Key highlights: i) Provisioning to improve meaningfully from 4Q16 (slight improvement in 3Q16); ii) absolute dividend to decline relative to 2015 reflecting the down-trend in earnings; and iii) eyeing ROE of mid-teen in 2017 and high-teen from 2018   Overall: Management expects revenue growth to be a challenge in 2H16, however it expects a gradual improvement in credit quality. Management expects ROE to improve to mid-teens in 2017 and high teens in 2017 from c12% in 1H16 mainly due to lower provisioning. Provisioning peaked in 2Q16: Management expects provisioning to start improving from 3Q16 – slight improvement in 3Q16 and a more meaningful improvement in 4Q16. Management stated that there has been a drop in the number of skips (creditors leaving the country with unpaid debts) over the last four months, which suggests that provisioning would reduce over the coming quarters.   NIMs to remain under pressure: RAK Bank’s NIM remains under pressure as the bank curtails exposure to the high yielding RAK Finance segment. Management expects NIM to continue declining in the coming quarters, however it expects the downtrend to flatten. Management did not give specific guidance for NIM.   Loan growth: Loan growth is likely to be driven by the corporate segment (growth in the emirate of RAK is gaining traction). In retail the bank is focusing on mortgages and salary assigned accounts and pulling back from the expat segment.   Capitalisation and dividends: With earnings down 38% Y-o-Y in 1H16, management expects overall dividend to be lower this year. However, management intends to soften the impact of lower earnings by raising the pay-out ratio. RAK Bank’s capitalization continues to be healthy with Tier 1 of 24.1% as of 2Q16. (Shabbir Malik, Murad Ansari)   RAK Bank (AD): AED5.05 as of 8 August 2016, Rating: Neutral, FV: AED6.10 per share, MCap: USD2,307mn, RAKBANK UH / RAKB.AD