1H18 results in line with expectation
　　CEB’s 1H18 revenue rose 12.7% YoY to Rmb52.23bn and non-interestincome jumped 56.1% YoY. Attributable net profit grew 6.7% YoY toRmb18.08bn or Rmb0.34/sh. 2Q18 attributable net profit climbed7.8% YoY to Rmb9.03bn.
　　Trends to watch
　　2Q18 average NIM rose 18bp QoQ to 1.44%, boosting 2Q18 netinterest income growth to -3.0%. Excluding impact from IFRS9, 1H18net interest income increased 10.8% YoY and loan to deposit ratiowas 91.7%, above 90% for the 4th consecutive quarter. Lookingahead, we expect steepening yields to ease CEB’s liability pressure.
　　1H18 net fee income jumped 14.9% YoY with that of bankcardbusiness up 41.4% YoY and that of wealth management businessdown 77.7% YoY due to new rules on assets management.
　　Assets quality improved sequentially. End-2Q18 NPL ratio fell 8bpQoQ to 1.51%, while SML and overdue loan ratio declined 62bp and17bp vs. end-2017 to 2.35% and 2.29%. NPL to >90-day overdue loanratio rose to 1.11 due to stricter NPL recognition. 2Q18 PPOPincreased 20.0% YoY. Amid rapid earnings growth, asset impairmentprovision also jumped 67.4% YoY and provision coverage ratio stayedhigh at 173.0%.
　　Earnings forecast
　　We maintain our 2018e and 2019e earnings forecast.
　　Valuation and recommendation
　　CEB-A is trading at 0.7x 2018e and 0.6x 19e P/B, and CEB-H at 0.5xand 0.4x P/B. Given increased macroeconomic volatility andweakening risk appetites, we cut CEB-A/-H’s TPs by 15.8% and 30.5%to Rm4.95 （0.9x 2018e and 0.8x 2019e P/B and 33.9% upside） andHK$4.43 （0.7x 2018e and 0.6x 2019e P/B and 32.6% upside）。 MaintainBUY.
　　Risks
　　Macroeconomic downturn; deteriorating assets quality.