The Commercial Bank (P.S.Q.C.) Announces Net Profit of QAR 431 Million for the Quarter Ended 31 March 2019

Doha, Qatar: The Commercial Bank (P.S.Q.C.) (the Bank), its subsidiaries and associates (Group) announced today its financial results for the quarter ended 31 March 2019. The Group reported a net profit of QAR 431 million as compared to 405 million for the same period in 2018, an increase of 6.4%.

Key financial highlights for the Group compared to the same period in 2018

Net profit of QAR 431 million, up by 6.4%

Operating profit of QAR 621 million, up by 2.1%

Cost to income ratio of 30.9%, reduced from 33.9%

Provisions on loans and advances to customers QAR 207 million, down by 6.8%

Total assets of QAR 143.8 billion, down by 1.7%

Customer loans and advances of QAR 85.2 billion, down by 8.2%. Growth in domestic loans excluding Government temporary overdraft repayment and de-risking.

Loan deposit ratio 104.4%, down from 116.9%

Best Cash Management Bank in Qatar award for the third year in a row, and Best Transaction Banking service in Qatar from The Asian Banker

Best Retail Bank in Qatar award for the third year in a row and the Best Remittance Product and Service in Asia Pacific, Middle East and Africa from The Asian Banker

Sheikh Abdulla bin Ali bin Jabor Al Thani, Chairman of the Board of Directors of Commercial Bank, said, In 2018 Qatar’s GDP increased by 2.4% and the IMF forecasts a growth of 3.1% for 2019. The country’s leadership has prioritised economic transformation and continues to invest heavily in strengthening Qatar’s knowledge-based economy to secure the nation’s long-term financial future.

Markets have responded positively to this, and in the first quarter of 2019, Qatar successfully raised $12 billion from the bond markets, a clear indication of the confidence that international investors have in the Qatari economy.

Commercial Bank is privileged to play a part in Qatar’s ambitious transformation agenda. As one of the leading financial institutions in the country, with deep rooted ties to the business community, we are committed to leveraging our expertise to support Qatar on its economic journey.

Financial Performance

Mr. Hussain Alfardan, Commercial Bank’s Vice Chairman, added, In the first quarter of 2019 we continued with the implementation of our five-year strategic plan and strategic focus on Client Experience and Transaction Banking, with our successes recognised by renowned awarding bodies.

Commercial Bank took home the award for ‘Best Cash Management Bank in Qatar’ for the third year in a row and won the ‘Best Transaction Banking service in Qatar’ at the Asian Banker’s Middle East and Africa Awards 2019. Further, Commercial Bank won the Asian Banker’s ‘Best Retail Bank in Qatar’ award for the third year in a row and the ‘Best Remittance Product and Service in Asia Pacific, Middle East and Africa.’ These awards are testimony to the strong franchise built by teams across the organization and our ability to apply ideas and technology to develop world beating product capabilities; our Remittance Product has been recognised as being the best not just in the Middle East but also in the Asia Pacific despite there being many excellent banks in Asia. It shows that in Qatar we can develop new and innovative products which will help us in developing best-in-class Transaction Banking products and services for the benefit of our clients.

Operating profit for the Group increased by 2.1% to QAR 621 million for the quarter ended 31 March 2019, compared to QAR 608 million achieved in the same period in 2018.

Net interest income for the Group reduced by 11.8% to QAR 581 million for the quarter ended 31 March 2019 compared to QAR 659 million achieved in the same period in 2018. Net interest margin declined marginally to 2.0% for the quarter ended 31 March 2019 compared to 2.1% achieved in 2018. The reduction in margins is mainly due to the increase in cost of funding in Turkey, although margins have been managed through active loan book re-pricing and diversifying liquidity sources to minimize the increasing cost of funding.

Non-interest income for the Group increased by 22.7% to QAR 319 million for the quarter ended 31 March 2019 compared with QAR 260 million. The overall increase in non-interest income was mainly due to Increase in foreign exchange gains.

Total operating expenses were tightly managed at a Group level, down by 10.6% to QAR 278 million for the quarter ended 31 March 2019 compared with QAR 311 million in the same period in 2018. Costs reductions were primarily driven by lower staff and administrative expenses.

