Upgrade to BUY from Hold with higher TP of HKD35.60 on 6% increase in net profit forecasts, at the high end of consensus. We raise our NIM forecast by 5bps to 1.88% for 2013 as we expect the NIM of its China business will recover further in 2H13. We lower our credit cost forecast from 0.10% to 0.09% for 2013 as we expect slower rise in BEA China’s NPL in 2H13. What’s New Expecting further NIM rebound for BEA China. We expect BEA China’s net interest margin (NIM) to widen from 2.11% in 1H13 to 2.21% in 2H13 (2.16% in 2013 vs. 2.15% in 2012). This will be driven by: (i) the intake of low cost funding from the supply chain business; (ii) a slight rise in loan-to-deposit ratio from 70% in 1H13 to 72% in 2H13; and (iii) the increase in short-term SHIBOR and RMB bond yield by 50-90bps HoH in 2H13. Thus, we raise our NIM forecast for BEA group by 5bps to 1.88% for 2013. Slower rise in China NPLs. The NPLs in China increased by HKD253m HoH in 1H13 (NPL ratio of 0.4%). With more cautious lending in Fujian and Zhejiang provinces and the development of supply chain finance, we expect BEA China’s NPLs will rise slower in 2H13 compared with 1H13. We lower our credit cost forecast from 0.10% to 0.09% for 2013. What’s Our View Upgrade to BUY. With high NIM and lower credit cost forecasts, we raise our net profit forecast for BEA by 6.0% and 8.2% for 2013 and 2014, respectively. We also raise our long-term ROE assumption from 10.25% to 10.5% in our Gordon Growth Model (GGM). We derive a higher target price of HKD35.60, which translates to Dec 2014 P/B of 1.2x.