Key takeaways: Gross loan growth improves moderately to 7.9% Y-o-Y; Deposit growth slows to 2.9% Y-o-Y, as growth in resident deposits continues to be weak; Government deposits relatively stable M-o-M   Loan growth: Gross loan growth improved to 7.9% Y-o-Y in February from 7.4% Y-o-Y a month ago, as corporate loan growth picked up to 7.5% Y-o-Y from 6.8% Y-o-Y in January 2015. While growth in the retail segment continues to be relatively strong, it slowed to 9.4% Y-o-Y from 9.7% Y-o-Y in January 2016. On a M-o-M basis loan growth improved to 0.8% in February from 0.4% in January 2016.   Deposit growth: Deposit growth slowed to 2.9% Y-o-Y from 4.2% Y-o-Y in January as growth in resident deposits decelerated to 1.3% Y-o-Y from 2.9% Y-o-Y a month ago. Growth in non-resident deposits continues to be robust at 16.9% Y-o-Y up from 15.6% Y-o-Y in January. Liquidity tightened slightly as the loan-to-deposit ratio rose to 95.4% from 94.6%. The sector’s regulatory lending to stable resources ratio rose a bit to 87.2% from 86.9% in January, but it continues to be well within the regulatory ceiling of 100%. On a M-o-M basis, deposits remained stable as government deposits rose by 0.6% M-o-M (-0.9% M-o-M in January 2016).   Investment perspective: Against a backdrop of growing macro risks, we are cautious and prefer banks with corporate-focused quality franchises, well capitalized balance sheets, adequate provision buffers and reasonable valuations. Our top picks in the UAE are ADCB and ENBD. (Shabbir Malik)