The Group’s net provisions for loans and advances decreased by 6.8% to QAR 207 million for the quarter ended 31 March 2019, from QAR 222 million in the same period in 2018. The non-performing loan (NPL) ratio has remained stable at 5.6% in Q1 2019 compared to 5.6% in Q4 2018. The loan coverage ratio has increased to 80.3% in Q1 2019 compared to 78.9% in Q4 2018.

The Group balance sheet has increased by 6.6% for the quarter ended 31 March 2019 with total assets at QAR 143.8 billion, compared to QAR 134.9 billion in December 2018. The increase was mainly in balances with banks and loans and advances.

The Group’s loans and advances to customers increased by 1.8% to QAR 85.2 billion in Q1 2019 compared with QAR 83.7 billion in December 2018. The increase was mainly in the government and services sectors.

The Group’s investment securities increased by 13.2% to QAR 22.9 billion in Q1 2019 compared with QAR 20.2 billion in Q1 2018. The increase is mainly in Government bonds.

The Group’s customer deposits increased by 14.4% to QAR 81.6 billion in Q1 2019, compared with QAR 71.3 billion in December 2018, and has resulted in the loan deposit ratio reducing from 116.9% to 104.4%.

Mr. Joseph Abraham, Commercial Bank’s Group Chief Executive Officer, commented, Commercial Bank made a good start to the year, maintaining the positive momentum from 2018. Consolidated operating profit was QAR 621 million for the first quarter of 2019, an increase of 2.1% compared to the same period last year and consolidated net profit was QAR 431 million in Q1 2019 an increase of 6.4% compared to the same period in 2018. We continue to make good progress against our five-year strategic plan positioning Commercial Bank as a leading financial institution in Qatar.

The increase in consolidated operating profit was driven by careful management of operating expenses which decreased 10.6% in Q1 2019, compared to the same period last year, to QAR 278 million, a result of insourcing and greater investment in our internal systems and processes. Consolidated net profit was also supported by a reduction in net loan provisioning which declined 6.8% during Q1 2019, supported by an improved asset quality and increased recovery of NPLs.

Consolidated net interest income was down by 11.8% to QAR 581 million during the first quarter of the year. The reduction stemmed from weakness in the Turkish Lira which declined by circa 30% during the period and a higher cost of funding in the Qatari market. We expect to see improvement in consolidated net interest income going forward as we attract lower cost deposits and reprice our loan book.

Loans and advances were QAR 85.2 billion in the first quarter of 2019, down 8% compared to the same period last year, largely due to the depreciation of the Turkish Lira and a contraction in government borrowing following Qatar’s sovereign bond issuance in April 2018. Customer deposits increased moderately to QAR 81.6 billion, up 3% in Q1 2019, compared to the same period last year.

The Domestic Bank reported net profit of QAR 399 million in Q1 2019, an increase of 12.1% compared to the same period last year. The improvement was largely driven by a reduction in net provisioning which decreased 20.1% compared to the same period last year. Operating profit increased to QAR 558 million during the period, driven by cost optimisation and an increase in total fees and other income which partially offset the decline in net interest income. Loan and advances to customers were down 5.7% to QAR 74.1 billion in Q1 2019 on the back of the repayment of a temporary overdraft by the Government following Qatar’s sovereign bond issuance in April 2018. Customer deposits increased 5.2% to QAR 72.9 billion.

The Lira’s depreciation by circa 30% compared to the same period last year has impacted Alternatif Bank’s comparatives when translated in terms of Qatari Riyal. Alternatif Bank reported a decrease in net profit to TL 33 million, down 15.4% compared to the same period last year. In Turkish Lira, Alternatif Bank grew customer deposits by 22.8% and loans and advances by 10.7%, however in terms of Qatari Riyals, currency depreciation led to a 21.7% decline in loans and advances to customers and a 12.8% decline in customer deposits.

Our Associate, NBO, performed steadily during the first quarter of 2019, reporting a net profit of OMR 12 million. UAB continues to be an asset held for sale in Q1 2019

Source: Commercial Bank of Qatar