Ahli Bank Q.P.S.C. (ABQK) Earnings Call Transcript & Summary

This is Rakesh from Franklin Templeton.

Hi. This is Ahli Bank team. I think we're 4 minutes early, but we'll just wait if it's okay with you.

Yes. Sure. Thank you. While we wait, would it be possible for you to maybe guide me to the investor presentation for the second quarter results if it's available there?

Yes. Good morning. Yes, so the investor presentation will be put in the website very shortly, very shortly I mean in a couple of days. So we can give you some overview of some numbers, which is what you are going to see in the investor presentation. So let me just quickly walk through some of the key numbers, key drivers and so on if that's okay with you.

Yes, yes, sir. Thank you.

Okay. So this is Ahli Bank team just to step back a little bit and then [indiscernible]. My name is Shankar, and I'm Deputy CEO. I have Trevor also with me, Trevor Bailey, who is the Head of International Banking and one of our key person in the bank. So you can see the performance. I'll just walk you through quickly these numbers. So we have a very steady performance H1 2021, 6 months half yearly ending 2021 with a strong operating profit growth of about 27%, with a bottom line growth of 4.7%. We must say that this has been very satisfactory considering the -- all kinds of thing we have faced in the last 1, 1.5 years. We had an asset growth June versus December for about 1%. We had a loan growth. We have a deposit growth. As you all know, we also came out with AT1 -- successful AT1 issuance of $300 million. So that strengthened the capital. And as of July 2021, post June quarter or half yearly, we came out with a $500 million EMTN. So overall, if you see all these, add all these, connect all these dots, we had a very profitable 6 months. Our capital has strengthened, our liquidity has been very strong. And in terms of some key numbers apart from profits, our NPL ratio has actually come down, and our provision coverage has gone up. So in all these metrics, the bank has become more strong and strongest ever in terms of every single metric you can see, in terms of capital, in terms of liquidity, in terms of profitability, in terms of NPLs and NPL coverage ratio. So this is the overview of what had happened in the first 6 months. We had 2 key strategic, just to summarize, very profitable half year. We had good growth in customer deposits and loans and profits and operating profit. We had strengthened our capital. We have strengthened our liquidity. Our NPL provision coverage is almost all-time high of 158%. Our NPL ratio is 2.26%, has come down from December level. So this is the summary of what had happened. And in terms of what we see rest of the year, we see a similar steady performance for the full year. That's what we expect. Any questions, please? Hello?

Yes. A couple of questions. So first, I mean since you've come out with the LCL as well, it's definitely going to improve the funding profile. But in general, I wanted to understand what are your thoughts about the kind of deposit growth that you're seeing and the kind of funding -- the kind of distribution that you have across the sources of funds and the high LTV ratio. So what are your thoughts in general about that?

Well, we have focused, as always, on the long-term funding, stable funding rather than any one type of funding. Customer deposits in this quarter, the world typically is short term. So we wanted a certain percentage of our funding. We've always focused on that on a long-term basis. So our stable funding ratio, for example, what we define it as better than 1-year funding is highest in the sector. This has been our -- we have articulated this with all our investor, investor community internally and with the Central Bank that we are a bank who would like to prefer a stable funding in terms of funding profile over the short-term, volatile -- a little bit volatility which we see in domestic, particularly deposits. So we are okay. We are fine in terms of what we are right now, but we'll continue to focus on long-term funding like EMTN and the other type of long-term funding which we have. So this is what we see, and we'll continue to be in this zone for -- because it's our status strategy. And we have always said this, and we always executed what we have said.

Right. So 120-odd levels of NTD ratio, is it something that you're comfortable at? You don't see it as any worry? This more of a deliberate strategy of the bank, right?

