AlRayan Bank Q.P.S.C. ($MARK)

Hello, and welcome to AlRayan Bank. Please note that this call is being recorded. [Operator Instructions]. I'd like to hand the call over now to our moderator, Shahan, please go ahead.

Thank you, Gail, and hello, everyone. I want to welcome you to AlRayan's First Quarter 2026 Financial Results Conference Call. On this call from management, we have Shahnawaz Niazi, the bank's group CFO; 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, sir.

Thank you, Shahan. Good afternoon, everyone. Thank you to everyone for joining, and welcome to AlRayan Bank's Q1 2026 financial results conference call. We'll start with our profitability. The bank reported a profit before tax of QAR 421 million in Q1 2026 versus QAR 417 million in Q1 2025. Net profit after tax, which includes global minimum taxes, were at QAR 361 million. Earnings per share are at QAR 0.039 versus QAR 0.044 in Q1 2025. The book value per share went up compared to Q1 '25. It is now QAR 2.56 versus QAR 2.54 year-on-year last quarter. The return on average equity was at 5.98%, against 6.84% in Q1 '25. The decrease is only on account of the global minimum taxes. Despite the high cost of funds and pressure on margins and if we exclude the impact of global minimum taxes, our profitability is stable in Q1 versus Q1 2025. The cost-to-income ratio is at 29.9%, it's gone up from 27.2% in Q1 '25, and this is mainly due to lower operating income in Q1 '26. On the balance sheet, the group total assets are now at QAR 175 billion as at Q1 2026, representing an increase of 3.3% year-on-year. Customer deposits closed at QAR 116 billion with an increase of 3.9% year-on-year. Financing assets were at QAR 112 billion, up by 0.7% year-on-year. Investment securities increased to QAR 48 billion with a significant increase of 12.9% year-on-year, reflecting our continued focus on value generating assets. In terms of asset quality, 48% of our financing assets is with the Government of Qatar. 87% of investment securities is sovereign debt and 84% of invested securities is our state of Qatar owned. The coverage ratio of Stage 3 financing assets is now at 69.6%, was almost 70% against 63.8% in Q1 2025. The group's nonperforming financing assets remained at 5.36%, no change year-on-year. In terms of capitalization, the bank's capital position continues to be strong and well above the minimum regulatory requirement of 17.4% as a DSIB. Capital adequacy ratio stands at 25.9% in Q1 '26 and core capital CET1 is at 23.65% in Q1 2026.

Taking up the ECL. 82.8% of total exposures subject to ECL are in Stage 1, 13.8% are in Stage 2 and 3.4% are in Stage 3, demonstrating the bank's consistently strong base of high-quality assets. The total ECL provision booked during Q1 2026 was QAR 138 million , making the overall coverage ratio stable at 3% at the end of Q1.

On the liquidity, we have seen Qatar GCC markets remain sufficiently liquid despite the current geopolitical situation. U.S. treasuries have been pretty volatile as we have seen a swing of around 50 basis points since end of last year in the curve. Currently, this is reduced to about 25 basis points to 30 basis points since February 2026. Now economists and markets have been adjusting their fed rate projections, basically reversing all their rate cuts in 2026, to either none or only one that [indiscernible] towards the end of the year. Liquidity position, particularly in GCC, remains sufficiently available, and we continue to see funds flowing in from diverse investors despite the ongoing geopolitical situation, purely for picking up some premium over peers. Nonresident pool of liquidity in Qatar remains more or less the same level, that is 19%. High-quality liquid assets are roughly at QAR 50 billion, reflecting a strong liquidity position that continues to support financing asset growth in the Wholesale Banking sector. Thank you. We'll open for Q&A now.

[Operator Instructions] Your first question comes from the line of Salome Skhirtladze with Bloomberg Intelligence.

I have a couple of questions. First of all, could you please reiterate your 2026 guidance on NIMs and cost of risk. And the second one is on the loan decline. What was the driver behind? And do you have the same guidance for the entire year to see low single-digit number growth? And which business lines drove this decline? If you could elaborate.

Sure. So let me take your first question on NIMs and the loan decline, and then I'll hand over to my colleague for the cost of risk. So in terms of NIM, my guidance continues to be that the NIMs will -- for full year 2026 will be more or less in line with how you see them in Q1. However, the good thing that will help in the later part of the year is that we are now having to reprice all our expensive deposits, which are maturing in April and May. So the benefit of that, you should be able to see in the later quarters. So the guidance is -- and of course, if there are no significant additional Fed rate cuts, and the expectation is that there will be very -- none considering the geopolitical situation, if at all, maybe one at the later part of the year that should not have a significant impact on my NIMs. So the guidance on NIM to conclude is -- should be in line with Q1 with a slight uptick due to cost of deposits being repriced downwards. On the loan decline, we had one significant government entity loan, which got repaid in Q1. This was expected. This was in the pipeline. This is part of our budget for 2026, and our guidance in terms of loan is on a full year basis, we expect to grow our loan book in lower single digits, 2% to 3%. So we've got a healthy pipeline, which we are working on, and we are hoping that this geopolitical situation resolves quickly, if that's going to happen, then the guidance what I just explained is will hold true. Alexis?

Sure. Thanks, Shahnawaz. In terms of the cost of risk, in Q1, we were at about 53 basis points. However, for the full year, I would expect this to be in the 65 to 75 basis point range. Again, it depends, obviously, just given the calculation. It depends on the loan growth in the year. But at the minute, the guidance is between 65 and 75 bps.

[Operator Instructions] Your next question comes from the line of Nikhil [indiscernible] with CBFS.

I think so one of the questions are answered in terms of loan growth, which took place unlike local peers. But wanted to know on this much more. I mean, is it got to do with also acceptance loans, which was also part in the fourth quarter? Or this is two independent things?

No, no, there are completely two independent things. This is one loan repayment, one customer, which was a significant loan, a big ticket loan, and this has been in the works in the pipeline that they want to repay their loan. We were expecting that, and this happened in Q1. We were expecting that to happen in April, but it happens slightly earlier. So this was as per our expectation. This is as per -- is included in our budget, in our plan for 2026. This loan repayment. In spite of this loan repayment, I can tell you that our guidance to the market is that full year 2026, we would still see a loan growth in lower single digits, 2% to 3%.

Okay. And regarding your [indiscernible] deposit, just wanted to know, I mean, how much is right now currently?

It's just around 3% for us. The point that we need to reinforce that even for the whole year of 2025, the nonresident deposits were in the tune of about 4%. So we have seen a slight dip in this, but we are still maintaining a similar level of 3%.

And that concludes our Q&A session for today. I would like to hand the call over back to Shahan for the closing remarks. Thank you.

Okay. If there are no further questions, we can wrap up this call. I'd like to thank management for giving us an update on the quarter and the guidance, and we'll pick this up again in the coming quarters. Thank you.

Thank you, everyone. You may now all disconnect. Have a nice day ahead.