HDB reported 4Q2015 consolidated net income was EGP126 million, a strong increase of 201% Y-o-Y, albeit from a depressed 4Q2014 net income base, and up 6% Q-o-Q. The actual earnings in 4Q2015 came in 28% below our forecast of EGP174 million, as higher-than-expected provisioning charges and operating costs outweighed higher-than-expected revenues. Provisioning costs spiked in 4Q2015 partly due to an additional EGP85 million tax-related provision booked in 4Q2015, following a similar charge of EGP157 million in 3Q2015. The strong Y-o-Y surge in earnings in 4Q2015 was mostly boosted by strong revenue growth of 77% Y-o-Y as well as lower tax charges. FY2015 net income increased 69% Y-o-Y to EGP568 million, and came in 8% below our forecast of EGP616 million on higher-than-expected provisioning costs.   Our view on the results: Revenue growth was strong at 77% Y-o-Y (5% Q-o-Q) boosted by i) net interest income and fee income growth of 81% and 50% Y-o-Y respectively and ii) strong investment, trading and associate income. We note its net interest income was boosted by the free funding related to land auctions conducted by state-owned NUCA (New Urban Communities Authority); households wanting to take part in these auctions deposit an amount at HDB, and these funds (EGP7.5 billion in December 2015 or 33% of total interest earnings assets), which have no cost for the bank, are invested in ST treasury instruments. According to HDB, land auctions have been strong in 2015 and are expected to remain strong in 2016. Loan growth was solid at 4% Q-o-Q and 15% Y-o-Y. Net interest spread widened 11bps Q-o-Q and 57bps Y-o-Y on higher asset yields in 4Q2015. On the negative side, provisioning costs spiked owing to both higher loan loss provisions and a one-off other provision related to tax charges. Operating expenses picked-up 52% Y-o-Y (29% Q-o-Q). Credit quality deteriorated slightly  Q-o-Q as the NPL ratio increased 43bps Q-o-Q to 7.5% with absolute NPLs up 11% Q-o-Q (12% Y-o-Y). NPL coverage stood at 115% in December 2015.   Main positives: Strong Y-o-Y net interest income and fee income growth; Strong non-interest income (compared to both 3Q15 and 4Q14), thanks partly to strong income from associates; Widening in the net interest spread both Y-o-Y and Q-o-Q on higher asset yields. Main negatives: Higher-than-expected provisioning costs, on both higher loan loss provisions and one-off tax-related provisioning charges; Surge in operating expenses both Y-o-Y and Q-o-Q; Increase in NPL ratio Q-o-Q. (Elena Sanchez-Cabezudo, CFA, Rajae Aadel, Company)   Housing & Dev. Bank: EGP19.50 as of 16 March 2016, Rating: Buy, FV: EGP29.65 per share, MCap: USD276 million, HDBK EY / HDBK.CA