Commercial Bank has registered a more than 6% year-on-year increase in its consolidated net profit to QR431mn in the first quarter (Q1) of this year.
Non-interest income increased by about 23% to QR319mn, mainly on account of robust growth in foreign exchange gains.
Net interest income stood at QR581mn with margins declining marginally to 2% due to increase in cost of funding in Turkey, but margins have been managed through active loan book re-pricing and diversifying liquidity sources to minimise the increasing funding cost.
“We expect to see improvement in consolidated net interest income going forward as we attract lower cost deposits and re-price our loan book,” Commercial Bank group chief executive Joseph Abraham said.
Total operating expenses were tightly managed at the group level, down 10.6% to QR278mn, primarily driven by lower staff and administrative expenses.
“Commercial Bank is privileged to play a part in Qatar’s ambitious transformation agenda. As one of the leading financial institutions in the country, with deep rooted ties to the business community, we are committed to leveraging our expertise to support Qatar on its economic journey,” Sheikh Abdulla bin Ali bin Jabor al-Thani, the bank’s chairman, said.
Quoting the International Monetary Fund forecasts of 3.1% growth in Qatar for this year; he said the country’s leadership has prioritised economic transformation and continues to invest heavily in strengthening Qatar’s knowledge-based economy to secure long-term financial future.
“Markets have responded positively to this, and in Q1 2019, Qatar successfully raised $12bn from the bond markets, a clear indication of the confidence that international investors have in the Qatari economy,” he said.
Hussain Alfardan, Commercial Bank’s vice chairman, said in Q1, 2019, the bank continued with the implementation of its five-year strategic plan and strategic focus on client experience and transaction banking.
The group’s net provisions for loans and advances decreased 6.8% to QR207mn for the quarter ended March 31, 2019.
The non-performing loan ratio remained stable at 5.6% in Q1 2019 compared to 5.6% in the fourth quarter (Q4) of 2018. The loan coverage ratio has increased to 80.3% in Q1 2019 against 78.9% in Q4, 2018.
The group balance sheet has grown with total assets at QR143.8bn at the end of March 31, 2019 compared to QR134.9bn in December 2018. The increase was mainly in balances with banks as well as loans and advances.
Loans and advances rose 1.8% to QR85.2bn in Q1, 2019 against QR83.7bn in December 2018, mainly on government and services sectors. On a yearly basis, loans and advances fell 8%, largely due to the depreciation of the Turkish lira and a contraction in government borrowing, following Qatar’s sovereign bond issuance in April 2018.
Investment securities expanded 13.2% year-on-year to QR22.9bn; while customer deposits amounted to QR81.6bn, thus helping the bank reduce loan-deposit ratio to 104.4% against 116.9%.
“Commercial Bank made a good start to the year, maintaining the positive momentum from 2018. Consolidated operating profit was QR621mn for Q1, 2019, an increase of 2.1% compared to the same period last year,” according to Abraham.
He said the increase in consolidated operating profit was driven by careful management of operating expenses, which fell 10.6% in Q1, 2019 to QR278mn, a result of insourcing and greater investment in the internal systems and processes.
“Consolidated net profit was also supported by a reduction in net loan provisioning which declined 6.8% during Q1, 2019, supported by an improved asset quality and increased recovery of NPLs” (non-performing loans), he said.
The domestic unit of the bank reported net profit of QR399mn, an increase of 12.1% year-on-year, largely driven by a 20.1% reduction in net provisioning.
Operating profit increased to QR558mn 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.
Loans and advances were down 5.7% to QR74.1bn in Q1 2019 on the back of the repayment of a temporary overdraft by the government, following Qatar’s sovereign bond issuance in April 2018. Customer deposits increased 5.2% to QR72.9bn.
The lira’s depreciation by about 30% year-on-year has impacted Alternatif Bank’s comparatives when translated in terms of Qatari riyal, Commercial Bank said. In Turkish lira, Alternatif Bank grew customer deposits by 22.8% and loans and advances by 10.7%, however in terms of Qatari riyals, currency depreciation led to a 21.7% decline in loans and advances to customers and a 12.8% decline in customer deposits.
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