Key takeaways:   Cost of risk guidance maintained at 55bps (56bps in 1H16) NIM is stable due to strong funding profile; loan re-pricing has been minimal Future cost uplift to be controlled, further investment to be funded through efficiency gains International business faces a challenging 2016 due to risk of devaluation of EGP and GBP   Liquidity: NBAD’s domestic LDR has improved to 94% in 2Q16 (international 64%) from 97% in 1Q16 (63% international). NBAD believes the market in general is in good shape with respect to liquidity. While banks with relatively high LDRs would face moderate challenges, the situation is better than 12 months ago.   NIM: NBAD stated that they are seeing competition in the top end of the corporate segment primarily from foreign banks (American, Japanese and French) which enjoy lower cost of funding relative to domestic banks. NBAD continues to focus on improving its funding profile which is i) enabling it to keep cost of funding under control; and ii) placing it in a good position to benefit from higher interest rates.      Operating costs: NBAD’s quarterly operating costs have been flattish since 1Q15. Management, however, continues to invest in the business which is being funded through cost efficiencies.   Credit quality: The stress in the loan book is mainly in the low end of the commercial book (0.8% of the bank’s loans). Management stated that NPLs in this segment had started to plateau. Retail has held up well for the bank as NBAD has kept its underwriting standards quite strict. Growth in the retail segment has been strong and driven by mortgages, a segment whish management feels comfortable with in the prevailing market conditions. NBAD stated that its provisioning standards for retail lending are quite strict – it provides 100% for skip cases 15 days after they become past-due. The bank’s corporate book has also held up quite well, and NBAD has seen recoveries from this segment in 2Q. An area in corporate which poses a risk, in NBAD’s view, is civil construction, and it is being very careful, in terms of lending to this segment and monitoring its portfolio carefully.   International business: NBAD stated that its international business is a source of its competitive advantage. It is a source of liquidity (international deposits account for 34% of deposits) and risk diversification (18% of profit in 1H16). Management, however, expects a relatively challenging 2016, owing to risk of devaluation of EGP and GBP.   Merger: Management did not give any further details. They reiterated that they aim to close the transaction in 1Q17. (Company conference call, Shabbir Malik, Murad Ansari)   National Bank of Abu Dhabi: AED9.90 as of 27 July 2016, Rating: Neutral, FV: AED9.00 per share, MCap: USD14,053mn, NBAD UH / NBAD.AD