QNB ALAHLY (QAA), 97.12%-owned by QNB, reported 4Q2015 net income of EGP870 million, a strong increase of 40% Y-o-Y (-3% Q-o-Q). Earnings growth on a Y-o-Y basis was driven by higher revenues, up 28% Y-o-Y, and the lower tax rate of 22.5% (versus 30% last year). FY2015 net income of EGP3,192 million increased by 38% Y-o-Y. Total loans increased 7% Q-o-Q (+29% Y-o-Y). Retail loans increased 26% Y-o-Y (+5% Q-o-Q), and corporate loans by 30% Y-o-Y (+7% Q-o-Q). Customer deposits increased 26% Y-o-Y and 4% Q-o-Q. Deposit inflows during 4Q2015 were sourced from the corporate sector, with retail deposits falling slightly by 2% Q-o-Q, most likely due to the impact of the increase in three-year CD rates by state-owned banks. The share of demand deposits to total deposits was flat Q-o-Q at 21%, and the share of corporate deposits to total deposits increased slightly to 60% in December 2015, compared to 58% in September 2015. Despite a slight increase in funding costs Q-o-Q (+10bps), asset yields increased in 4Q2015 (+20bps), driving a c10bps increase in the net interest spread in 4Q2015 to 3.81%. Growth in fee income was solid, up 15% Y-o-Y and 4% Q-o-Q, despite the shortage of FX negatively impacting trade finance volumes. The loan-to-deposit ratio in foreign currencies fell from 92% in September 2015 to 84% in December 2015, as loans in FX  fell. In local currency, the loan to deposit ratio increased but remained low at 50%. The NPL ratio fell to 2.6% in December 2015 from 2.8% in September, due mainly to the strong growth in gross loans. The NPL ratio continues to be very low in the context of Egypt banking sector. NPL coverage also improved to 139%. (Earnings release, Elena Sanchez-Cabezudo, Rajae Aadel)   NSGB: EGP29.99 as of 13 January 2016, Rating: N/R, MCap: USD2,471 million, NSGB EY / QNBA.CA