Commercial International Bank (CIB) has reported 2Q16 net income of EGP1,464mn, up 28% Y-o-Y and by 13% Q-o-Q. The actual earnings came in 5% ahead of our forecast of EGP1,390mn (7% ahead of Bloomberg consensus of EGP1,373mn), on very strong non-interest income in 2Q16 (mainly trading and investment income), as well as lower-than-expected provisioning expenses, with both more than offsetting weaker-than-expected net interest income. On a Y-o-Y basis, the pace of net interest income growth was solid, up 17% Y-o-Y, although decelerating from the growth reported in previous quarters. Strong trading gains, as well as lower Y-o-Y provisioning costs, were both key drivers of earnings growth in 2Q16.   Main positives: i) Strong non-interest income; ii) Lower-than-expected provisioning costs   Main negatives: i) Weaker-than-expected net interest spread and net interest income; ii) Lower-than-expected loan growth and deposit growth; iii) Slight increase in NPL ratio   Our view on the results: The Q-o-Q decline in the net interest spread was, in our view, a key negative surprise, as we had expected that the increase in benchmark rates by the CBE in mid-March would have led to stronger spreads in 2Q16. While asset yields did increase on a Q-o-Q basis by 13bps, funding costs increased by 37bps Q-o-Q, resulting in a 24bps decline in the net interest spread in 2Q16 compared to 1Q16. The press release mentions a shift in the balance sheet into lower maturity instruments, which could partly explain the modest increase in asset yields in 2Q16. Balance sheet growth was also weaker than expected. Customer loans were flat Q-o-Q (+10% Y-o-Y); retail loans increased by a healthy 5% Q-o-Q, but corporate loans declined slightly Q-o-Q. Customer deposit growth decelerated, with flat growth on a Q-o-Q basis, as time deposits fell Q-o-Q. In terms of credit quality, there was just a slight worsening in 2Q16, with the NPL ratio increasing to 4.9% compared to 4.7% in March 2016. NPL coverage continued to be strong at 170%. The capital adequacy ratio improved Q-o-Q to 14% from 13.4% in 1Q16. Overall, a mixed set of results, in our view. Management will hold a conference call today at 3.30 pm Cairo time. We expect to get some colour on: i) upside risks to management guidance for earnings growth of c25% in FY2016; ii) whether the deceleration in deposit growth in 2Q16 was driven by one-offs (deposit growth has been a key driver of net interest income growth for CIB over the past two years); and iii) outlook on net interest margins and credit quality. We have a Neutral rating on CIB. (Earnings release, Elena Sanchez-Cabezudo, Rajae Aadel)   CIB: EGP45.54 as of 27 July 2016, Rating: Neutral, FV: EGP46.38 per share, MCap: USD5,917mn, COMI EY / COMI.CA