Dukhan Bank Q.P.S.C. ($DUBK)

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

Thank you, Gale, and hello, everyone. I want to welcome you to Dukhan Bank's First Quarter 2026 Financial Results Conference Call. On this call from management, we have the bank's acting CEO, Ahmed Hashem; Group CFO, Osama Abu Baker; and Riaz Khan, Head of Reporting and Budgeting and IRO. So as usual, we will conduct this call with first management reviewing the company's results followed by a Q&A session. I will now turn the call over to Ahmed. Please go ahead.

Thank you, Shahan. [Foreign Language] everyone. A warm welcome to all of you joining us today. Before turning to our financial results, I'd like to briefly frame our performance within the broader economic and sectoral developments in Qatar during the first quarter of '26. The recent geopolitical developments introduced a degree of uncertainty across the GCC with potential implications for energy markets, trade flows and regional economic activity. Within this context, the group has maintained stable operations, supported by a well-established operating framework and prudent risk management. These factors have enabled the bank to provide consistent, secure and reliable services to its customers. The bank's business continuity and crisis management frameworks remained integral to its operational resilience. Through disciplined execution, robust infrastructure and ongoing coordination with regulators and relevant stakeholders, the bank has ensured continuity of operations, while maintaining a strong control environment. The Qatari banking sector continues to demonstrate sound fundamentals, characterized by strong capitalization and liquidity. In response to recent developments, the QCB has introduced a range of precautionary measures aimed at supporting liquidity conditions and preserving financial stability. These measures provide an additional layer of assurance of the -- for the continued smooth functioning of the financial system. During the quarter, we also progressed on our strategy, focusing on enhancing liquidity measures, risk management protocols and selective growth. Additionally, we continue to deepen our engagement within the broader financial ecosystem through targeted partnerships and collaborations, supporting innovation across key areas of the sector, while contributing to the development of Qatar's digital economy. Looking ahead, we will continue [Foreign Language] to build on this momentum with a clear focus on disciplined execution, innovation and long-term value creation, while supporting Qatar's National Vision 2030. With that, I'll now hand over to Osama and Riaz, who will take you through the financial results. Over to you, Osama. Thank you.

Thank you, Ahmed, and good afternoon, everyone. Our results reflected a disciplined approach to growth, underpinned by a well-managed balance sheet, a diversified financing portfolio and a stable funding base. Continued customer confidence and a clear focus on operational efficiency and asset quality remains central to sustaining this performance. At the end of this quarter, liquidity remained strong with all key ratios above regulatory threshold. Total deposit base remained at historic level, underscoring customers' confidence and the strength of the bank's value chain. Our group total assets reached the highest level at QAR 126 billion, underscoring balanced growth across our portfolios. However, our profitability marginally dropped by 1.7% to reach QAR 430 million. Our capital adequacy ratio stood at 19.1%. Outlook. Our focus for the rest of the financial year 2026 will remain firmly aligned to our strategy, building a leading digital-enabled bank centered on exceptional customer experience, delivering sustainable, well-balanced growth with continued discipline on capital, liquidity and risk, strengthening our people, culture and capabilities, ensuring Dukhan Bank remains a place where talent thrives, creating a long-term value for shareholders, while contributing meaningfully to Qatar's economic and social development. Looking ahead, we expect a low single-digit balance sheet growth led by wholesale and private banking. Profitability growth is expected to mirror this trend, supported by stable NIMs. We will maintain a conservative provisioning approach, continuing to build buffers. I will now turn it over to Riaz for a detailed overview of our quarter end financials.

