UPDATE 1-Malaysia Bumi-Commerce raises ROE target as Q2 net up

* Q2 net 663 mln ringgit vs 650 mln ringgit yr ago

* Expects jump in capital market activity to lift H2 earnings

* Cautions potential deterioration in asset quality

* Shares end up 0.9 pct before results; outperformer this yr

KUALA LUMPUR, Aug 12 (Reuters) - Malaysia's No.2 lender Bumiputra-Commerce BUCM.KL raised its return on equity (ROE) target for 2009 as it expects a sharp rise in capital market activity to outweigh the risk of rising bad debts.

Bumiputra-Commerce, which owns banking assets in Malaysia, Thailand and Indonesia under the CIMB brand, revised up its 2009 ROE target to 14-15 percent from 12.5 percent previously after it reported a slight increase in April-June earnings.

CIMB, the country's top dealmaker, is tipped to be the prime beneficiary of the government's economic reforms in June that saw ownership rules eased for merger and acquisition deals as well as IPOs.

"We expect heightened level of capital market activity in Malaysia and across the region, and relatively stable global financial markets," said Bumiputra-Commerce CEO Nazir Razak.

The executive however said the outlook for loan growth was still uncertain and the risk of rising bad debts in the second half remains.

"We will keep the 8 percent loan growth target for 2009, because corporate lending can still be a bit volatile," he told a news conference when announcing the quarterly results.

"There may still be some lag effect in non-performing loan formation," said Nazir.

Nazir's comments echoed Southeast Asia's biggest bank DBS' (DBSM.SI) remarks last week when it reported a fall in quarterly earnings and raised red flags about deteriorating asset quality. [ID:nSIN202704]

Bumiputra-Commerce on Wednesday said it posted a net profit of 663 million ringgit ($187.8 million) in April-June, compared to 650.15 million ringgit in the same quarter last year, aided by new acquisitions in Indonesia and Thailand.

The quarterly net profit was in line with the 650-680 million ringgit range forecast by Credit Suisse.

On average, 20 analysts polled by Thomson First Call before the earnings release expected the bank to make a net profit of 2.25 billion ringgit for 2009, compared to 1.95 billion ringgit in 2008.

Shares in Bumiputra-Commerce ended 0.9 percent higher at 10.80 ringgit a share on Wednesday, compared to the broader market's .KLSE 0.5 percent drop. The stock has gained 84 percent so far this year, outpacing the benchmark stock index's 35 percent gain. ($1=3.531 Malaysian Ringgit) (Reporting by Soo Ai Peng and Royce Cheah; Editing by Lincoln Feast)