UNB reported net profit of AED470mn (EPS: AED0.17) for 2Q16, -17% Y-o-Y and +5% Q-o-Q. UNB’s earnings came in ahead of our AED410mn estimate (Bloomberg consensus: AED386mn), owing to i) lower-than-expected provisioning; and ii) stronger-than-expected fee income.   Main positives: i) Loan growth recovers (+2.5% Q-o-Q); ii) spreads widen (2.35% in 2Q16 versus 2.3% in 1Q16); iii) lower-than-expected provisioning (cost of risk 63bps versus expectation of 84bps)   Main negatives: None   Our view of the results: UNB’s results were decent, relative to our subdued expectations. The bank’s spreads improved marginally after shrinking sharply in 1Q16. Fee income improved as loan growth recovered Q-o-Q (+ 2.5% Q-o-Q in 2Q16 vs. -0.1% Q-o-Q in 1Q16). Provisioning surprised positively as cost of risk came in at 63bps vs. our expectation of 84bps, owing to reduced provisioning pressure in the retail segment. Credit quality metrics were broadly stable Q-o-Q, with NPL ratio at 3.6% and NPL coverage at 102%. (Earnings release, Shabbir Malik, Murad Ansari)   Union National Bank: AED4.46 as of 16 July 2016, Rating: Neutral, FV: AED3.80 per share, MCap: USD3,344mn, UNB UH / UNB.AD