Arab National Bank (ANB) reported 4Q16 net income of SAR565mn, 22% lower Q-o-Q, and 27% below our forecast of SAR772mn and 22% below Bloomberg consensus of SAR721mn.   Key positive: Strong deposit growth (+6% Q-o-Q)   Key negatives: i) Weaker net interest spreads (-15bps Q-o-Q); ii) Higher provisioning costs (est. cost of risk of 93bps); iii) Weaker non-interest income (-15% Q-o-Q)   Our take on the results:  A weak set of results. Earnings were dented by weakness in revenues and jump in provisioning costs. Net interest spreads declined sharply, likely driven by higher funding costs on strong deposit growth. Moreover, most of the incremental liquidity was placed in low yielding assets (reverse repos and interbank) which should have also weighed on asset yields. Non-interest income also weakened sharply, falling 17% Q-o-Q. The impact of weak revenues on earnings was exacerbated by a sharp increase in provisioning costs. We estimate that cost of risks moved up to 93bps in 4Q16 from 73bps in 3Q16. Higher credit costs were a surprise given that ANB’s NPL coverage is one of the highest in the sector (259% in 3Q16). (Company disclosure, Murad Ansari)   Arab National Bank: SAR19.55 as of 18 January 2017, Rating: Neutral, TP: SAR22.00 per share, MCap: USD5,213mn, ARNB AB / 1080.SE