Thank you, Osama. Let me begin with a brief overview of group's balance sheet performance as at March 2026. Our total assets reached all-time high at QAR 126.5 billion, underpinned primarily by financing assets of QAR 91 billion, which represents 72% of the total asset base. Investment securities contributed 21% to the total assets amounting to QAR 25.9 billion. On the funding side, we continued our efforts to diversify, while leveraging long-standing relationships with clients and maintaining a balanced maturity profile. As a result, we maintained a regulatory loans-to-deposit ratio of 95.4% with both the LCR and NSFR comfortably above the regulatory thresholds, demonstrating bank's sound liquidity management. Also, nonresident deposits remained minimal at 8% of the total deposit. This is in line with our strategy to focus on stable domestic funding sources. Now turning to profitability. For the first 3 months of 2026, the bank reported a net profit of QAR 429.5 million, 1.7% decline compared to the same period of last year. This was mainly due to a decline noted in the net banking income, which actually declined by 0.2% versus the same period of last year. Despite challenging macroeconomic dynamics, the group continued to focus on revenue diversification and strengthening of nonfinance-related income streams, along with prudent management of funding costs. Operational efficiency also remained a key strategic focus with continued optimization efforts enhancing overall profitability. We remain committed to protecting our margins and managing the cost of funds efficiently. Our current NIMs are stabilized at 2.1%. Operational efficiency also remained a key strategic focus with continued optimization efforts enhancing the overall profitability. These results highlight the group's resilience and its ability to sustain in an evolving operating environment. On the credit quality front, NPL ratio was maintained at 4.2%. Stage 3 coverage ratio continued at the same levels of financial year 2025 at 75.7%. The coverage ratio is over 95% when including the effects of eligible collaterals. Stage 2 loans represented 8.9% of the gross loans with a solid coverage of 9.5%. Our financing book remained well diversified, covering all sectors, including government, 21%; real estate, 23%; commercial lending, 14%; consumer financing, 9%; contracting, 4%; industry and manufacturing, 3%; and services and other sectors about 26%. Exposures to GREs accounted for 17% of the total financing book at the end of March 2026. GRE exposures are currently reported within their respective sector classes. Our capital adequacy ratio stood at 19.1%, well above the regulatory minimum of 14.63%. On the tax front, based on the assessments performed for the period 2026, it is concluded that the parent company and its subsidiaries are tax residents in the state of Qatar and are not subject to Pillar 2 requirements. Accordingly, there is no impact on the group's condensed consolidated interim financial statements. In summary, our financial performance reflects the strength of our fundamentals, strategic clarity and prudent financial management. We remain focused on sustainable growth, margin preservation and long-term value creation for our stakeholders. With that, we now open the floor for your questions. Thank you.

[Operator Instructions] So first question comes from the line of Abhinav Sinha with Lesha Bank.

Just a couple of questions from my end. So one is on the loan growth, do you still see mid-single-digit growth for the full year? And on the NIM, given that there was slight pressure on the banking income in 1Q, so do you expect at least a stable NIM for the remaining of the year?

Yes, we still have -- we still see a low single-digit growth in the loan book. We have a good pipeline. We have been always selective, and now we are more selective. So a low single digit is achievable, and we can fund that from our deposit base. Regarding the NIM, right now, there is no pressure on the cost of funds, and we don't see that in the near future. Definitely, all depends on how the situation will unfold. And at the right time, we might update our guidance. But currently, our NIM, we expect it to stabilize at the current levels.

Your next question comes from the line of Lee with Al Rayan Investment.

If I could just ask for a little bit more color on NPLs, if you see any additional pressure. I mean, from your results, it was a bit -- I guess, it looks like it's okay. But going ahead from here, are you seeing any other stresses from it? And maybe we could talk a little bit about going forward, how have you seen the income in terms of loans growth and in terms of deposit growth in terms of your clientele from first quarter onwards? You probably have about a month or so of that now. Are you seeing any recovery in that area? And the third question would be, you mentioned GRE 17% of your finances. Is there a target what that would be for the year?

Okay. Regarding the NPLs, I don't see any move from last year or Q1 numbers. There are no significant movement either in or out of the NPLs. And as Riaz mentioned, we have a good coverage so far, and we continue monitoring the coverage. In the first quarter, and due to the current circumstances, the bank decided to take around QAR 60 million, QAR 63 million to be on the safe side for Stage 1 and Stage 2. And that gives you an indication that we are comfortable with our NPL coverage. Regarding the loan growth, actually, I didn't understand the question. But if you are talking about the growth, yes, we see that the single -- mid -- sorry, low single digit is achievable. And it always comes from the wholesale banking. Mainly, the growth will come from that area. Regarding the GREs, it has been always the case, the same percentage or the same composition for the last 3, 4 years, and we expect it to continue the same.

