C Bk Qatar S Regulatory News (CBQS)

The Commercial Bank (P.S.Q.C.) Announces

Net Profit of QAR 604 Million for the Full Year Ended 31 December 2017

29 January 2018, Doha, Qatar: The Commercial Bank (P.S.Q.C.) ("the Bank"), its subsidiaries and associates ("Group") announced today its financial results for the full year ended 31 December 2017. The Group reported a net profit of QAR 604 million as compared to QAR 501 million for the same period in 2016, an increase of 20.4%.

Key financial highlights for the Group compared to the same period in 2016:

· Total assets of QAR 138.4 billion, up by 6.2%

· Customer loans and advances of QAR 89.1 billion, up by 14.6%

· Customer deposits of QAR 77.6 billion, up by 9.5%

· Operating profit of QAR 2,204 million, up by 13.5%

· Cost income ratio of 37.5% reduced from 45.7%

· Provisions on non-performing loans at QAR 1,697 million, up by 33.8%

· Net profit of QAR 604 million, up by 20.4%

His Excellency Sheikh Abdullah bin Ali bin Jabor Al Thani, Chairman of the Board of Directors of Commercial Bank, said, "2017 was a challenging year for Qatar and Commercial Bank where both the public and private sectors adapted to a new market environment due to the land, air and sea blockade imposed by Qatar's neighbours. Both have proven to be resilient. Despite this, Qatar's robust macro fundamentals have not materially changed, reflected by an AA- rating by Fitch and Aa3 by Moody's. Commercial Bank has successfully concluded the first year of the 5-year strategic plan under which it has made good progress in cleaning up its balance sheet, diversifying its loan portfolio geographically and tenor to create a healthier risk profile, and driving efficiencies across the business. Looking ahead, country fundamentals remain strong which will provide opportunities for Commercial Bank as well. Qatar's large financial buffers of approximately $35 billion in net international reserves at the Qatar Central Bank and more than $300 billion of assets managed by the Qatar Investment Authority provide a strong liquidity position. Spending is set to increase in education, health and construction projects in advance of the FIFA 2022 World Cup for which preparations are on track."

Financial Performance

Mr. Hussain Al Fardan, Commercial Bank's Vice Chairman, added, "The impact of the economic blockade on our business has been minimal, with the actions taken under the strategic plan already showing results and positioning the Bank to show significant improved bottom line performance in the coming years. Consequently, the Board of Directors have recommended a cash dividend pay-out of 10% of par value or QAR 1.0 per share (pay-out ratio of 66%) subject to approval at the Annual General Assembly on 21 March 2018.

Net operating income for the Group decreased by 1.4% to QAR 3,529 million for the full year ended 31 December 2017, down from QAR 3,578 million achieved in the same period in 2016.

Net interest income for the Group increased by 7.6% to QAR 2,518 million for the full year ended 31 December 2017 compared to QAR 2,341 million achieved in the same period in 2016, due to an increase in the interest income as a result of higher interest rates as compared to last year. Net interest margin remains stable at 2.2% compared to Q3 2017.

Non-interest income for the Group decreased by 18.3% to QAR 1,011 million for the full year ended 31 December 2017 compared with QAR 1,237 million for the same period last year. The overall decrease in non-interest income was mainly due to lower income from investment securities as equity holdings were scaled down in line with the strategic plan and foreign exchange income.

Total operating expenses were tightly managed at a Group level, down 19.0% to QAR 1,325 million for the full year ended 31 December 2017 compared with QAR 1,636 million for the same period in 2016. Costs reductions were primarily driven by lower staff and administrative expenses.

The Group's net provisions for loans and advances increased by 33.8% to QAR 1,697 million for the full year ended 31 December 2017, from QAR 1,268 million for the same period in 2016. The non-performing loan (NPL) ratio increased to 5.65% in the full year ended 31 December 2017 compared to 5.01% for the same period in 2016. The loan coverage ratio increased to 81.0% in the full year ended 31 December 2017 compared to 78.9% for the same period in 2016.

