The Commercial Bank (P.S.Q.C.) (CBQK) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. I'm Mohamed Farhan, Head of Investor Relations, and I welcome you all to the Commercial Bank Financial Year 2024 Results Call. On this call today, I have on to my left, Joseph Abraham, who is the Group Chief Executive Officer of Commercial Bank of Qatar. And to my far left is Noman Ali, who is the Chief Financial Officer. During the duration of the call, we will put you on mute on the present is complete, I'll come back to you for question and answers. Now I may request everybody to please put yourself handsets on mute. And now I hand over to Joseph Abraham.

Thank you, Farhan. Good afternoon, everyone, and thank you for joining us today. As usual, we will start with a little bit of outlook on the economy. Qatar's economy is expected in 2025 to grow approximately 2% to 2.5%. And from 2026 is expected to go to about 4% and then 5% in 2027. So overall, I'd say that we expect this growth to be probably towards the back half of the year. In terms of our loan growth, we, therefore, expect our loan growth to match GDP or slightly above it. This is our approach because we are very careful in our quality of our loan book booking. The other aspect I would say is that if you look at our profits, we have grown this year by just under 1%. And there was a bit of a negative drag due to Turkey and its inflationary situation. If that had not been there and it has been on a like-for-like basis, then we would have been up by 5%. So the Turkey effect has impacted us. But that said, this is still the fourth consecutive year of an increase in profit, and this again is the highest profit in the bank's history. In terms of Page 5, I'll just go to our guidance page, and I think this is always an important one. As you can see, this shows the strategic approach of the bank. We always have a 5-year targets -- 5-year plan and then the 5-year strategic guidance. As you can see in the middle of the table, there's a 5-year 2026. We look to the right of that '24 guidance, how did we actually do again '24 and then our '25 guidance. As you can see on the capital ratios, we achieved our guidance, that's CET1 12.3%. And our guidance for 2025 is to continue to improve that. And our capital ratio -- total capital will also rise. In terms of our cost of risk and our NPL ratio, NPL ratio bumped up a little bit above our guidance. We said between 5.4% and 5.9%. We were at 6.2%. About 10 basis points of this increase is due to the slight reduction in our loan book overall. So that was a denominator effect. And the balance comes from some migrations from Stage 2 to Stage 3, which there's nothing new there or surprising, but it's part of the approach we have. Our net cost of risk is probably much lower than expected. And that, I think, is a positive because it reflects the strength of our recovery and our strong legal and other recovery processes, which we have invested in significantly. And as you can see, the gross is about 102 basis points. And we continue to give this guidance that for the next 1 to 2 years, we'll probably be running at INR 115 crores to INR 130 crores. The net could be impact. we said INR 80 crores to INR 100 crores for next year. I believe our recovery efforts are very strong. And the one good thing with having real estate as collateral is that you can actually get some recovery. So we probably may come in a bit -- there's more, let's say, that it could come in lower at the net level than our guidance, but we've conservatively guided there. The loan book, I think, again, as we've said in discussions before that the government has prudently used this budget surpluses to pay down debt. So the government sector is not growing hugely. And as a result of that, these ratios are slightly below where we'd like them to be. And accordingly, the real estate sector, which would have been impacted by growth in the other areas has not moved as much. But we're comfortable with our exposures and how we're managing them. Our cost-to-income ratio, again, you can see at the macro level, this is the Turkey effect because Turkey made an overall loss this year. So that flowed through to our cost ratio of 29%. At the domestic level, we were 23%, which is slightly above where we wanted to be, 21%. But again, this reflects investment in our businesses. We are very careful with our cost growth. We have invested significantly in our wealth management, in our asset management unit and we were in IT. And all these, I believe lay the foundation for future growth whether it's across businesses or across our infrastructure. So our guidance will -- for next year is that it will be in this range. Of course, Turkey is the macro factor which affects us, but we are hoping that Turkey in 2025 will provide a better performance as inflation is brought under control in the country, and we're seeing the positive outlook there. Finally, return on equity, it was because of the overall -- some of these impacts that we had, the drag from Turkey, that's why our return on equity is slightly below where we targeted it to be. But we are confident that for next year, we should be achieving these targets. It's a measure of our confidence that we also increased our dividend, and our payout ratio is about 40% now, which is within our guidance of a maximum 50% payout, subject to a finally it's a Board decision and QCB approval. So overall, I'd say that the bank has a clear strategy. Our strategy has been clean up the legacy loan book, which has -- is continuing. We anticipate another 2 years of this gross cost of risk. But I think what has been the positive upside is our recoveries are very, very strong, and we see that strong recovery potential continuing plus we see some positive movement in some accounts, which are in Stage 3, which we could see some positive movement. So overall, I'd say that -- and we're not seeing any new surprises coming through. So this is very important. Remember that the interest rate environment remains high. So despite that, we are not seeing any new surprises coming through. And on all the other aspects, our strategy is very clear. I think we have Turkey will -- we have clear strategy in Turkey to make sure that it's a positive year this year. And the other part is that our efforts in UAE. We have a good management team there, strong and they're showing significant growth. And similarly, Oman also has a good management team, and that's showing steady upward growth, and these are both contributed from what used to be a drag on our prior results right across our subsidiaries and associates, now we're seeing positive contribution. And that reflects the hard yards that have been done in terms of cleaning up their legacy books and putting in place new management and having clear strategy. So our associates are now contributing. And I'm confident that Turkey, due to the external macro factors will also contribute positively in this year and coming years. So overall, I'd say that shows the overall strategic impact of our of the work that we have done to turn around our subsidiaries and associates too. So I'll now hand over to Noman, our CFO, please welcome Noman, and he will give you more detail and more color on individual line items.

