Upgrading target price to Rmb12.2 — We believe the new information provided in
CMB\'s H share IPO prospectus should help investors appreciate that CMB\'s
sustainable ROE can be as high as 18-19%, given the expected turnaround in the
profitability of its retail banking business, low and sustainable provisions of 60-
70bps and potential decline in taxes due to increase in tax-deductible staff costs.

Retail banking to triple its profits — We believe the normalized pre-tax profit from
retail banking can reach Rmb3.5bn with a pre-tax ROA of 4% (similar to peers), or
1.8 times higher than the annualized figure of Rmb1.26bn in \'06. We estimate
wealth mgt services and credit cards to contribute additional earnings of
Rmb1.36bn and Rmb0.6bn once CMB\'s past investment starts to bear fruit.

Lower provisions and falling taxes — CMB\'s average gross and net new NPL
formation rates from \'03 to 1Q06 were low at 48bps and 3bps of average loans,
respectively. This suggests that our impairment charges forecasts of 70bps for \'06-
\'08 are highly conservative. The increase in tax-deductible staff costs will also
greatly benefit CMB, as its staff costs were 80% higher than peers.