Macro highlights: i) Corporate, retail and SME segments face credit quality challenges; ii) There are however signs of a slowdown of deterioration in the SME segment; iii) NPLs in the retail segment are ticking upwards; iv) Liquidity constraints continue to push up cost of funds and squeeze margin   Our view: No new information on the merger was provided in the call. The call was primarily on the performance of the bank in 3Q16 and the current trends in the UAE banking sector.   Retail credit quality weakening: Management stated that they are beginning to see an uptick in NPLs in the retail segment, particularly in the personal loan product (size of the portfolio AED11bn), owing to soft macro-economic conditions.   Civil construction under pressure due to shelving of projects: The bank has some concern about the civil construction sector in the UAE as the government shelves non-essential projects to cope with lower oil price. Loans to contractors are part of NBAD’s commercial loan book, which amounts to AED8bn.   Continue to maintain strong liquidity: NBAD’s international business is becoming a significant contributor to liquidity accounting for 35% of the group’s deposits. Management said that they continue to get a lot of interest from investors willing to invest in NBAD’s bonds. The international bond issuance by KSA has enhanced investor interest in GCC bond issuances. The bank is also rolling out a cash management platform across the GCC which would help boost its CASA deposits. NBAD’s CASA stood at 30% as of 3Q16.   Fee income: Lower trade finance lending (NBAD’s de-emphasizing growth in this area as yields are low) and seasonality weighed on fee income. Management expects an improvement in 4Q16. (Company, Shabbir Malik)   NBAD: AED8.50 as of 25 October 2016, Rating: Neutral, FV: AED9.00 per share, MCap: USD12,066mn, NBAD UH / NBAD.AD