Qatar International Islamic Bank (Q.P.S.C) (QIIK) Earnings Call Transcript & Summary

Hello, and welcome to Qatar International Islamic Bank Conference Call. Please note that this call is being recorded. I'd now like to hand over the call to Fabian, our moderator for today. Please go ahead.

Thank you, Ellie. Good afternoon to you all. Thank you for joining us for Qatar International Islamic Bank's First Quarter 2024 Earnings Conference Call. My name is Fabian, I am a senior analyst QNB Financial Services. On today's call from QIIK, we have Hossam Khattab, who is the Chief Financial Officer; and we've got Dr. Mohammed Ghiyath, the Head of Treasury and Investments. And as usual, they will go over the performance and we have a Q&A session immediately afterwards. I now turn over the call to Hossam to begin the call. Over to you, sir. Please go ahead.

Thank you, Fabian. Thank you, everyone, for joining our call to does call for 2024. We're going to present today's QIIB performance by end of Q1 2024 compared with Q1 2023. We have a very promising results by end of Q1 2024. I was going to start my presentation today with providing a high-level financial snapshot about our performance by end of Q1. As presented in our presentation Page #5, the total assets by end of Q1 2024 stand at QAR 62.9 billion, presenting about 2.1% growth rate compared to year-end 2023 and about 14.4% growth compared to Q1 2023. Total financing assets stand at QAR 37.5 billion, representing about 2.6% growth compared to December 2023 and about 7.2% growth compared to Q1 2023. Customers deposits stand at QAR 39.7 billion, representing about 2.1% growth compared to December '23 and 8.2% growth compared to Q1 2023. Net profit at QAR 335 million, within this about 6.1% growth rate compared to Q1 2023. Everything we achieved at 2022 Dirhams compared to '21 Dirhams by Q1 2023. Cost to income ratio at 18.8% growth -- sorry, 18.5% compared to 17.0% by end of 2023. Nonperformance ratio slightly up to 3.2% compared to 2.9% by end of December 2023. Total market capitalization stands at QAR 16.3 billion that was a high-level financial results by end of Q1. If we move to the shareholder structure of the QIIB that by end of Q1, we are very consistent, 62% ownership by Qatari companies and individuals followed by about 21 GCC and foreign nationals shareholders. QIA is a single and large ownership by 17.1% on QIIB wants its operational business through main business segments, 3 business segments. The first one is corporate banking. Corporate banking assets representing about 39% of the total banking asset, while it's going to contribute about 50% of our total revenues by end of Q1 2024, followed by treasury and investment ways to contribute to the share of assets 38%, while the share of revenues is 27%. When we have personal banking and financing assets by share of assets, about 24%, where it's contribute about 24% as well from the operating revenue. The bank runs its operations through 17 branches, 3 of them is fully dedicated for corporate customers, one digital, fully digital branch and about 84 ATMs across the whole Qatar. If we move towards more in our financial performance by end of Q1 2024. As I mentioned a while ago that QIIB achieved about 2.6% asset growth compared to December 2023, representing about 14.4% growth compared to Q1 2023. This is mainly driven by our strong financing assets growth by about 7.2% compared to 2023 Q1 as well a good growth in our financing assets, financing investments by about 18.2% compared to March 2023. The QIIB maintained a well-diversified asset positions, mainly driven by financing assets, representing about 60% of the total banking assets, followed by the balances and investments with banks by about 22% of the total banking assets followed by financial investments, representing about 12% of the total banking assets, mainly our financial investment, it is high quality of sukuk, mainly in sovereigns sukuk. The split of our financing assets by industry as consistent, mainly driven by consumer lending growth 44% compared to 45% by December, followed by about 23% for trading business activities. Then we have a real estate about 19%, 6% for the contracting. If we move to the next slide about our asset quality. It will show that as well, QIIB will maintain its asset quality by end of Q1, we will reach about 3.2% only nonperforming loans at 2.3% only compared to the average market by last year about 3% -- 3.7%, which shows that we are much lower than our market average. Even with a low nonperforming ratio, QIIB continued its policy and practice over the last few years to support Stage 3 provisions where we stand at 86% coverage ratio for Stage 3 only. With other provision, we stand at 142%. The overall coverage ratio for all financing assets is about 4.3% compared to as well to 4.3% by end of 2023. The majority of our financing assets is Stage 1 with 87% consistently with last year at 87% as well. Stage 2 at 9.8% of the total financing assets down from 10.2% by end of 2023. Stage 3 up from 2.9% by end of 2023 to be at 3.2% by end of Q1 2024. If we move to the next slide about our profitability operating efficiency. It will be noticed as well how is the bank consistently holds and face strong profit margin, either from direct core banking business, i.e., financing and investment activities all from indirect such as fees and commissions. The bank by end of Q1 2024 achieved about 23.6% gross from the core banking activities, mainly financing assets and investments, where we achieved about 33% growth from fees and commissions. This one, it will help the bank a lot to absorb the large increase in our cost of fund by end of Q1 2024 compared to Q1 2023, which are approximately about 60%. It as well helps the bank to maintain very positive cost-to-income ratio at 19.3%, which consider one of the top in the local market. In addition, the bank as well achieved by end of Q1 2024, a very high level of return on equity at 14.4%. Return on average assets at 2.2%. If we move to the next slide, Page 11. In terms of the capitalization that was related to CAR ratio by end of Q1 2024 stand at 18.54% compared to 17% by end of -- by end of -- sorry, by end of December 2023. This mainly driven by the good retention of our last year profit. We transferred to our retained earnings by end of -- by end of Q1 2024. In addition to the new changes applied to the Basel III fees calculations as well allow the banks in Qatar to include interim profit in the [indiscernible] calculation. Other regulatory issues as well in a very positive position with LCR at 290% compared to 100% with [indiscernible]. NSFR at 116% compared to the minimum at 100%. Loan-to-deposit ratio at only 89% or the maximum is at 100%. So that is the position of the bank by Q1 in terms of the capitalization and other regulatory issues. I will end my presentation today with Page 12, which will summarize the bank position by end of Q1 2023. It shows, as I mentioned, [indiscernible] 2.1%; asset growth 2.6; financing asset growth compared to December 2023. Liquid asset as well a ratio up by almost 1.4%, customer deposit by 2%. Total income, as we mentioned is 20% up compared to Q1 2023. Net profit by 6.1%. This performance demonstrates the bank ability to sustain its profitability and asset quality as well the will management of our performance and potential issues quarter-over-quarter, year-over-year. That is my end of the presentation. I will leave the floor now to leave my colleague, Dr. Mohammed, who is going to cover the funding overview of the bank.