The Group delivered balance sheet growth of 6.2% for the full year ended 31 December 2017 with total assets at QAR 138.4 billion, compared to QAR 130.4 billion for the same period in 2016. Total asset growth was driven mainly by an increase of QAR 11.3 billion in loans and advances and QAR 4.2 billion in investment securities, which was partially offset by a decrease of QAR 8.8 billion in Due from banks & financial institutions.

The Group's loans and advances to customers increased by 14.6% to QAR 89.1 billion for the full year ended 31 December 2017 compared with QAR 77.8 billion for the same period in 2016. The growth in lending has been generated, mainly from the government, semi-government and services sectors.

The Group's investment securities increased by 27.6% to QAR 19.6 billion for the full year ended 31 December 2017 compared with QAR 15.4 billion for the same period last year. The increase is mainly in Government bonds.

The Group's customer deposits increased by 9.5% to QAR 77.6 billion for the full year ended 31 December 2017, compared with QAR 70.9 billion for the same period last year.

Mr. Joseph Abraham, Commercial Bank's Group Chief Executive Officer, commented, "Commercial Bank reported results for the year ended December 2017 demonstrate the impact of strong execution of our strategic plan which called for building a strong diversified business whilst provisioning legacy loans and improving cost efficiency. Despite market conditions, Commercial bank continued to grow its business with the right sector mix underpinned by faster than market growth of 14.6% in loans and advances to customers and 9.5% in customer deposits. Consolidated Net Interest Income increased 7.6% year on year to QAR 2.52 billion.

"Consolidated Operating Profit increased 13.5% year on year to QAR 2.21 billion, driven by overall balance sheet growth and stable margins which reflected the actions taken on the management of liquidity and funding costs. I am also pleased to report a significant decrease in our operating expenses of 19.0% year on year, in line with our strategy to drive efficiencies across the business, streamline processes and reduce costs. Consequently, the Bank reported a healthy consolidated cost of income ratio of 37.5%, down from 45.7% at FY 2016.

"As part of our strategy, we strengthened our balance sheet and made additional provisions on legacy assets, increasing provisioning by 33.8% year on year to QAR 1.70 billion. Consolidated Net Profit was QAR 604 million at FY 2017.

"Domestic Bank reported an increase of 4.7% in Net Interest Income, while advances to customers grew by 14.5% and customer deposits were up 7.7% for the year ended 31st December 2017.

"2017 saw ABank return to profitability to deliver QAR 49 million in Net Profit. Loans and advances to customers were up 24% while customer deposits grew 32% year on year. We have also appointed a new well experienced CEO and two new Turkish board directors at ABank who will lead its strategic re-shape and growth. ABank remains a strategic asset and an important opportunity for us to leverage outside the GCC market.

"For our Associates, NBO reported an operating profit of QAR 416 million and maintains its strong position in the Oman market. For UAB, as announced earlier, we have entered into an exclusivity agreement to negotiate terms of the potential sale of Commercial Bank's stake in UAB. An extension on this agreement has been given until the 28th of February 2018. If this happens capital will be re-deployed to support growth of our other businesses."

Subsidiary in Turkey

Alternatifbank ("ABank") delivered a net profit of TL 49 million (QAR 49 million) for the full year ended 31 December 2017 (TL 2 million net profit for the same period in 2016).

Net operating income increased by 7.5% to TL 516 million (QAR 515 million) for the full year ended 31 December 2017, from TL 480 million (QAR 580 million in 2016), due to an increase in net interest income. As at 31 December 2017, ABank had increased its customer lending by 24% to TL 14.1 billion (QAR 13.5 billion) from TL 11.3 billion (QAR 11.7 billion) in December 2016. Customers' deposits increased by 32% to TL 10.7 billion (QAR 10.3 billion) during the full year ended December 2017, compared to TL 8.1 billion (QAR 8.3 billion) during the same period last year.

