Leading Shariah-compliant bank QFB recorded a “net loss” of QR265.6mn in 2016, resulting mainly from the “downward revision” of the valuations of some of its investments across several markets.
Despite the “write-down” of the investment book, the bank’s total assets didn’t decline and closed at almost QR6bn last year, mainly driven by the increase from financing assets. Moreover, the investment portfolio continued to generate “healthy” dividends of QR13mn, QFB said yesterday.
Additionally, financing assets increased by 33%, and will generate recurring income during the coming years. QFB’s sukuk book continued to generate positive returns close to QR30mn.
The bank’s income from placement with financial institutions has tripled mainly from cash deployment in Shariah-compliant money market funds.
As the global investment market has been going through major challenges since the beginning of 2016, QFB’s private equity portfolio has been “negatively impacted” by country-specific events mainly in Turkey and the UK.
The decrease in the valuation of the bank’s investments reflects the effect of the macroeconomic and extraordinary factors both countries have been facing. The main impact came from the depreciation of the pound sterling and Turkish lira, against the dollar and from the weakness of the real estate sector in the UK.
QFB CEO Ziad Makkawi said, “Our private equity portfolio had consistently generated significant returns over the last six years. Our Turkish investments are still 47% higher than their acquisition price and will continue to grow in sales and profitability and occupy leading positions in their respective industries of healthcare and retail. Our UK investments are still significantly above our acquisition costs, both in pounds and riyals. However, the ongoing global political and economic conditions continue to weigh on our markets, and as a consequence, on our overall profitability. Our 2016 revenues have been significantly affected by reversals of previous years’ fair value gains on our private equity investments, specifically in Turkey and the UK, resulting in overall losses of QR265.6mn, the majority of which are unrealised.”
Makkawi said, “We continue executing on our strategy, announced in 2015, that streamlined the bank to focus on the most lucrative areas while building on the successes in the ‘Private Equity’ area, being QFB’s core business line. Our aim is to fully match the evolution of Qatar and the wider region’s investment direction, as well as act as the gateway for investors looking to access lucrative investment opportunities alongside QFB.”
“2017 remains a “buyer’s market” offering an increasing amount of investment opportunities. With credit markets still tight, medium-sized enterprises and businesses will continue to seek alternative funding sources and private equity investors will benefit from this. Our focus will continue to be on the alternative investment space including private equity and real estate and generating interesting investment Shariah-compliant products. Additionally, we will continue to grow our distribution and placement capability, in Qatar and beyond in the GCC.” Makkawi added.
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