Riyad Bank’s 4Q2015 headline net income declined 5% Q-o-Q to SAR851 million, 12% ahead of our estimates, but in line with Bloomberg consensus.   Main positives: i) Sharp improvement in net interest spreads (+16bps Q-o-Q); ii) Strong loan growth (+5% Q-o-Q); iii) Strong deposit growth (+4%)   Main negatives: i) Weaker non-interest income (-7% Q-o-Q); ii) Provisioning costs remain high (est. annualised cost of risk of 101bps)   Our view on the results: While earnings declined Q-o-Q, we were surprised by the strong increase in net interest spreads. We estimate that Riyad’s net interest spreads rose by 16bps Q-o-Q – strongest Q-o-Q increase in the past four years. While strong loan growth (+5% Q-o-Q) is likely to have fed into net interest income growth, the magnitude of spread increase suggests that there could be some one-off adjustments in net interest income. Deposits also rose sharply – up 4% Q-o-Q – which in the current liquidity environment, is likely to have weighed on funding costs. Non-interest income was weaker Q-o-Q as investment income should have normalised from a high base in the previous quarter. We have a Neutral rating on Riyad Bank. Though balance sheet growth momentum and spreads improvements were impressive in 4Q15, it has not flowed through to earnings, with 4Q15 annualised ROAE at 10%. (Earnings release, Murad Ansari)   Riyad Bank: SAR11.11 as of 18 January 2016, Rating: Neutral, FV: SAR14.00 per share, MCap: USD8,888 million, RIBL AB / 1010.SE