C Bk Qatar S Regulatory News (CBQS)

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

Net Profit of QAR 855 Million for the Half Year Ended 30 June 2018

18 July 2018, 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 2018. The Group reported a net profit of QAR 855 million as compared to QAR 180 million for the same period in 2017, an increase of 376%.

Key financial highlights for the Group compared to the same period in 2017

· Total assets of QAR 139.9 billion, up by 4.8%

· Customer loans and advances of QAR 87.2 billion, up by 4.3%

· Customer deposits of QAR 75.1 billion, up by 1.0%

· Operating profit of QAR 1.2 billion, up by 12.3%

· Cost income ratio of 33.9% reduced from 38.9%

· Provisions on loans and advances to customers QAR 462 million, down by 51.9%

· Net profit of QAR 855 million, up by 376%

His Excellency Sheikh Abdullah bin Ali bin Jabor Al Thani, Chairman of the Board of Directors of Commercial Bank, said, "The Qatari economy remains extremely resilient, demonstrating sustained GDP growth with Fitch and Moody's upgrading Qatar's outlook from negative to stable. In this, the second year of our five year plan, the Bank has made very good progress in reshaping its business for sustained growth. As Commercial Bank's activities closely align with the strategic economic objectives of the nation, our Bank is well positioned to benefit from the resilience and growth of the economy.

Financial Performance

Mr. Hussain Al Fardan, Commercial Bank's Vice Chairman, added, "This quarter, the Bank continues to position itself to show significant improved bottom line performance in coming years. For example, the Bank achieved a successful issuance of a USD 500 million bond as part of the Bank's European Medium Term Note ("EMTN") Programme. The bond issuance was twice oversubscribed, a clear indication of the confidence of international investors in the strength and stability of Qatar's economy, and a testament to the growth prospects of Commercial Bank, underpinned by its strategy, financial strength and prudent management.

Net operating income for the Group increased by 3.7% to QAR 1,833 million for the half year ended 30 June 2018, up from QAR 1,767 million achieved in the same period in 2017.

Net interest income for the Group increased by 8.2% to QAR 1,328 million for the half year ended 30 June 2018 compared to QAR 1,228 million achieved in the same period in 2017, driven mainly by strong loan growth. Net interest margin is 2.3% for the half year, an increase of 0.1% compared to H1 2017.

Non-interest income for the Group decreased by 6.5% to QAR 504 million for the half year ended 30 June 2018 compared with QAR 539 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 lower foreign exchange income.

Total operating expenses were tightly managed at a Group level, down 9.7% to QAR 620 million for the half year ended 30 June 2018 compared with QAR 688 million for the same period in 2017. Costs reductions were primarily driven by lower staff and administrative expenses.

The Group's net provisions for loans and advances decreased by 51.9% to QAR 462 million for the half year ended 30 June 2018, from QAR 962 million for the same period in 2017. The non-performing loan (NPL) ratio decreased to 5.39% in the half year ended 30 June 2018 compared to 5.64% for the same period in 2017. The loan coverage ratio is maintained at 84.2% in the half year ended 30 June 2018 compared to 84.3% for the same period in 2017.

The Group delivered balance sheet growth of 4.8% for the half year ended 30 June 2018 with total assets at QAR 139.9 billion, compared to QAR 133.4 billion for the same period in 2017. Total asset growth was driven mainly by an increase of QAR 3.6 billion in loans and advances and QAR 2.9 billion in investment securities.

The Group's loans and advances to customers increased by 4.3% to QAR 87.2 billion for the half year ended 30 June 2018 compared with QAR 83.6 billion for the same period in 2017. The growth in lending has been generated mainly from the semi-government and services sectors.

The Group's investment securities increased by 15.2% to QAR 21.7 billion for the half year ended 30 June 2018 compared with QAR 18.8 billion for the same period last year. The increase is mainly in Government bonds.

The Group's customer deposits increased by 1.0% to QAR 75.1 billion for the half year ended 30 June 2018, compared with QAR 74.4 billion for the same period last year.

