Riyad Bank reported 1Q2016 net income of SAR1,174 million. Recurring earnings of SAR973 million, adjusting for SAR201 million capital gain on land sales, were 14% higher Q-o-Q, ahead of our forecast of SAR833 million.   Main positives: i) Low provisions (est. cost of risk of 22bps); ii) Loan growth (+5.5% Q-o-Q); iii) Capital gain on land sale of SAR201 million   Main negatives: i) Weaker spreads (-21bps Q-o-Q); ii) Decline in deposits (-1% Q-o-Q); iii) Weak recurring non-interest income (-8% Q-o-Q)   Our take on the results: Pre-provision earnings were broadly in line with our estimates. As expected, spreads weakened from high base in 4Q2015, likely dented by higher funding costs despite decline in deposits. Non-interest income ex-capital gains weakened further, despite strong loan growth, suggesting weaker investment income. We estimate annualised cost of risk of only 22bps, which -along with capital gain on land sales- cushioned weaker revenue growth. However, loan growth was strong at 5.5% Q-o-Q. However, this pushed up the bank’s LDR (adjusted for LT loans) to 88%. This could translate into sustained pressure on funding costs. (Earnings release, Murad Ansari)   Riyad Bank: SAR11.10 as of 13 April 2016, Rating: Neutral, FV: SAR14.00 per share, MCap: USD8,880 million, RIBL AB / 1010.SE