AlRayan Bank Q.P.S.C. (MARK) Earnings Call Transcript & Summary

Hello, everyone, and welcome to AlRayan Bank Conference Call. Please note that this call is being recorded. I'd now like to hand the call over to Shahan, QNB, moderator for today. Please go ahead.

Thank you, and hello, everyone. This is Shahan from QNB FS. I want to welcome you to AlRayan's Fourth Quarter and Fiscal Year 2025 Financial Results Conference Call. So on this call from management, we have Shahnawaz Niazi, Group Chief Financial Officer; Tahir Pirzada, Group Head of Treasury and Financial Institutions and Alexis Neeson, Group Chief Risk Officer. So as usual, we will conduct this call with first management reviewing the company's results followed by a Q&A session. I will turn the call over now to Shahnawaz. Please go ahead.

Thank you, Shahan. Good afternoon, everyone. So we'll start the call. Thank you, everyone, for joining, and welcome to AlRayan Bank's Quarter 4, 2025 Financial Results Conference Call. We'll start with the profitability first. We reported a consolidated net profit of QAR 1,530 million in 2025 versus QAR 1,507 million in 2024. Earnings per share for the period slightly higher at QAR 0.160 versus QAR 0.157 in 2024. The book value per share went up compared to 2024. 2025 was QAR 2.66 versus QAR 2.59, respectively. The return on average equity is 6.27% against 6.33% in 2024. Despite the high cost of funds and the pressure on the margins, our profitability has remained stable in 2025 compared to last year. Cost-to-income ratio is at 29.3%, slightly up from 27.1% in 2024, which is mainly due to our ongoing digitization and transformation process. Moving to balance sheet. The group achieved its highest ever total asset base in 2025, reaching QAR 181 billion, which is an increase of 5.9% compared to 31st December 2024. Our financing assets grew by 7.4% year-on-year, which are at QAR 118 billion, and this is driven by continued demand from our corporate customer segment. Investment securities also increased by 4.9% year-on-year to be at QAR 46 billion, reflecting our continued focus on value generating assets. Customer deposits closed at QAR 111 billion, last year were QAR 108 billion. On asset quality, 49% of our financing assets continue to be with the government, 86% of our investment securities is sovereign debt and 81% of investment securities is with the State of Qatar. The coverage ratio of Stage 3 financing assets is now at 67.8% against 62.3% in 2024. The group's nonperforming financing assets represented 5.11% of the total financing assets. This is an improvement of 34 bps compared to 2024. On capitalization, the bank's capital position continues to be strong and well above the minimum regulatory requirement of 16.9% as [indiscernible]. Capital adequacy ratio stands at 25.5% and core capital CET1 ratio is at 23.28% in 2025. I would like to hand over to Alexis to take us through the ECL.

Hi. 82.1% of total exposures subject to ECL are in Stage 1. 14.4% are in Stage 2 compared to 15.6% in 2024 and 3.5% are in Stage 3 compared to 3.8% in 2024, which demonstrates the bank's consistently strong base of high-quality assets. The total ECL provision booked during 2025 was QAR 818 million compared to QAR 1.041 billion last year, making the overall coverage ratio stable at around 3% in 2025. On the Basel situation, I will pass over to Tahir.

Thank you, Alexis. So on the Basel III and liquidity, Qatar and GCC markets remain sufficiently liquid despite recent geopolitical situation. U.S. treasuries have weakened since end of 2025 for the obvious reasons, including the geopolitical situation. Economists and markets have been adjusting their fed rate projections, basically reversing from 3 to 4 rate cuts that were projected last year for 2026 to now either none or only 1 rate cut and that too towards the end of the year. Our liquidity position in GCC remains comfortable and we continue to see funds flowing in from diverse investors purely to pick up some premium that this region offers. Nonresident pool of liquidity in Qatar remains more or less at similar level of 19%. High-quality liquid assets are roughly at QAR 50 billion, reflecting strong liquidity position that continues to support financing asset growth in the wholesale banking sectors. Thank you. That would be it, Shahan, if there are any questions.