Associate in Oman

The National Bank of Oman's ("NBO") net profit decreased by 27.6% to OMR 44 million (QAR 416 million) for the full year ended 31 December 2017 as compared to OMR 55.8 million (QAR 599.4 million) in the same period in 2016. Net operating income decreased by 3% to OMR 132.1 million (QAR 1,249 million), compared to the same period in 2016. Provisions for loans and advances increased to OMR 16.3 million (QAR 154.5 million) from OMR 10 million (QAR 94.8 million) in the same period last year. As at 31 December 2017, NBO maintained its customer lending at OMR 2.7 billion (QAR 25.1 billion) and customers' deposits increased by 2.5% to OMR 2.5 billion (QAR 23.3 billion) compared to the same period last year.

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Notes to Editors

About Commercial Bank

Commercial Bank has total assets of QAR 138.4 billion as at 31 December 2017. As a full service commercial bank, the Bank offers a full range of corporate, retail and investment banking services as well as owning and operating the exclusive Diners Club franchise in Qatar. The Bank's countrywide network includes 29 full service branches and 179 ATMs.

Profitable every year since incorporation in 1974, continual investment in technology and human capital, together with a strong capital base, provides a solid foundation for continued growth. Expanding its geographical footprint, Commercial Bank is 100% owner of Alternatifbank in Turkey and has a strategic partnership with the National Bank of Oman (NBO). NBO is the second largest bank in Oman with total assets of OMR 3.5 billion as at 31 December 2017, has 60 conventional branches and 6 Islamic branches in Oman and 1 branch each in Egypt, Abu Dhabi and Dubai. Commercial Bank has entered into an exclusivity agreement with Tabarak Investment to negotiate terms of the potential sale of the Bank's stake in United Arab Bank.

Commercial Bank enjoys strong credit ratings of (A2) from Moody's, (A) from Fitch, and (BBB+) from Standard & Poor's. The Bank is listed on the Qatar Exchange and was the first Qatari bank to list its Global Depository Receipts (GDRs) on the London Stock Exchange. Commercial Bank's Swiss Franc bond issuance in December 2010, listed on the SIX Swiss Exchange, was the first public bond issuance by a Qatari bank in Switzerland. Commercial Bank's latest bond issuance in June 2014 and June 2016 are listed on the Irish Stock Exchange.

Commercial Bank was awarded the "Best Retail Bank in Qatar," "SME Bank of the Year in the Middle East," and "Best Cash Management Bank in Qatar" for 2017 by The Asian Banker. In recognition of its CSR activities benefitting the Qatari community, Commercial Bank was awarded the "Best CSR Report", at the Corporate Social Responsibility awards ceremony for organisations in Qatar. The Bank also won the "Best Investor Relations award for mid-cap companies" at the Qatar Stock Exchange's annual IR awards ceremony in 2017 recognising best practice in investor relations.

The Bank is dedicated to supporting Qatar's community and social infrastructure through Corporate Social Responsibility programmes and sponsorship of various events. Title sponsorship of the Commercial Bank Qatar Masters reflects the Bank's promotion of excellence in sports and its keen interest in enhancing Qatar's international sporting reputation. www.cbq.qa

About Alternatifbank (ABank)

ABank was established in 1991. Commercial Bank became the majority shareholder in ABank in 2013 holding a 74.24% stake, following the acquisition of ABank shares of 70.84% from the Anadolu Group and 3.40% through a public tender offer. In December 2016 the Bank completed the put option exercise of purchasing 25% of share in ABank from Anadolu group. Currently the Bank owns 100% of ABank shares.

ABank is a mid-size Turkish bank that predominately serves medium-sized companies through a country-wide network of 53 branches. ABank provides commercial/corporate banking services and products, with a special focus on the growing segment of Small and Medium-Sized Enterprises. ABank's main product ranges cover trade finance instruments, working capital finance, cash management, and portfolio management.

As at 31 December 2017, ABank had total assets of TL 20.6 billion, total loans stood at TL 14.1 billion, customer deposits of TL 10.7 billion and shareholders' equity of TL 1.6 billion.

https://www.abank.com.tr/en/