Bank Dhofar reported 2Q16 net income of OMR12.6mn, 7% lower Q-o-Q, and below our forecast of OMR13.6mn.   Main positive: Operating expenses controlled (+1.7% Q-o-Q)   Main negatives: i) Decline in deposits (-2% Q-o-Q); ii) Slower loan growth (+1.2% Q-o-Q); iii) Higher provisions (+14% Q-o-Q)   Our take on the results: Bank Dhofar reported a weak set of results, in our view, with balance sheet and earnings growth momentum slowing. Revenue growth is likely to have been dented by slowing balance sheet growth, and weaker net interest spreads. Provisioning costs also jumped, and have been a rising trends since 2Q15. Deposits declined 2% Q-o-Q after strong growth (8% Q-o-Q) in the previous quarter. With loan growth slowing, the bank is likely to have shed some of the deposits raised in the previous quarter to protect spreads, in our view. (Earnings release, Murad Ansari)   Bank Dhofar: OMR0.24 as of 13 July 2016, Rating: Sell, FV: OMR0.22 per share, MCap: USD1,078mn, BKDB OM / BDOF.OM