C Bk Qatar S Regulatory News (CBQS)

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

Net Profit of QAR 934 Million for the half year ended 30 June 2019

17 July 2019, Doha, Qatar: The Commercial Bank (P.S.Q.C.) ("the Bank"), its subsidiaries and associates ("Group") announced today its financial results for the half year ended 30 June 2019. The Group reported a net profit of QAR 934 million as compared to 855 million for the same period in 2018, an increase of 9.2%.

Key financial highlights for the Group for H1 2019 compared to the same period in 2018

· Net profit of QAR 934 million, up by 9.2% 

· Operating profit of QAR 1,295 million, up by 6.8%

· Cost to income ratio of 29.9%, reduced from 33.9%

· Net provisions QAR 428 million, down by 1.7%, NPL ratio reduced from 5.4% to 4.9% and coverage improved from 84.2% to 96.2%

· Total assets of QAR 141.3 billion, up by 1%

· CET1 improved from 9.7% to 11.0% and total CAR improved from 14.5% to 16.3% 

· Customer loans and advances of QAR 84.8 billion, down by 2.7%. Growth in domestic loans excluding Government temporary overdraft repayment and de-risking.

· Loan deposit ratio 110.3%, down from 116.1%

· 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 "Financial Technology Innovation Award 2019" for the 60 Seconds Online Remittance service and digital innovations

Sheikh Abdulla bin Ali bin Jabor Al Thani, Chairman of the Board of Directors of Commercial Bank, said, "Qatar is progressing well with its economic transformation, strengthening the country's capital market by taking significant steps to attract inward investment and improve liquidity on its stock exchange through a ten-to-one stock split.

"I am proud that Commercial Bank as a leading financial institution in Qatar is able to play a key part in the development of the nation by offering a myriad of innovative banking and financial services to government entities, businesses and retail customers. We had the honour of becoming the first company to implement the stock split and look forward to supporting the continued growth and prosperity of the Qatari economy."

Financial Performance

Mr. Hussain Alfardan, Commercial Bank's Vice Chairman, added, "We continue to see excellent results from the execution of our 5-year strategic plan. The bank has developed a strong franchise in Qatar and is renowned for its exceptional client experience and innovative services. We continue to extend our capabilities to better serve the needs of our clients and strengthen our position in the market.

Operating profit for the Group increased by 6.9% to QAR 1,295 million for the half-ended 30 June 2019, compared to QAR 1,212 million achieved in the same period in 2018.

Net interest income for the Group reduced by 8.3% to QAR 1,218 million for the half year ended 30 June 2019 compared to QAR 1,328 million achieved in the same period in 2018. Net interest margin reduced to 2.1% for the half year ended 30 June 2019 compared to 2.3% achieved in  H1 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. However, NIM has improved quarter on quarter from 2.0% in Q1 2019 to 2.2% in Q2 2019.

Non-interest income for the Group increased by 24.7% to QAR 629 million for the Half year ended 30 June 2019 compared with QAR 504 million in the same period 2018. The overall increase in non-interest income was mainly due to Increase in foreign exchange earnings.

Total operating expenses were tightly managed at a Group level, down by 11.1% to QAR 552 million for the half year ended 30 June 2019 compared with QAR 621 million in the same period in 2018. Costs reductions were primarily driven by lower staff and administrative expenses.

The Group's net provisions decreased by 1.7% to QAR 428 million for the half year ended 30 June 2019, from QAR 436 million in the same period in 2018. The non-performing loan (NPL) ratio has reduced to 4.9% in H1 2019 compared to 5.6% in December 2018. The loan coverage ratio has increased to 97% in H1 2019 compared to 78.8% in December 2018.

The Group balance sheet has increased by 4.6% for the half year ended 30 June 2019 with total assets at QAR 141.3 billion, compared to QAR 135.1 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 1.3% to QAR 84.8 billion in H1 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 7.6% to QAR 23.3 billion in H1 2019 compared with QAR 21.7 billion in H1 2018. The increase is mainly in Government bonds.

The Group's customer deposits increased by 7.8% to QAR 76.9 billion in H1 2019, compared with QAR 71.3 billion in December 2018, and has resulted in the loan deposit ratio reducing from 117.4% to 110.3%.

Mr. Joseph Abraham, Commercial Bank's Group Chief Executive Officer, commented, "I am pleased to announce a strong set of financial results for the first half of 2019. Consolidated operating profit was QAR 1.29 billion for the first half of 2019, an increase of 7% compared to the same period last year and consolidated net profit was QAR 934 million in H1 2019 an increase of 9% compared to the same period in 2018. The strong execution of our five-year strategic plan continues to yield positive results along with the continued focus on productivity enhancements through digitization of operational processes.

"The increase in consolidated operating profit was driven by careful management of operating expenses and positive contributions from fees and other income. Operating expenses decreased 11% to QAR 552 million during the first half of 2019 compared with the same period last year, a result of careful cost control and savings from our insourcing programme.

"Fees and other income were up 25% during H1 2019, compared with the same period last year, to QAR 629 million. The increase was driven by gains in foreign exchange trading income and investment income. Consolidated net profit was also supported by a reduction in net loan provisioning which declined 2% during H1 2019, supported by an improved asset quality and increased recovery of NPLs.

"Consolidated net interest income was down by 8% to QAR 1.21 billion during the first half of the year, due to weakness in the Turkish Lira and higher cost of funding in the Qatari market during the first quarter of 2019. However, when comparing the second quarter of 2019 with first quarter of 2019, there was an improvement of 9.7% as a result of systematic efforts to improve net interest margins during the quarter. This was achieved through a reduction in the cost of funding through careful management of our cost of deposits and repricing of our loan book.

"Loans and advances were QAR 84.8 billion in the first half of 2019, down 2% compared to the same period last year, largely due to the depreciation of the Turkish Lira. Customer deposits increased moderately to QAR 76.9 billion, up 3% in H1 2019, compared to the same period last year.

"The Domestic Bank reported net profit of QAR 870 million in H1 2019, an increase of 11% compared to the same period last year. The improvement was largely driven by a reduction in net provisioning which decreased 15% compared to the same period last year. Operating profit increased to QAR 1.16 billion 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 stable at QAR 73.7 billion in H1 2019. Customer deposits increased 5% to QAR 67.5 billion.

"The Lira's depreciation by circa 26% compared to the same period last year has impacted Alternatif Bank's comparatives when translated in terms of Qatari Riyal. Alternatif Bank reported an increase in net profit to TL 99 million, up 25% compared to the same period last year. In Turkish Lira, Alternatif Bank grew customer deposits by 15% and loans and advances by 8%, however in terms of Qatari Riyals, currency depreciation led to a 15% decline in loans and advances to customers and a 9% decline in customer deposits.

"Our Associate, NBO, performed steadily during the first half of 2019, reporting a net profit of OMR 25 million. UAB continues to be an asset held for sale."

Commercial Bank will publish its financial statements after receiving approval from the Ministry of Commerce and Industry.