Mr. Joseph Abraham, Commercial Bank's Group Chief Executive Officer, commented, "The benefits of our 5-year strategic plan and its continued execution are evident in our H1 2018 results, with a consolidated operating profit of QAR 1.21 billion and a net profit of QAR 855 million, representing a 12% and a 376% increase over the same period last year, respectively. 

"As advised previously we have completed the majority of the legacy loan book provisioning and the lowered credit charge has benefited our bottom line. More importantly, during the first half of the year we continued to grow our business with a focus on the government and service sector, while also maintaining a tight focus on efficiency and driving down our cost to income ratio. We continue to introduce new and innovative products in retail banking as part of our digital agenda, most notably with the rollout of our "60 Second" remittance service, which allows customer to send funds to home countries in under a minute, and is now been deployed to five countries.

"In recognition of this initiative we were awarded the 'Best Remittance Bank in the Middle East' by the Asian Banker which again shows our focus on building new fee based income streams.

"Consolidated net interest income increased to QAR 1.33 billion during H1 2018, up 8% compared with QAR 1.23 billion during the same period last year. Loans and advances were up 4% to QAR 87.2 billion in H1 2018, driven by growth in the services and industries sectors. Government loans contracted due to repayment of loans post the State of Qatar bond issue but net of this adjustment the govt sector grew by 30%. Customer deposits were up 1% to QAR 75.1 billion in H1 2018, compared to the same period last year. Growth was driven by the Domestic Bank and supplemented by Alternatif Bank's strong top-line performance. Growth in the Domestic bank was largely due its strong market position and brand recognition in Qatar.

"The Domestic Bank reported an increase of 5% in Net Interest Income to QAR 1.11 billion in H1 2018, supported by 4% growth in loans and advances compared to the same period last year and customer deposits remained stable at QAR 64.4 billion. 

"The strategy to more closely align Alternatif Bank with the group continues to yield results. Alternatif Bank reported an increase in operating profit to QAR 147 million after adjusting for a one off exchange gain of 53 million in H1 2018, up 14 % compared with the same period last year. Loans and advances to customers were up 7%, while customer deposits grew 25% in H1 2018 compared to the same period last year. We continue to closely monitor the the challenging macroeconomic conditions in Turkey but have the right strategy and management team in place to manage in the current economic environment and the improved results are evidence of this capability. 

"For our Associates, NBO reported a net profit of QAR 240 million for the half year, slightly impacted by challenging market conditions. As for UAB, discussions for the sale of Commercial Bank's stake in the UAB have been terminated. We currently classify as an Asset Held for Sale but will focus on improving the performance of the entity. "

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Notes to Editors

About Commercial Bank

Commercial Bank has total assets of QAR 139.9 billion as at 30 June 2018. 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 174 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 Alternatif Bank 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 3.4 billion as at 30 June 2018 and has 69 branches, including 1 branch each in Egypt, Abu Dhabi and Dubai. Commercial Bank has ceased discussion 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 (A3) 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 issued in March 2018 is the largest ever CHF bond from the MENA region.

Commercial Bank was awarded the "Best Remittance Bank in the Middle East 2018", "Best Retail Bank in Qatar 2018," "SME Bank of the Year in the Middle East 2017," and "Best Cash Management Bank in Qatar 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 Alternatif Bank

Alternatif Bank was established in 1991. Commercial Bank became the majority shareholder in Alternatif Bank in 2013 holding a 74.24% stake, following the acquisition of Alternatif Bank 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 Alternatif Bank from Anadolu group. Currently the Bank owns 100% of Alternatif Bank shares.

Alternatif Bank is a mid-size Turkish bank that provides its customers in the corporate, commercial and retail banking segments with high value products, services and solutions through a country-wide network of 53 branches widely distributed across Turkey. Alternatif Bank works closely with Commercial Bank to realise synergies and leverage regional trade opportunities.

As at 30 June 2018, Alternatif Bank had total assets of TL 26.0 billion, total loans stood at TL 16.5 billion, customer deposits of TL 13.4 billion and shareholders' equity of TL 1.6 billion.

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