Posted on April 17, 2017

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 2017. The Group reported a net profit of QAR 91.2 million as compared to QAR 274.2 million for the same period in 2016, a decrease of 66.7%.

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

  • Completion of rights issue of QAR 1.5 billion in Q1 2017
  • Total assets of QAR 135.1 billion, up by 9.5%
  • Customer loans and advances of QAR 82 billion, up by 8.6%
  • Customers’ deposits stable at QAR 71.9 billion Net operating income of QAR 885.4 million, down by 4.2%
  • Operating profit of QAR 530.1 million, up by 4.3%
  • Cost income ratio of 40.1% as compared to 45%
  • Provisions on non-performing accounts at QAR 484.7 million, up by 73.5%
  • Net profit of QAR 91.2 million, down by 66.7%
  • Earnings per share of QAR 0.24

His Excellency Sheikh Abdullah bin Ali bin Jabor Al Thani, Chairman of the Board of Directors of Commercial Bank, said “Commercial Bank has started the year on a strong note, with an improved capital position and with the Strategic Reshape plan well under way. As we look towards Qatar’s future, we have re-aligned the Bank’s strategy to focus on sustainable earnings and growth, while continuing to positively contribute to the development of the local economy. AA rated by Fitch, Qatar’s economy is resilient and set for a healthy GDP growth of 3.6% in 2017, which will also support the growth of our bank.”

Financial Performance

Mr. Hussain Al Fardan, Commercial Bank’s Vice Chairman, added, “Commercial Bank delivered an operating profit of QAR 530.1 million in the first quarter of 2017. Loans have grown by 8.6% year on year at the Group level. Growth in lending was driven by services, consumption and industry sectors.”

Net operating income for the Group decreased by 4.2% to QAR 885.4 million for the quarter ended 31 March 2017, down from QAR 924.7 million achieved in the same period in 2016.

Net interest income for the Group decreased by 4.1% to QAR 598.5 million for the quarter ended 31 March 2017 compared to QAR 624.3 million achieved in the same period in 2016, mainly due to a change in the business mix in ABank resulting in lower income. Net interest margin remains stable at 2.2% as compared to Q4 2016.

Non-interest income for the Group decreased by 4.5% to QAR 286.9 million for the quarter ended 31 March 2017 compared with QAR 300.5 million. The overall decrease in non-interest income was due to lower income from investment securities and other income.

 

Total operating expenses were well controlled for Group and these decreased by 14.7% at QAR 355.4 million for the quarter ended 31 March 2017 compared with QAR 416.5 million for the same period in 2016. Costs reduced in both staff as well as administrative expenses.

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The Group’s net provisions for loans and advances increased by 84.7% to QAR 478.7 million for the quarter ended 31 March 2017, from QAR 259.1 million for the same period in 2016. The non-performing loan (NPL) ratio has remained at 5% at 31 March 2017 as compared to that of December 2016, however, loan coverage ratio has increased to 85.9% as at 31 March 2017 compared to 78.9% as at December 2016.

The Group delivered balance sheet growth of 9.5% at the end of March 2017 with total assets at QAR 135.1 billion, compared to QAR 123.3 billion at the end of March 2016. Total asset growth was driven mainly by an increase of QAR 6.5 billion in loans and advances and QAR 3.7 billion in investment securities.

Group’s loans and advances to customers increased by 8.6% to QAR 82 billion at 31 March 2017 compared with QAR 75.5 billion at the end of March 2016. The growth in lending has been generated, mainly in services, consumption and industry sectors.

Group’s investment securities increased by 27.2% to QAR 17.2 billion as at 31 March 2017 compared with QAR 13.5 billion at the end of March 2016. The increase is mainly in Government bonds.

Group’s customers’ deposits are stable at QAR 71.9 billion at 31 March 2017, compared with QAR 72.1 billion as at 31 March 2016.

Mr. Joseph Abraham, Commercial Bank’s Chief Executive Officer, commented, “Q1 2017 has shown early signs of the successful implementation of our Strategic Reshape plan. The Bank delivered solid growth in Qatar and has delivered on the key commitments in our Strategic plan, including strengthening our core capital. “We completed the rights issue of QAR 1.5 billion in Q1 2017. In addition, the AGM approved the scrip dividend of 1 share for every 20 shares owned and no cash dividend. We also completed the revaluation of owned fixed assets of QAR 1.3 billion in Q4 2016. These actions have improved CET1 to over 11% and total CAR to over 16%.

 “At a Group level, operating profit before provisioning was QAR 530.1 million, representing an increase of 4.3% year on year. In line with previous guidance, our provisions will remain elevated for the next few quarters as we continue to ensure the Bank’s loan book is adequately and prudently provisioned, in an ongoing process. Consequently, the Group reported a net profit of QAR 91.2 million. “The lending book has shown growth of 8.6% and CB domestic growth has exceeded the market growth in Q1 2017. We have built a strong pipeline for the public and government sector through a refocused relationship strategy and improved credit approval processes. Consequently, lending growth is now diversified across different sectors as part of our Strategic Reshape plan to reduce reliance on real estate sector alone. “Costs have been well managed and have shown a 14.7% reduction over the same period in March 2016. Consequently our cost to income ratio has improved to 40.1% in Q1 2017 as compared to 45% for the same period in 2016.

