Loan growth guidance revised upwards: ENBD raised its loan growth guidance to mid-to-high single digit from mid-single digit earlier. ENBD’s loan book has grown 6% YTD. Management expects loan growth to slow-down in 2H16 as competition between banks remains strong and credit appetite weakens.   NIM guidance cut: ENBD cut its NIM guidance for 2016 to 2.55-2.65% from 2.70-2.85% owing to higher cost of funds (mainly due to more expensive term deposits) and difficulty in passing on the higher cost of funds to borrowers as i) there continues to be pressure on corporate spreads as certain foreign banks were offering competitive rates on loans and ii) deposits re-price faster than loans to reflect the EIBOR hike. ENBD stated that competition from domestic and regional institutions has led to higher rates on term deposits. However, ENBD has not experienced similar level of competition for its CASA deposits (CASA mix: 57%), as these deposits are generated using systems, infrastructure and relationships, which are not easy to replicate in a short period.   Focus on costs: Management stated that the cost control measures that were introduced in 1Q16 (staff cuts and hiring freeze) have started to take effect. The cuts in staff were made primarily in the micro SME segment where market conditions have been unfavorable. It has folded its dedicated micro SME business Emirates Money into the bank’s conventional SME business.   Provisioning outlook: ENBD expects the improving trend in provisioning to continue aided by write backs and recoveries, and tighter underwriting standards. ENBD said that while SMEs (particularly the micro SME segment) is a challenge for the market, the issue is not tangible for ENBD given the bank’s scale. Management also said that NPL formation in the corporate segment continues to be low.   Comments on FGB-NBAD merger: Management believes there is room for further consolidation in the sector, as it believes that there is an advantage of scale when investments are made in new technology and products. The merged entity (NBAD-FGB) would have to deal with the integration process before it begins to pose a challenge to ENBD in the retail segment. That said, management believes that it is comfortable in its ability to cope with the competition from a new large player in the market. (Shabbir Malik, Murad Ansari)