Net profit down 18% Q-o-Q, beats estimates - FGB reported a net profit of AED1.5bn for 4Q16, -18% Q-o-Q and -11% Y-o-Y. The bank’s earnings came ahead of our estimate of AED1.3bn (consensus: AED1.3bn). FGB’s board proposed a cash dividend of AED1.0/share (yield: 7.7%) which is in-line with our estimate. Our view of the results:  A strong set of results. FGB’s earnings beat expectations, with fee income and provisioning depicting an encouraging trend. FGB’s net interest income rose 3% Q-o-Q as interest earning assets grew 6% Q-o-Q driven by strong deposit growth. Provisioning surprised positively as cost of risk dropped to 70bps in 4Q16 from 105bps in 3Q16. FGB’s NPL ratio improved to 2.3% ( a seven year low) from 2.6% in 3Q16, while NPL coverage increased to 121% from 114% in 3Q16. Deposit growth was robust at 6% Q-o-Q, likely on the back of growth in international deposits. FGB’s LDR decreased to 105% from 111% in 3Q16. Spreads came under pressure, weighed down by an increase in cost of funds.   Main Positives: i) Strong deposit growth (+6% Q-o-Q); ii) Lower-than-expected provisioning (cost of risk of 70bps versus 105bps in 3Q16); iii) Stronger-than-expected fee income   Main Negatives: i) Weak loan growth (+0.3% Q-o-Q); ii) Contraction in spreads (-8bps Q-o-Q to 2.76%) (Shabbir Malik, company)   First Gulf Bank: AED13.05 as of 30 Jan, Rating: Buy, TP: AED14.00/share, MCap: USD16,001mn, FGB UH / FGB.AD