Al Rajhi Bank reported 4Q16 net income of SAR2,047mn, +2% Q-o-Q & +5% Y-o-Y, and marginally below our forecast of SAR2,085mn, but in line with Bloomberg consensus of SAR2,061mn.   Main positive: Low provisioning (cost of risk 78bps versus 93bps in 3Q16)   Main negatives: i) Weaker net interest spreads (-4bps Q-o-Q); ii) Weak non-interest income (-7.5% Q-o-Q); iii) Slight contraction in loan book (-0.4% Q-o-Q)   Our take on the results: Al Rajhi’s earnings came in line with expectation, as lower provisioning charge compensated for a weak non-interest income. The bank’s cost of risk eased to 78bps from 92bps in 3Q16, likely due to release of provision reserves as it had built up its NPL coverage to 200% in 3Q16 from 163% in 1Q16. Non-interest income remained weak and failed to recover from a seasonally weak 3Q16, reflecting slower business activity and loan growth. Loans and deposits were broadly flat sequentially. Spreads declined marginally (-4bps Q-o-Q to 3.51%) though cost of funds remained under stable Q-o-Q. (Company disclosure, Murad Ansari)   Al-Rajhi Bank: SAR62.69 as of 18 January 2017, Rating: Neutral, TP: SAR54.00 per share, MCap: USD27,166mn, RJHI AB / 1120.SE