Hello, everyone, and thank you for joining in. So getting into the details of our results, I will mainly focus on Slide #8, which shows the consolidated financial high highlights of the group on a reported basis as well as after excluding the impact of the long-term incentive scheme stripping out the IFRS 2 share-based accounting impact. So overall, the group reported a consolidated net profit of QAR 3,032 million, which is 1% higher than the reported net consolidated net profit of QAR 3,010 million in 2023. As Joseph mentioned, our results were impacted by the performance of our subsidiary in Turkey, which reported a loss of QAR 85.2 million in 2024 after hyperinflationary accounting versus a profit of QAR 83.6 million in 2023. Had Turkey maintained profit levels similar to financial year 2023, our profits would have been higher by approximately 5%. In relation to operating income, our reported operating income is down by 17% and this is driven primarily by two factors: One is the reduction in the net interest income as well as the reduction in the FX and trading income line pertaining to Turkey. If we deep dive into the numbers, our net interest income decreased by 14% year-on-year. And the key reasons for this decrease are firstly higher cost of funding during the year. What we saw was that the interest rate peaked in August 2023. Therefore, the fuller impact of the higher interest rate we saw was in 2024. So that was one reason for the increase. The second one was a one-off in relation to the reversal of interest income to customers after the downgrade in accordance with the Central Bank regulations of around QAR 216 million. In relation to our net interest margin, our net interest margin was 2.4%. And if we exclude the one-off interest in suspense item, our net interest margin would have been around 2.6%. We expect net interest income to grow in 2025 and NIM expected to normalize between 2.4% to 2.5% in 2024 -- in 2026. Moving on to total fees and other income. These were lower by 23.6% to QAR 1,238.8 million year-on-year, mainly due to the movement in FX and trading income. This was primarily driven by higher FX swap cost and lower FX trading income in alternative bank in Turkey. It should be noted that the group's core net fee and commission-based income improved year-on-year by 10.7% supported by, a, on the retail banking side by more retail banking fees, including cards, wealth management, remittances related and the wholesale banking fees, in particular, relating to payments. In relation to operating expenses, the reported operating costs were lower by 11.6% year-on-year, mainly due to the decreased stock-related LTIP cost as a consequence of a decline in share price as required by IFRS 2. When we exclude the impact of LTIP, we can see that the group's operating expense reduced marginally by 0.9% as we continue to invest in people, technology and automation. As a result, the group's reported cost-to-income ratio reached 27.9% compared to 26.2% last year, when we exclude the impact of LTIP, the group's cost-to-income ratio increased to 29.1% in to 24.4% at a consolidated level, and one of the drivers is the cost-to-income ratio of alternative bank, which reported a cost-to-income ratio of 114.4% in '24 compared to 38.2% in '23. At the domestic level, our cost-to-income ratio on a reported basis now is at 23.9% from -- up from 22.5% last year, supported by investment in certain identified areas. Moving on, the net provisions decreased to QAR 467.2 million for the year ended '24 from QAR 917 million in '23. In relation to provisions on loans to customers, although the gross provisions were more than QAR 1 billion, consistent with previous years, we saw higher recoveries on both CV level as well as at alternative level. At this commercial bank domestic level, our recoveries during the year were around QAR 260 million higher than last year. And obviously, this resulted in a significantly lower provisions number. Therefore a net cost of risk on loans was 76 basis points, whereas the gross cost of risk on loans is at 102 basis points for the year. As Joseph mentioned, aligning with our conservative approach on provisioning, we expect at the consolidated level with gross cost of risk of between 115 to 130 bps and net cost of risk between 80 to 100 bps for 2025. As of 31st December '24, the NPL ratio stood at 6.2% while our loan coverage ratio, including ECL, stood at 82.2%. The increase in NPL ratio is mainly due to lower gross loan balances as well as newly recognized NPLs transferred from Stage 2. This did result in a decline in our stage 2 balances by 4.9%. So our Stage 2 loans were approximately 20% of our total book in December '23. They increased to 21% at September '24. And now at December '24, that have decreased to 19%. So that shows that our stage 2 balances are going on the -- is on the declining trend. Moving on to the balance sheet. The total assets were marginally up by 0.9% year-on-year to QAR 165.8 billion. Gross loans and advances remain flat at QAR 91.5 billion. At the same time, it is important to mention that on the retail side, we see good progress on lending growth, which grew by 11% year-on-year. Customer deposits increased by 0.6% to QAR 77 billion at 31st December '24 compared to QAR 76.5 billion in '23. This is mainly driven by increase in current and called deposits. On the capital side, our capital remaining strong. CET1 ratio and the total capital adequacy ratio stood at 12.3% and 17.2%, respectively. The capital adequacy ratio of 17.2% is an improvement from 14.9% which we reported in December '23. On our associates, as Joseph mentioned, NBO and UAB continue to deliver better performances. Commercial Bank continues to work closely with both entities in the execution of their strategies. Alternative bank, as we mentioned, reported a net loss of TRY 790.9 million, equivalent to QAR 85.2 million for 2024 compared to a net profit of TRY 467.5 million, equaling to QAR 83.6 million in '23. Although there is an improvement in performance with lower operating expenses and lower net provision in Qatari riyal terms, the results were mainly impacted by due to lower FX and trading income as alternative bank had higher amounts of income under treasury money market activities in '23. Overall, the impact of hyperinflationary accounting is TRY 1,178.2 million, which is equal to QAR 131.8 million for '24, which is spread across various lines, including the nonmonetary loss and then absorb through operating income, cost and tax. Commercial Bank will continue to report under IS-29 till Turkey continues to be classified as a hyperinflationary economy. And accordingly, there will be an ongoing impact to the P&L of commercial bank. Lastly, alternative bank at a consolidated level represents 3% of the overall balance sheet side. So that's an overall summary of results, and we will be happy to take any questions.

