Pre-minorities profit down 59.4% Q-o-Q, dividend cut to AED0.20/share. UNB reported net profit (pre-minorities) of AED195 million for 4Q2015, down 59.4% Q-o-Q and 54.5% Y-o-Y.  The bank’s earnings were well short of our expectations of AED432 million and Bloomberg consensus (net profit: AED438 million), owing to weak net interest income and higher-than-expected provisioning. The bank’s board proposed a cash dividend of AED0.20/share (pay-out c30%), versus AED0.25/share for 2014, and below our expectations of AED0.28/share.   Our view of the results: A disappointing set of results. Net interest income weakened sharply (-11.9% Q-o-Q and -4.9% Y-o-Y), as we expect UNB’s spreads to have weakened due to an increase in cost of funds (competition for deposits, increase in EIBOR), a wider liquidity buffer (LDR decreased to 91% from 94% in 3Q2015) and lack of suspended interest reversals this quarter. Provisioning was higher-than-expected due to i) sustained stress in the commercial and SME loan portfolio and ii) build-up of general provisions to comply with central bank’s minimum requirements (UNB’s general provision reserve rose to 1.50% as of 4Q2015 from 1.36% at the end of 3Q2015). We have a Neutral rating on UNB. While the bank has addressed its general provision shortfall, the stress in the SME segment would continue to be a drag on the bank’s profitability until 2Q2016. Moreover, the sharp contraction of spreads in 4Q2015 is a source of a concern, and a trend which could materialise in other UAE bank’s results due to growing competition for liquidity in the system.   Main positives: 1) Credit quality metrics improved (NPL ratio down 30bps Q-o-Q to 3.5%; general provision reserve rose to 1.50% from 1.36% in 3Q2015); Main negatives: i) Contraction in net interest spread, ii) Jump in provisioning (+97.7% Q-o-Q, +43.8% Y-o-Y), iii) Sluggish loan growth (-0.3% Q-o-Q, +6.8% Y-o-Y)