Bank Muscat reported 2Q16 net income of OMR46.7mn, 6.8% higher Q-o-Q. Earnings were ahead of our estimates of OMR41.8mn on lower-than-expected provisioning costs.   Main positive: Strong NPL recoveries drive provisioning costs lower (est. annualised cost of risk almost halves Q-o-Q to 28bps)   Main negatives: i) Weaker non-interest income (-14% Q-o-Q); ii) Loans and deposit flat Q-o-Q   Our view on the results: Apart from an almost halving of credit costs, there is not much in the results to highlight. Revenues eased on lower non-interest income – driven by a slowdown in volume growth. We estimate that net interest spreads were broadly stable Q-o-Q, while operating costs eased marginally compared to the previous quarter. Loans and deposits were flat Q-o-Q, suggesting slow business activity during the quarter. Credit costs eased to 28bps in 2Q16 vs. 59bps in 1Q16, as NPL recoveries doubled Q-o-Q. (Earnings release, Murad Ansari)   Bank Muscat: OMR0.38 as of 12 July 2016, Rating: Buy, FV: OMR0.49 per share, MCap: USD2,419mn, BKMB OM / BMAO.OM