[Operator Instructions] We have the first question from our Rahul Bajaj.

I have three questions to begin with. The first one is on margins, and you mentioned, this new QAR 260, one-off impact in 4Q. Even if I can add that back, seems to me -- it appears to me that the Turkish as well as the Qatari NIMs has -- have contracted on a sequential basis. So just wanted to understand the trends there and what kind of building blocks are playing out both in the Qatari business and the ABank business. My interpretation was that rate cuts in Turkey should have lowered the cost of funding there. So NIMs would have gone up ideally in the Turkish business, but that hasn't happened. Is that expected in the first half of this year? So also basically, the underlying NIM trends, that is what I want to get some clarity on. The second question is around NPL coverage, which has dropped quite materially sequentially, if I look at 4Q versus 3Q, it's come down to 82% from over 100% in the previous quarter. Is this the new run rate you want to run at, which is in the 80s or it could go further down from these levels? And so any comment on that and what does this mean for cost of risk for this year? That will be very useful. And my final question is on the ROE guidance for 2025, which is, I think 15% to 16% -- 16% to 17%, sorry, after excluding the AT1. Now if I kind of think about the building blocks for this guidance compared to this year -- compared to last year, I mean, there are two main negatives I see: One is the increase in cost of risk going from 36, 35 basis points to close to 80 basis points and also the tax -- corporate income tax. Are you not baking in the corporate income tax impact in this ROE guidance? And what would draw the ROE from 15.4% from last year to 16% to 17% in 2025. That's kind of my question, when you have two big reasons of cost of risk going up and tax also kind of going up in Qatar. So those are my three questions, sorry for taking a lot of time.

