Rights issue in 2Q16: Management plans to raise cAED3.2 billion via a rights issue. The rights issue is priced at AED3.2/share and shareholders will be able to subscribe to 1 share for every 4 shares held. We believe the bank CET1 ratio could go up to 12% from the 9.6% as of 2015 post the rights issue. The process for issuing the rights has started and management aims to complete it in 2Q16.   Higher cost of funds dents spreads: Pressure on NIMs in 1Q16 was driven by an increase in cost of funds, which was in part driven by market conditions and in part driven by DIB’s efforts to build a liquidity buffer. DIB’s LDR had reached 88% at the end of 4Q15, but it dropped to 84% at the end of 1Q16 owing to strong deposit growth. Management believes that pressure on liquidity has eased off since 2H2015. We believe spreads can improve as the bank deploys excess liquidity into loans. In 1Q16 NIM dropped to 3.26% compared to 3.63% in 2015. Guidance for 2016 is 3.25-3.50%.     Loan growth guidance maintained: Management expects loan growth at 10-15% in 2016 (1Q16: 26% Y-o-Y). DIB would look to revise guidance if necessary post 2Q16 results. Management is diversifying the loan book and is growing it across the UAE.   Provisioning: The bank’s provisioning was driven mainly by general provisions owing to the strong growth in the loan book. Management highlighted that c65% of the bank’s retail loan book is to salary assigned customers, which tend to be of lower risk in our view.   Cost to income: Although management is satisfied with its current cost to income ratio (1Q16: 34%), it will continue to focus to bring this level down further (2016 guidance low-mid 30%). (Shabbir Malik, Company Disclosure)