I suppose what I was going to ask about the growth for 1Q is we've probably had a difficult -- ever since February, things are probably looking a bit difficult. That was a new situation for everybody. I'm just asking from April onwards, indications, is everything coming back to normal? Are you seeing things still under a little bit of pressure? Maybe some color in the business environment.

Things are not normal, definitely, but things are slowly getting back to normal. But definitely, today, it's not exactly the same situation in February '27, that's for sure. We have been selective, as I mentioned, and that helped us during this time. But we have a healthy pipeline, as I mentioned, in the wholesale banking area. We continue to support our client base. But again, we are cautious. We are very selective, and we don't see any pressure from that perspective.

Your next question comes from the line of Andy Andrew with Ashmore Group.

Just on the -- it was good to see that you added the sort of extra buffer, as you mentioned, on cost of risk. And I think you said coverage is now 75%, excluding collateral, and you wanted to build buffer. Is there a target coverage from that 75% that you hope to get to either the end of 2026 or just sort of in the medium term, please? That would be useful.

Yes. If the situation is a normal situation, definitely, we would love to increase it to the 80% level in the medium term. But due to the current circumstances, the bank opted or the management opted to take the buffers on Stage 1 and Stage 2 because Stage 3 with the securities that we have is well covered. So now our attention is towards Stage 1 and Stage 2, to be honest. Right now, we have to build the buffers in these 2 stages.

Yes. Okay. And sorry, I missed what is the Stage 2 level of NPLs now and the coverage level there, please?

Stage 2 makes 8.9% of the total loan book and the coverage is close to 10%, 9.9% precisely.

Right. Great. And then sorry, just one more that I missed, apologies. The percentage of exposure of the loan book to the real estate sector, please, what was that figure?

This was 23% of the total loan book. But here, you have to take care that out of the total real estate exposures, close to 37% and 40%, that is the GREs basically, which we classify as part of the real estate.

Right. Got it. Okay. Sorry, maybe just one final one. You said the NIM, you hope, can be stable. You're not seeing any pressure on cost of funds now. So you're not seeing any liquidity issues. Is that just a liquidity being provided? Or it's just that it's simply not by the authorities or it's just simply not needed right now. So there's no liquidity needs? Or is it a combination of the 2? Just to get a little bit of color on that, please?

Yes. Actually, it is attributed to many factors. Number one, the QCB has given the relief on the minimum required reserves. That helps the system to get more liquid. The government definitely didn't withdraw any of its deposits. To the contrary, we have seen some increase from the GREs in their deposits. And the most important factor in Qatar, we didn't see a run on deposits. I mean when the things escalated, our deposits either -- neither from individuals or corporates, there was no run on the bank in order to transfer the funds outside or to move the funds. So all of these factors helped to reduce the pressure on the NIM. As I mentioned earlier, our growth in our assets is very moderate this year, low single digits. So we don't anticipate any pressure on liquidity. Plus, as Riaz mentioned, that the nonresident deposits composition in the bank balance sheet is very minimal compared to the market. So always we have a buffer, and we have very good relations with international customers. We can tap into that area where we can get 3 to 5 years' deposits at a very attractive rate.

Great. Yes, that's very useful color. Sorry, I just sort of another final, final question. OpEx growth, please. Last few years, it's been reasonably high. You've been making some investments. There's been some digital costs. Is that all done now? What would sort of be your estimate of just the absolute growth in the OpEx line, please?

I don't see any absolute increase compared to last year. The cost-to-income ratio might go up or down based on the growth or shrink in income, but the absolute growth, the number is not going to change from last year.

Thank you, everyone. And that concludes our Q&A session for today. I will now turn the call back over to Shahan for the closing remarks.

Thank you, everyone, for joining the call, and I'd like to thank management for giving us an update on the [ quarter ], and we will pick this up again in the second quarter. Thank you.

Thank you very much, everyone. See you next quarter.

Thank you.

Thank you all for joining. Thank you. You may now all disconnect. Have a nice day ahead.