So thanks, Rahul, for your questions. So if we start with the NIMs. So as we mentioned that the NIMs were impacted a bit by this interest and suspense on 2 names around QAR 260 million. If we stripped that out, then we would expect that the NIMs would be in the range of 2.6%. Having said that, obviously, there will be pressure on the NIMs in 2025. And what we are doing right now is really focusing on the cost of funding and enhancing our low-cost funding, especially the [ CASA ] account. So that is -- that will be our strategy to really make sure that our cost of funding remains low. And then secondly, on the lending side, we would expect that our loan book to grow in line with GDP at least. So that will help us to keep the NIM level around a bit higher. On the Turkey side, to answer your questions on the NIM. So yes, we would expect that there will be -- the changes will impact in the first half of 2025. And hence, we would expect Turkey to benefit from that from a NIM perspective. Moving on to your NPL question. So yes, the NPL coverage is a bit -- so the NPL ratio moved -- increased and the loan coverage reduced, we would expect that -- although we had certain write-offs, the NPL ratio did increase, however, we would expect it to come down over the next 2 years. On the coverage, the reason why the coverage went reduce was that we took out like this fully written off and fully provided loans. And we had two NIMs coming into Stage 2 to Stage 3. And overall, we will expect we will be further building our provisioning on those NIMs. So we would expect that the loan loss coverage will increase on those -- in the next year or so. Moving on to your third question, on the return and how we will manage to ensure that it increases. As we mentioned, we are expecting our loan growth to be in line with the GDP at least of 2.5%, which will help us to generate further revenues. And then we are focusing on reducing the cost of funding through our initiatives in relation to cost of deposits as well as focusing on our cost base as well. So those are the main reasons which will ensure that we are able to be closer to our return on equity targets. And then your question in relation to the 15%. So yes, we have taken that into account, into our guidance and calculations. Although you might have seen some of the news which came through yesterday with some executive orders in the U.S.. So we really need to see how that would play between the U.S. and the OECD and whether it has any impact on Qatar. At this moment in time, obviously, we will -- we are baking into the impact of 15%, but we need to monitor this space closely.

And also, Rahul, you asked a question why return on equity has dropped from the previous report to 15.4. That's because here you can see our return in the same year-on-year QAR 3 billion and slightly over QAR 3 billion, but our equity has improved by slightly over QAR 2 billion. So it's a denominate effect that has reduced the return on equity year-on-year. We have another question from [ Salone ].

I have two questions, please. The first one, how do you project the growth which sectors are expected to be a key contributor and whether you rely on the government borrowing this year? And what could be the share from the Turkey? And another one on the noninterest income, how can we project this item? Should it come closer to the last year's level? Or do you expect some major changes there?

So thanks, [ Salone ], for your questions. In relation to the projected growth. So yes, you are right. I mean, from a wholesale perspective, as you know, there is a significant amount of government spending, which will happen in relation to the North Field as well as some of the projects such as the Simaisma project on the real estate tourism side. So yes, there will be some focus on -- to ensure to increase our government lending through new projects.

And just to add to that. I think you'll see it primarily coming from contractors as we bank some of the contractors. And again, we're very careful with contractors, but -- and the pay masters. But this is usually for the North Field. So we will see some increase in business across that piece. And again, I think that will be, I think, one of the main growth areas for next year as a subset of the overall North Field expansion.