So we can go to Q&A now, please.

[Operator Instructions] Your first comes from the line of Abhinav Sinha of Lesha Bank.

Yes. Could you please provide the guidance for 2026 on NIM loan growth and earnings? Because if I look at the numbers, so the other income jumped a lot this year because of the -- I think it was a one-off recovery, so if we exclude that, the profitability could be a bit lower. So what could buffer for that in the next year?

So allow me to answer that question. Our guidance for loan growth and deposit growth would be in the lower to mid-single digits. And in terms of profitability, and NIM, I expect my NIMs to remain in line with 2025. I'm not seeing any major upside there because of the liquidity situation in the market, as Tahir also explained. And yes, you're right, there are one-off recoveries. We do expect a few one-offs to also come in 2026. So that's the guidance.

Understood. And would you be providing like the quantum or it's still very early stage?

It's still very early. It's still very early Yes, so there are a couple of one-offs in pipeline, but still too early to actually quantify how much will that be.

Your next question comes from the line of Salome Skhirtladze of Bloomberg Intelligence. Let's move on for our next question for now. Our next question comes from the line of Muraad [indiscernible] of Global Trading Network.

Thanks for the presentation. So a question around NIMs. So you're guiding towards NIMs to be stable broadly in reference to 2025. Now you have talked about how rate cuts do impact your NIM and we can see fourth quarter was something similar impact. When -- I just want to get a sense of where would you see your normalized NIM and over what period do you expect that you will get there? So that's on NIMs. Second is on asset quality and provisioning. So we've seen some recoveries. You've highlighted about recoveries in 2026 as well in terms of pipeline. Cost of risk, I mean, where do you expect -- I mean, this year, you've ended at around the lower end of the guidance. I mean you guided about QAR 800 million to QAR 900 million in costs. You've ended the year about QAR 818 million. Where do you expect the cost of risk to be for this year? And also in terms of loan growth guidance. I mean, this year has been -- we've seen decent growth. We've seen some of the banks post good numbers in the fourth quarter in particular. So just trying to get a sense, is that broader play here, which has impacted most of the banks in terms of loan growth, is there syndicated lending that's happened where most banks have participated? And what are the upside risks that you see to loan growth?

Thank you, Muraad. I'll take your question on NIM. So on NIM, I expect my normalized NIMs to go up by about 20 to 25 basis points. Now as I explained in my previous -- in our previous calls as well, in terms of how the Fed rate cut impacts us -- we have to -- 90% of the loan book is variable and that gets repriced immediately. But a lot of our term deposits, 20% to 30% are fixed. So this -- so there is a timing difference in terms of when we reprice our loan and when we are able to fully reprice all our deposit book. And that timing difference is 6 to 9 months. During a period of Fed rate cuts, we are impacted, our NIMs are negatively impacted, and this is a timing difference. Now the same thing happened in 20 -- so when the Fed rates cut started to happen in 2024, our NIMs took a slight nosedive, and they went back up to their original level in July, August 2025. Unfortunately, we went through the same Fed rate cycle in Q3, Q4 2025, and we are having to -- now again, in Q1 2026, Q2 2026, we are having to go through the same cycle once again. Now if no more Fed rate cut happens, then I expect my NIMs to go back up to my normalized 160, 170 level by July, August 2026. So that's the answer to your question on NIMs. In terms of loan book guidance, as I explained earlier, we expect -- we have a healthy pipeline, and we expect the loan growth for 2026 to be in the -- slightly in the mid-single digits to slightly lower single digits. Yes, you do see -- we do see a good loan growth across the banking sector in Qatar. And part of that loan growth, I cannot say for all the banks, but some of the banks, we know that because we also participated in 1 or 2 syndications and there were other banks also as part of that. So yes, a few syndicated deals did happen, which contributed to the loan growth. I will hand over to my colleague, Alexis, to answer the question on cost of risk.