>LEADERS AND LAGGARDS (CLSA)

While growth markets Indonesia, India and China have seen strong bank performance, relative to local markets they are down YTD. We moved to OWT Indonesia following our country visit last week. Our India recommendation remains OWT and China which is Neutral, remains under
review for an upgrade, as the cycle appears to be being pushed out longer and where margins are about to expand with provisions levelling off.

Banks since January
■ Banks stocks are up 45% on average this year
■ However vs local market banks are down 1%
■ Some high growth bank markets have underperformed

Indonesia (OWT)
■ While Indonesian banks are up 59% YTD they are down 10% vs their market
■ Banks there indicate NPL formation has been muted and they will restart lending
■ Demand remains strong given low penetration and rates on mtgs are being cut

India (OWT)
■ India bank stocks are up 42% but banks are down 11% vs their market YTD
■ Results out of India’s banks have generally been in line or stronger than estimates
■ Treasury gains have supported profits, but also limited NPLs and provision costs

China (Neutral – Under review for upgrade)
■ China’s banks are down 2% vs the market YTD, even though they are up 44%
■ Key feature of 2H09 will likely be stable margins if not slightly higher, unlike 1H09
■ Having met provision requirements, expect lower growth in LLP during 2H09, 2010

Valuations
■ We focus a lot more on PB when in times of distress
■ India’s banks are on 11.0x PE with a peak of 17x
■ China’s banks are on 10.7x PE with a peak of 28x
■ Within high growth markets, China’s banks are 2nd cheapest, India PSU are 1st
■ Indonesia’s banks PEs historically are high due to losses
■ BCA is on 15x vs peak of 20x, in recent years, with no losses
■ Mandiri is at 14x on 10CL, where earnings will most positively surprise in 2H09

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