Loan growth in the UAE slowed to 7.4% Y-o-Y in January from 7.8% Y-o-Y a month ago and 7.8% Y-o-Y in January 2015. The Central Bank’s 4Q2015 Credit Survey suggests that banks plan to tighten credit standards this quarter in light of growing macro risks.   Private sector led improvement in deposit growth: Sector’s deposit growth improved to 4.2% Y-o-Y in January from 3.5% Y-o-Y a month ago, however it was significantly below the 9.4% Y-o-Y growth recorded a year ago. While government deposits continue to contract, the decline slowed down to 11.6% Y-o-Y in January 2016 from 16.6% Y-o-Y a month ago. Government deposits represented 10.8% of total deposits as of January 2015 compared to 12.7% a year ago.   Investment Perspective: UAE banks trade at a 2016e P/E of 8.2x and P/BV of 1.3x. Our preferred picks in the sector are FGB, ADCB, ENBD and NBAD. The key risk facing the sector is deterioration in credit quality as the credit cycle turns. (Shabbir Malik, Murad Ansari)