Net profit up 5% Q-o-Q, beats estimate. ADIB reported a net profit of AED507mn (EPS: AED0.11) for 2Q16, +5% Q-o-Q and +1% Y-o-Y. The bank’s earnings beat our expectation of AED477mn (consensus AED470mn) owing to stronger-than-expected FX income.   Our view of the results: ADIB’s results were a mixed bag. The bank’s loan growth improved sequentially and spreads were relatively stable aided by a liquid balance sheet (LDR: 82%).  While the NPL ratio and NPL coverage improved Q-o-Q, the bank’s past due loans continue to increase (+14% Q-o-Q). ADIB’s capitalisation remains stretched – CET1 ratio 8.6% - and this is likely to weigh on growth prospects and dividends in the long run. FX income improved after the bank took a hit in 1Q16 due to EGP devaluation against the USD. Any further devaluation of the EGP could dent the bank’s earnings going forward.   Main Positives: i) Loan growth recovers (+1.8% Q-o-Q from -0.1% Q-o-Q in 1Q16); ii) NPL ratio improved to 3.2% from 3.4% in 1Q16; NPL coverage improves to 116% from 113% in 1Q16; iii) Stable spreads helped by strong balance sheet liquidity. Main Negatives: i) Relatively low capitalization (CET 1: 8.6%); ii) Increase in past due loans (+14% Q-o-Q, +93% Y-o-Y) (Company, Shabbir Malik, Murad Ansari)   ADIB: AED3.96 as of 16 July 2016, Rating: Neutral, FV: AED4.20/share, MCap: USD3,418mn, ADIB UH / ADIB.AD