% dividendyield. Our estimates and 12m TPs of HK$4.6/Rmb3.7 (on 1.4x ‘13E adjustedP/B) are unchanged. Risks: worse-than-expected GDP; earnings misses.

We reiterate our CL Buy and maintain our 12m TP of Rmb20.40, based on1.7X 12E P/B, on 1) likely above-consensus 2012 earnings given healthy feeincome momentum, NII and deposits growth, and strong interbankbusiness, 2) removed capital raising overhang, and 3) 21% 2012E P/Ediscount vs. A-share peers. Risks include higher-than-expected provisions.

CMB reported 1H11 NPAT of Rmb18.6bn (+41% yoy), 1% above our estimateand accounting for 55%/56% of our/Reuters consensus FY11 estimates onbetter-than-expected fees, PPOP, and Rmb892mn trading income from transferbills. Key positives: 1) 6% qoq NII growth in 2Q11 given 4.8% earnings assetgrowth and 3bp NIM gain; 2) 1H11 net fees grew 53% yoy and 36% hoh onstrong credit commitment, agency/wealth mgmt, and investment bankingbusinesses. Non-interest income rose 13% qoq and 56% yoy partly due to aninterest spread from selling bills amid spiking interbank rates during 2Q11; assuch, 1H11 PPOP were 2% above our estimate (excluding this, we would havebeen in line). Asset quality: NPL balance/ratio dropped 2%/7bp hoh, but loansoverdue more than 1 day/SML rose 19%/10% hoh off a low base, and overdueloan ratio remained flat at 1.5%. LLR/loans rose slightly to 2.13% from 2.05% inFY10. Negatives: 1) 1H11 expense grew 32% yoy mainly due to staff costs,bringing CIR to 39%, or 2% higher than our 1H11 estimate; 2) RWA grew a bitfaster than loans, at 15% hoh (partly due to 45% hoh growth of acceptance),causing tier 1 CAR to drop 23bp to 7.8%. We estimate that after the rightsissuance of maximum Rmb35bn announced on July 18, pro-forma core tier ICAR would rise to 9.5% by 2011E. What to do with the stock。 We view CMB’s 1H11 results as solid, and see CMB A-shares as a GARP ideawith 6.5X 2012E P/E and 1.3X 2012E P/B vs. 6.4X and 1.1X for A-share peers. Thus, we maintain our ratings on CMB A/H (CL-Buy/Neutral) and our 12-monthTP at Rmb17.00/HK$20.20 based on 1.9X 2012E BVPS. Key risks include worsethan-expected inflation, tightening and CMB’s earnings beat.