And then obviously, on the retail side, as you can see, we grew 11%. So we are, again, ensuring that we progress more on it and there has been investment on our front line staff, especially on the wealth management side. So there will be a focus on increasing some of the growth there. Speaking from a Turkey perspective, again, we would expect as the regulations loosen up a bit, we will have more growth in Turkey, in particular, on the focus on the retail lending in Turkey as well. On the NII side -- sorry, the noninterest income side, yes, I believe that the 2024 noninterest income, I guess, in particular, fees and commission, income would be a good base to use for your projections in the future.

We have a question on the chat box from [indiscernible]. Can you talk about the reason for renewed optimism regarding the recoveries? Is the QCB more receptive to reclassification and is that a factor?

I would say that the recoveries are showing such strong growth because the bank has strengthened our litigation team and strengthened our recoveries team. So I would say [indiscernible] also the government has made the commercial court actually give judgments much quicker, maximum 6 months I believe is the time line now as compared to more open-ended in the past. So this combination of a strengthened legal team and stress asset management team. I would say probably a more robust approach in our approach to enforcing legal actions and to also using that as a pressure on [ recalcitrant ] borrowers has worked. So I would say that's the prime driver of this rather than any other factor. And also the fact that the collateral is real estate and other debt can be sort.

We have a question from Chiro Ghosh.

So a couple of questions. So the first one, just help me understand whether my calculation is correct or not. I saw in first 9 months, your NIM was 2.7%. So even if we take away this interest suspension part of it, the full year has now come to 2.6%. So that means the fourth quarter has still been quite weak from -- purely from the NIM perspective. So if you can throw some light on it. Second is the legacy loan has still continues to be layered Achilles heel. So how much more concerned can we expect from it? I mean how much of the legacy loan still remains in your book. If you can give some light on it. And third one is, I know you gave some clarity on this, but still just want to get more sense of how much profit can we expect from the Turkey operation next year?

So I will take the first one and then the third one. So on the NIM, right? So yes, so there is the -- obviously, the interest in suspense is the primary driver on that. There was also some increase in cost of funding in relation in the last quarter to some of the interbank placements. But that is more of a timing thing. As I mentioned, we are looking at the market and how interest rates pan out, then with the focus on our low-cost funding, our [ CASA ] strategy as well as then also planning our debt issuance next year, then we will be able to address that and reduce the cost of funding there. Moving on to your third question on -- sorry, Chiro, that was in relation to Turkey, right?

Yes, Turkey, that's right.

So on Turkey, again, I think we do expect Turkey to be profitable in 2025. We are seeing -- we are expecting that the regulation, some of the cash will go away. The -- it will turn around on [ Novel ] as a Turkish economy inflation.

And inflation is also coming down. It's on track and the year-end target, I think, is in the late 20s. So we shall see, but that will also benefit the hyperinflation impact.

Lastly, interest rates also, which is at 50% at the -- in 2024 is expected to come down by 7.5% to 8%. So that's also going to -- and also, they are going to remove the cap on the lending, which used to be 2% every month, and that's all going to come out. So that will also help the P&L.

So in a declining interest rate environment, you are better placed in Turkey is what I meant. So in a declining interest, you are better placed in Turkey?

I would say I think it's -- Turkey is a very complex environment. There are so many rules that have been placed on your reserve ratios on your cap on lending, et cetera. So I think to give a generic answers saying that it's a low interest rate will benefit, I think it's a combination of a number of, I think, restrictive regulations being eased, which should benefit because in the current environment, I think there's a negative cost effectively cost to carry some of the funding because of the restrictions on new growth at higher rates and on the results which have replaced on deposits. But it's a very complex. I think there are hundreds of new regulations that come through in the last year. So I would hesitate to say that's a straightforward equation, but in the current set that should benefit us. That's what I'm saying.

Yes. Just to add, I think the projections from the government on the inflation was closer to like 20%, close to that number. So we would expect that inflation will come down significantly in 2025.