So we are not worried at all. I just want to tell you something just an internal. So there is a little bit of a -- something which you must understand. So there is a Qatar Central Bank support for industry, and the support is by lending to bank at 0% and asking us to lend to customers at 1.5%. So this is continuing until 30th -- sorry, 15th of September 2021. So part of the funding for loan is, in any case, an interbank funding coming from QCB, Central Bank. So the loan -- LTV loan-to-deposit ratio, as you said, it cannot be 100% in any case or less than that because some of them are funded by the specific window which has been provided. That's number one. That portfolio is about $2 billion. So secondly, we have requested Central Bank, we are in discussion with them to include long-term funding like EMTN as a part of this equation, which you talked about. So we are -- if you add all these things, reduce this particular thing from the funding, that is a fund which we received from Central Bank at 0%. And add EMTN and you will find that our loan-to-deposit ratio is not 120% but substantially lower. So it is about 117%. Not 123%, but 117%, which -- and if you -- there is this one more component. There is a State of Qatar overdraft also. I mean there's -- so these are the internals we are comfortable. If you -- that is -- we are lending to the government, one of the arm of the government which is a short term, they take one turn and then they repay. There is volatility about $2 billion. So if you add all those things, we are absolutely comfortable in terms of LDR.

And to be very honest, it's Trevor here, this is very domestically driven in terms of this ratio. We are [ bringing ] the dialogue with the QCB anyway, it's fully understood, but we're much more focused on the Basel ratio's NSFR, which stands at nearly 109%; and LCL, which is well over 400%. So we're in a very satisfactory position.

Okay. Great. Great. And secondly, if you could talk a little bit about asset quality as well. So I do see that it has improved along this quarter. How do you see the asset quality evolving going forward? What could be possible of are that you see where you need to be more cautious? And how does that tie in basically with the way you are approaching growth?

So we are a very domestic-focused bank, as you know, just to give you a background. And we are not -- we don't have a loan mix or exposure to, let's say, Egypt or Turkey or other regional areas around this geography. So considering that, and we are a 35-year-old bank, so we know exactly who we are dealing with domestically. We exactly know their family background, the group, the businesses they have and so on and so forth. And so we are well connected, well in terms in this place. And we lend to family businesses. So we know who are the family, which runs the family, what business, et cetera, et cetera. So this is our kind of lending practice, if you like. Practically, this is what happens. We exactly know who are they and what is the connection and so on and so forth. So our asset quality, that is why it is industry-beating, if you like, I mean, among the best in the industry within Qatar. So we will continue to be in this level. So this is -- we don't see any deterioration going forward. And we see that our provision cycle, if you like, is really close to the end of the -- very close -- not end, but close to the end of provision-making cycle. So at about $1.3 billion or $1.35 billion, I think we would have covered the risk which is visible to us. So we don't see any deterioration at all in the NPL ratio as well as in the provision coverage ratio. If at all we see the recovery cycle kicking in, end of the day, we had to recover. So we will be starting with the recovery cycle maybe end of next year or sometime during next year onwards. So I think that is also at a place, at a zone where we are fine, absolutely comfortable with.

Right. So would it be fair then to expect your cost of risk to maybe start coming down next year onwards as you go into a more comfortable place in terms of provisions? And based on that, basically, the level of provisioning you did, assuming asset quality also holds, the provisioning also comes down?

That is fair. I think that's a very fair statement. Yes.

Okay. Lastly, just one more thing. So if you could talk a little bit about the way you see on lending to government or the -- and what proportion of your loan book do you see in that segment taking. How do you see it evolving?

Well, historically, we have not been very -- we don't have that portfolio, a big chunk of that portfolio for us. It remains private sector, and that is Ahli Bank for you. So we are a very private sector-driven bank in terms of loan portfolio, and we will continue to be like that. There is also -- you must understand that most of the government and GREs have a mandate to open account only with Qatar National Bank, QNB, or one more Islamic Bank is there. So if you look at their portfolio versus ours, you will see that most of the government accounts are mandated to be opened with them. So for us, as we said, family-owned, family-owned type of businesses where we are focused on. We will keep trying to have a little bit of these government accounts. But for us, I think this is what -- this is how the playfield looks like for us, and that is how we have organized ourselves.

Okay, okay. I think that answers all of my questions. Thank you very much.

Thank you very much. Appreciate it. Thank you for your time. Yes, we'll wait for others who will have joined, other investors, et cetera. We were waiting to hear from anyone, any questions, we are here. Hello, this is Ahli Bank team. We are here to take any questions from any investors. Please feel free to ask any questions. Thank you. Hello, this is Ahli Bank team waiting for any query from any investors. So we have given an overview already and attended some questions. Anyone else, please [ revert ]. Thank you. Hello, investors. This is Ahli Bank team, so we had a very successful second quarter and half year ending June 2021. Thank you for all your time. Thank you for attending the investor call. We are wrapping it up. See you next quarter. Thank you.