Commercial Bank of Kuwait (CBK) reported 1Q2016 net income of KWD7.8 million, 23% higher Y-o-Y but  60% lower Q-o-Q, as 4Q2015 net income was a high base boosted by low provisioning costs. The actual earnings in 1Q2016 missed our forecast of KWD8.9 million by 13% due to higher-than-expected provisioning costs. Revenues came in 9% above our estimate, on higher-than-expected fees and other non-interest income.   Net income – KWD7.8 million, +23% Y-o-Y, -60% Q-o-Q, -13% vs. EFGe Revenues – KWD38.2mn, +6% Y-o-Y, +15% Q-o-Q, +9% vs. EFGe Loan growth – +3% Y-o-Y, +0% Q-o-Q, -1% vs EFGe   Our view on the results:  A weak set of results,  in our view. Loan growth was weak, flat Q-o-Q (+3% Y-o-Y), after a short recovery in 2H2015 and customer deposits declined by 2% Q-o-Q (-3% Y-o-Y). The net interest spread narrowed by 3bps Q-o-Q due to both higher funding costs and lower asset yields. Net interest income was subdued, up by just 1% both Q-o-Q and Y-o-Y due to the weak lending expansion and lower spreads. Provisioning costs remain very high (provisioning costs accounted for c72% of pre-provisions income in 1Q2016). Out of the total KWD20.6 million provisioning charge, CBK added KWD16.8 million in additional provisions, which we believe was linked to precautionary provisions requested by the central bank. With the NPL ratio flat Q-o-Q at 0.9%, NPL coverage has risen to 678%, according to the press release, compared to 571% in December 2015.  Fee income surprised positively, up 12% Y-o-Y (+4% Q-o-Q).   Main Positives: i) Higher-than-expected fee income; ii) Higher-than-expected FX and dividend income; iii) Flat Q-o-Q NPL ratio and further increase in NPL coverage. Main Negatives: i) Weak loan growth (flat Q-o-Q); ii) Decline in deposits both Y-o-Y and Q-o-Q; iii) Higher than expected provisioning costs; iv) Net interest spread compression Q-o-Q. (company disclosure, Elena Sanchez-Cabezudo, CFA, Rajae Aadel)