Bank Muscat reported 4Q16 net income of OMR39.7mn, 15% lower Q-o-Q. Earnings were marginally below our estimates of OMR41.0mn.   Main positive: Loan growth (+1.8% Q-o-Q)   Main negatives: i) Weaker net interest spreads; ii) Higher gross credit costs, but partially offset by higher recoveries; iii) Decline in deposits (-1.6% Q-o-Q)   Our view on the results: All key earnings drivers weakened Q-o-Q. We estimate that Bank Muscat’s net interest spreads weakened, against our expectation of slight improvement, possibly suggesting continued pressure on funding costs. Balance sheet growth was sluggish and likely fed into weaker non-interest income. While gross credit provisioning charge was high, it was partially offset by higher recoveries/write-backs on previously classified NPLs. Deposits declined for the second consecutive quarter, as the bank appears to have shed liquidity to protect spreads. (Earnings release, Murad Ansari)   Bank Muscat: OMR0.47 as of 12 January 2017, Rating: Buy, TP: OMR0.49 per share, MCap: USD2,989mn, BKMB OM / BMAO.OM