I think on your last question about the legacy book, how much is that? Look, I think we have, as I said, consistently said that our cost of risk at the gross level will be running at 110 to 130 basis points. And we have said that, that's another 2 to 3 years of that, that's where we see. And then we wouldn't normalize. Ideally, we had said, we see our 2026 guidance. Our cost of risk should come around 60 to 80 basis points. That's what we said. So that would be sort of. But like I said, the environment has probably been tougher in terms of interest rates higher for longer and relative lack of growth. I would say another 2 years, maximum 3 of this, but I would expect us to achieve our 2025 guidance and -- but that will give you a rough idea of where I see our book. And that will flow through into Stage 2, improving over time and the NPL ratio over time. But I think the challenge is that any write-off of our NPL ratio is -- requires QCV approval. And that happens once a year at the end of the year. And it also requires even if you fully provide, you need to have your litigation, et cetera. So I would just say that the core legacy loan book is there. It's not changed, but there are no surprises. So having a higher NPL ratio and I've reiterated this many times, having a high NPL ratio is actually shows that we have recognized what is there in the booking. It's a backward-looking ratio or the quality of your back book, not of your forward book. I think this is a point which I would really emphasize. So since 2016, since when the new management strategy -- when new management came and a new strategy were put in place, our new net cost of risk is only running at 40 basis points. So I would say that's the way you should look at it. And so once we finish this in 2026 or '27, we should see that benefit flowing through in our cost of risk and in flowing through to the bottom line, plus you've seen the strength of the recovery now and you would still expect some recoveries to come. So the bank will benefit from those dual actions from '27 onwards, I think '27 onwards you will see some of these benefits.

We have a question on the Q&A box from Mohit, please expand a bit on interest expense during the year. It went up significantly from full year 2023, how should we look at that number going forward?

So yes, I mean, generally, our interest expense was around QAR 100 million to QAR 150 million a year. This year, you can see it has gone up to like QAR 449 million. So as I mentioned, like the increase was in relation to two customers, which is around QAR 260 million. For future, I mean, obviously, it depends how we are managing our portfolios and books. We -- so it will be difficult to say whether it will be an elevated level. But what I can say is if you look at the last 3 or 4 years on an average, our interest expense was in the range of QAR 100 million to QAR 150 million. So we would not expect a significant increase next year, but it depends how the market pans out in relation to that.

We have another question on the Q&A box from. As a percentage of your loan book, what are the proportion of Stage 1, Stage 2 and Stage 3 loans? So as you know, [ Alina ], stage 3 is at 6%. Stage 2 is at 19% and Stage 1 is 75%.

So I guess the key point there is, Alina, that from September when our Stage 2 was 21%, it has gone down to 19%, and we are really focused on reducing that as we go along, but it's going in the right direction.

Thank you. We have a question from Fatima [indiscernible].

Can you hear me?

Yes, Fatima.

I just have one question. What do you expect your blended cover tax to be next year?

Blended covered tax, you mean corporate tax?

Yes.

Sorry, go on.

Yes, the blended corporate tax for Turkey. So it will be 15% or will it be 15% last quarter.

The corporate tax. Yes, I think like as you know, the -- given the size of our operations, if the minimum tax comes in 15%, although we have to strip out the 2.5% of sports levy, I think there's a range of -- the blended rate will be in the range of, say, 12.5% to 15% on average, that's how I would expect it to be, given how stronger developed Turkey is, we are expecting it to be profitable, yes.

So I think the point is that in the tax application, which as you say is 15% but there's a 2.5% social contribution, which is anticipated will be allowed as a deduction. So that's anyway in your figures right now. So the net incremental effect would probably be around 12.5% to 13% depending on a bit of Turkey.

We have a question from Murad Ansari.

Just a few questions. I joined in a little bit late. So maybe I have missed it. I just want to get your guidance on NIMs for next year, what do you expect -- how do you expect a low interest rate environment to shape up your NIMs for 2025. And on loan growth, you're guiding loan growth in line with the GDP growth, so let's say, around 2.5%, 3%. You have had a good year on retail, and I'm assuming that the lower rates that should be supportive of continued growth on retail into 2025. But on the corporate side, it seems that if I strip that out, then the rest of the book growth at 2%, is that still some deleveraging impact that's coming through, which is keeping loan growth subdued? And when are we going to see -- I mean the kind of impact we expect from the North Field expansion on overall loan growth tools. Those are the two main questions. And thirdly, on the classification that you've done in the third quarter on the NPLs and the 2 accounts there, is there a -- can you give a color on which sector or segment of the business that is coming from?

Sorry, what was the last question, Murad?

The NPL classification of two accounts that have happened in the last quarter, is there a particular segment, sector you might have mentioned, or maybe I missed.

