Net profit down 6% Y-o-Y, beats estimate. FGB reported net profit of AED1,332 million (AED0.29) for 1Q16, -22.5% Q-o-Q and -6.0% Y-o-Y. Earnings beat our expectation of AED1,264 million, however they were in-line with consensus (AED1,332 million)     Our view of the results: FGB’s earnings topped our expectation as lower-than-expected provisioning and reduction in operating costs offset weak revenue. The bank’s credit quality trends were encouraging. The NPL ratio eased to 2.6% from 2.8% in 4Q15, while NPL coverage improved to 110% from 103% in 4Q15. Cost of risk at 97bps was lower than our expectation of 112bps and down compared to 122bps in 4Q15. Spreads tightened 16bps Q-o-Q to 2.88%, in part due to higher cost of funds and in part due to lower reversal of suspended interest. Cost control was however good as operating costs were down by 5.6% Y-o-Y on lower staff expenses.   Main Positives: i) Improved credit quality metrics (NPL ratio eased to 2.6% from 2.8% in 4Q15); ii) provisioning was lower-than-expected (cost of risk 97bps versus 122bps in 4Q15 and our estimate of 112bps); iii) lower operating costs (-12.7% Q-o-Q and -5.6% Y-o-Y)   Main Negatives: i) Pressure on spreads (-16bps Q-o-Q to 2.88%); ii) tighter liquidity (LDR rose to 108% from 105% as of 4Q15). (Shabbir Malik, Company disclosure)