“Our digital transformation agenda is well underway with many ‘first-in-market’ banking technology advancements already launched during the first quarter to enhance the client experience and also drive increased productivity and efficiency. To that end, we were the ‘first in the market’ to implement a fully electronic voting system during our AGM held earlier this month. Regulator representatives attending the AGM and Commercial Bank’s external auditors both appreciated the use of the electronic voting technology as it simplified the registration, voting and counting of votes process for shareholders. Commercial Bank has led the Qatari banking sector in creativity and innovation by introducing many banking ‘firsts’ to the country, and this new electronic voting system is the latest example of embedding digital technology throughout our organisation to further drive efficiencies.

“Earlier this year, we upgraded our Retail Internet Banking platform and Mobile Banking app to support the ‘first QR code online payment feature in Qatar’, and our customers were successfully able to purchase tickets online for the Commercial Bank Qatar Masters golf tournament using our Internet and Mobile Banking platforms. We believe that the simplicity of this innovative technology feature will allow us to enable digital payments for a wide array of other untapped categories of merchant payments and herald a shift in the adoption of electronic payments in the country.

“We also teamed up with Ooredoo to launch a new ‘first of its kind’ bulk bill payment service in the country. The new service enables all Commercial Bank Corporate clients to quickly and easily pay their Ooredoo Business bills through the Bank’s state-of-the-art online Corporate Internet Banking platform. To provide even more valued-added services for our corporate clients, the Bank has recently launched a Corporate Telephone Banking System with a dedicated customer care service line for this important segment of clients – another banking ‘first’ in Qatar. This service line will be running 24x7 to answer and address corporate client queries, and offer an electronic service for account balances, transactions and statements.

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 “We continued on our digital transformation journey and recently announced that Commercial Bank is the ‘first bank in Qatar’ to have successfully completed the initial pilot phase using the first ever blockchain network in the country to process international transfers in partnership with our regional alliance banks ABank in Turkey, National Bank of Oman, and United Arab Bank in the UAE, in addition to other banks in Egypt and India. This new innovative technology in fund transfer is part of our commitment to create an enhanced client experience in the fields of international transfer and trade finance. Blockchain has huge potential to transform the financial services sector and we are proud to be the pioneers in leading this change in Qatar by introducing yet another new technology to provide the best client experience for all our customers.

“We are pleased with the momentum of delivery on our Strategic Plan particularly on our creativity and technology innovation agenda, whilst also taking measures to leverage our strong client franchise as seen by the positive momentum on business growth and prudent management of costs. “Q1 2017 saw improvements in ABank’s performance, where we have managed costs tightly and reduced provisioning. ABank delivered a net profit of QAR 14.4 million compared to a net loss of QAR 55.8 million in Q1 2016. “NBO reported a profit of QAR 130.4 million compared to QAR 72.7 million in Q1 2016. The increase was mainly due to a one off large provisioning in 2016. UAB continues to focus on reshaping its business and delivered a profit of QAR 27.6 million compared to QAR 44.6 million in Q1 2016. Supported by a resilient UAE economy which is predicted to generate 3% growth in GDP in 2017, UAB is well positioned to generate sustainable growth.”

Subsidiary in Turkey

Alternatifbank (“ABank”) delivered a net profit of TL 14.6 million (QAR 14.4 million) for the quarter ended 31 March 2017 (TL 45.1 million loss for the same period in 2016).

Net operating income increased by TL 39.6 million to TL 131.9 million (QAR 130.1 million) for the quarter ended 31 March 2017, from TL 92.3 million (QAR 91 million in 2016), mainly due to increase in net fee and commission income and net foreign exchange income. As at 31 March 2017, ABank had increased its customer lending by 27.1% to TL 11.4 billion (QAR 11.3 billion) from TL 9 billion (QAR 11.6 billion) in March 2016. Customers’ deposits increased by 21.8% to TL 7.8 billion (QAR 7.7 billion) compared to TL 6.4 billion (QAR 7.7 billion) in March 2016.

Associates

National Bank of Oman

National Bank of Oman (“NBO”) net profit increased by 133.9% to OMR 13.8 million (QAR 130.4 million) for the quarter ended 31 March 2017 as compared to OMR 5.9 million (QAR 55.7 million) in the same period in 2016. Net operating income increased by OMR 1.1 million (QAR 10.4 million) to OMR 34.1 million (QAR 322.2 million), from OMR 33.1 million (QAR 312.8 million) in the same period in 2016, mainly due to an increase in non-interest income which increased by 21.7% to OMR 10.2 million (QAR 96.4 million). As at 31 March 2017, NBO increased its customer lending by 6.6% to OMR 2.8 billion (QAR 26.5 billion) and customers’ deposits increased by 5.7% to OMR 2.5 billion (QAR 23.6 billion) compared to March 2016.

United Arab Bank

United Arab Bank (“UAB”) results decreased by 38% to a net profit of AED 27.8 million (QAR 27.5 million) for the quarter ended 31 March 2017 over the same period in 2016. The operating income for the quarter ended 31 March 2017 decreased by 31.5% to AED 170.7 million (QAR 169 million), from AED 249.1 million (QAR 246.6 million) in 2016. Net Interest Income decreased by 36.7%, non-Interest Income decreased by 15.1%, as compared to the same period in 2016. UAB’s loans and advances decreased by 12.3% to AED 13.5 billion (QAR 13.4 billion) as at 31 March 2017, while customers’ deposits increased by 4.2% to AED 15.7 billion (QAR 15.5 billion) compared to 31 March 2016.

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