So first of all, in relation to the guidance on NIM, right? So as we said that we are expecting the NIM range to be around 2.4% to 2.5% -- closer to 2.5%, I believe. Obviously, as you know, that the -- what was being projected previously in relation to rate cuts is we will see lesser rate cuts in '25. So there will be some benefit there. And then secondly, as we mentioned that the focus on the CASA deposits and low-cost deposits, we are really focusing on that to reduce our cost of funding. So that is the kind of NIM range that you're seeing. On the loan growth, I mean, as we mentioned, obviously, retail going on the right trajectory from a corporate perspective was a bit muted. However, we do expect that the GDP growth of around 2.5% that we need to be -- we need to be closer to that. And then from a government perspective, the key point is that how much of that lending is coming from local markets versus any of the international financing which the government does. So we'll try to tap into that as we go along. And then lastly, your question on the classification, it was real estate related, yes. So those are two real estate related. And again, those were like a legacy names, which are kind of moving from Stage 2 to Stage 3.

Just one point, Murad, on the loan growth on the corporate sector, though, you saw a muted growth at the net level, we did have about good growth and there was repayment. So the growth that we had in 2024 was negative by the repayment we saw from some of the corporates.

I mean would you -- do you foresee that deleveraging or repayment -- is there more, I mean I know it's difficult to pinpoint, but I'm generally going by the trends that you're seeing and talking to the corporates. I mean, Is that something of a risk moving into 2025 as well?

So from the growth perspective, yes, I mean, we will focus on the corporate real estate sector -- corporate sector. There could be -- which will become more repayment as well because some of the public sector companies are cash rich. But our growth is that around, we are focusing 2% to 2.5% growth for next year.

Just to add to that point that our new book, I mean, for, say, 2017 onwards, what we see the cost of risk on that is around about 40 basis points. So the new book has been relatively impairment free with a lower cost of risk. So I think we're just trying to, as Joseph mentioned previously, some of the legacy names, I guess, a couple of years more of journey on it. and then you will see the cost of risk to be reduced after a couple of years or so.

We have more questions on the chat box. Can you please talk about the reason for renewed optimism regard -- could you please repeat NIM and NII expectation for 2025? Do you use 15% corporate tax in your current expectation? Do you expect to keep cost in QAR terms to remain flat in 2025 versus 2024?

Okay. So on NIM, as we said, we are expecting it to be around between 2.4% to 2.5%, more towards 2.5%. On the NII, again, we would be expecting loan growth to be in line with GDP growth, say, to 2.5%. So we will expect our interest -- sorry, noninterest income. So on the noninterest income, yes, I mean, I believe like if you take 2024 as a base. And then on that, we would expect some growth, again, in line with GDP around 2% noninterest income growth you would expect. The 15%, as of now, we have baked into our forecast and budgeting, which we will be going ahead unless something radically happens at the top level since the development from yesterday. And on the cost side, I think we will remain flat. However, if there are opportunities to invest, especially on the technology automation side and supporting our frontline staff, then we will be doing it. So we will aim for that on the cost side.

We have another question from Abhinav in the chat box. What was the reason for decline in Wholesale Banking revenue in 2024? Also my color on how it is expected to -- in 2025. So 2024 wholesale banking revenue dropped, that's because of the cost of fund impact that went through. But on the fees and other income side. [ Wholesale ] Banking had a significant improvement, which is reflected in the overall bank level, where the fees have grown by about 11%. The expectation for 2025, so we are expecting Wholesale Banking to do better in NII as well as in fees with the loan growth that we have projected and the pipeline that we have in our books.

And I think just to add that the decline in the wholesale banking income was, again, impacted by this kind of one-off interest of QAR 260 million. This as the QCP rule, we have to reverse that income, which we recognized.

We have another question on the chat box from [ Shafique ]. Can you elaborate on the substantial decline in the bank's foreign exchange income in 2024? Actually, could you provide details about the bank's open foreign exchange position and its exposure?

So in relation to the decline in the FX, this was, as we mentioned earlier, that this is primarily driven by Turkey. And we had some FX treasury income in Turkey, which has come down. And then the -- on the FX, there was an increase in the FX swap cost increase in Turkey. So those are the kind of main drivers there. And on the FX open position, obviously, this is an area where we continue to manage and work closely with the central bank. And the way we are managing our position is in line, and we are trying to maintain it at a stable level and reduce it as we go along. This -- the FX [ NOP ] issue is basically more of a bank-wide issue in Qatar, I think we are looking at it and actively managing as we go along.

And I would just add that the Qatari riyal is an affected currency. If you see the -- it runs current account surplus, it runs a budget surplus so. And it's been through real-life shocks and stress tests. We've talked about the blockade. So the Qatari riyal has actually gone through that without any [ de pick] or decoupling from the bank. So whilst there is a NOP, we are not too -- and I think it reflects the fact that even under the [ Basel III ] guidelines, that has not been implemented as -- in line with Saudi Arabia and the UAE. So I think given the strength of the effect currency, it's there, but it's not something that I see as a huge risk issue.

We have another question on chat box from [indiscernible]. Could you give any rough estimate of legacy book that is currently under Stage 2, but could move to Stage 3? That's the first question. Second question is, given its legacy book, Wondering why the NPL formation peaked in Q4 2024, where you've been in during 9 months in 2024? So we have a few names that are partly in Stage 2, which we have a plan in the next 2 to 2.5 years with the discussions and the negotiating that has been taking place could move to Stage 3, but it's part of our strategy, which we have highlighted that we will carry our cost of risk around 150 to 130 basis points in the next 2 to 3 years, gross cost of risk. So we will move some of those when we have to actually take an addition on those. In terms of the NPL formation, we actually reported 6.2 in December, but in the first 9 months, it was hovering around 5.996. So it only moved by about 22 basis points, of which 10 basis points came from the gross loan book reduction and the rest was partly due to the new NPL formation that we booked in the last quarter. We have a question on the Q&A box from [ Abhinav ]. What was the reason for decline in wholesale banking revenue in 2024? Also, any color on how it's expected in 2025? I think we answered this question. The question has come in [indiscernible]. We have another question from Varun Kumar again.

So I have just some follow-up -- a couple of follow-up questions on. The first one, on the FX line. So which was kind of point for you until I think this year, so you mentioned certain reasons why it went into negative territory because of swap funding cost and lower income. So I want to know, I mean, going forward next year, you expect this line to recover because from the guidance that you gave on non-interest income which is to be used '24 as a baseline and marginal growth, doesn't imply that this line will go back to nearly as high as in the previous level. So that's my first question.

Yes. So on this question, we mentioned that the FX line movement is driven primarily by Turkey and there are two reasons for it. One is higher FX swap cost as well as lower FX trading income in Turkey. So that depends on the volatility. So there was a lot of volatility in 2023 where we had more treasury money marketing activities, which was lower in '24. So I guess the answer to your question is from a guidance perspective, how to bake in that you can think of, more of a mid-level from the year before to last year because I think 2024, the higher swap cosst was because of some of the actions, which were taken from a regulatory perspective, we will see some of that constraints being reduced, which will remove that loss that will reduce the impact of it.

Okay. So -- okay, okay. So this means that it will grow from this level to the mid level that you have reached in the previous years, right, an average of the previous years.

I mean, it would be difficult to say that but I think that will be a reasonable assumption, I guess.

Okay. Okay. And secondly, on the expense line, again, you expected kind of flattish trend but given the impact of Turkey, do you expect that to have a material impact? That's my second question. And I'll ask my third question also, which is on the impact of the interest in suspense. Is it QAR 260 million or QAR 216 million?

Sorry, can you repeat your last question?

The interest in expense impact on the net interest income, is it QAR 216 million or QAR 260 million?

It's 260. On the operating expenses, yes.

Yes. So on the cost, just to highlight you, we have projected because at CB domestic levels, a margin of cost because we will continue to invest in technology, automation and also in our people -- so the small cost increase has been factored into the 2025 budget. About 3% to 4% approximately. That's all the questions from the audience. Joseph, if you have any closing remarks, please.

As always, thank you very much for joining us today. And our team is here from Investor Relations and finance to answer any subsequent queries that you may have. So thank you again and look forward to seeing you again at the next quarter. Thank you.

Thank you.