Thank you, Hossam. Our refunding comes from the customer deposit and equity of investment of account holders and is backed by the bank owned capital. Our QIIB funding split, there is not too much changes between December 31, 2023, and quarter 1 2024. We can see 53% come from equity of investment account holders and 15% is from the capital and comes due to banks come 17% and 10% from customer current account and 3% of sukuk. And if we compare it with -- as of 31 December 2023, in the presentation, we did not see a lot of changes. And our current -- our equity of investment account holders by sectors 64% come from individuals and 9% from the corporate and 26% come from government and semi government and 1% from nonbanking financial institutions. For growth in our total customer deposit returns, we can see that current account is QAR 6.4 billion and the QAR 33.2 billion is the equity of investment account holders. This is like the funding overview. And for rating, as Hossam stated, that we are -- Fitch long term, we are A and with outlook stable. And Moody's, we are A2 and outlook stable and Capital Intelligence A+ and outlook stable. That is what conclude my presentation. The floor is open for questions.

[Operator Instructions] Our first question comes from Zohaib [indiscernible] from Orion Investments.

This is Zohaib [indiscernible] from Orion investment. I've just got one question on your NPLs. So in the first quarter, we saw quite a strong buildup in NPLs about QAR 150 million. So could you tell us, is this across the board? Or is this specific to one client? Or -- and which sector is this NPL buildup come from?

Basically, the Q1 provisions were not moved from Stage 2 to Stage 3, mainly towards a few customers from the corporate and the majority is a retail smaller size. So -- but definitely, the major volume is coming from the corporate and corporate customers.

And which sector are these corporate customers in real estate or services, which sector?

Basically from -- most of all sectors, we don't have a concentration in 1 sector. It is among all sectors. We have service. We have contracting. We have real estate as well.

Our next question comes from Mark Krombas from TFI.

I was pleased to see that your return on equity has risen to almost 14.4% from previous years of around 12%. Given your coverage is now relatively high or 86%. Do you think you can avoid the sort of larger provisions in Q4, which have tended to bring down your ROE over history? Or do you think you're still not that comfortable with your coverage and that you might repeat that?

As you correctly mentioned that the return on equity, usually in Q -- in terms, it is at that level 14 to 16 because it's not adjusted for end of year profit and other provisions. But definitely, we provided -- we consistently with our policy in terms of the provision and coverage ratio. Last year, we provided almost like more than 100 basis points or 100 points as a provision cost of risk. In Q1, we follow the same. We provided almost like 15. Our policy is to maintain our coverage ratio at the highest level. Thus this one definitely in exclusive any other collateral like the cash collateral, share of real estate collaterals in our [indiscernible]. So we are way above the regulatory requirement in terms of the coverage ratio. Definitely, this 1 by end of year, we're going to review again, and if we need to provide any further provisions, we're going to provide. But the good thing is that we already had a very good positive position. So we not expect to change our policy by end of year to provide higher provisions, which might affect the ROE. So we believe we're going to maintain a very strong as well ROE by end of year.

Okay. So should your sort of forecast cost of risk. Is it more the 100 basis points or more than 50 basis points like or somewhere in between? Or like what do you anticipate?

Good question. Good question. This -- basically, if you notice before 2020, our coverage ratio, it was about 53%, 50% at maximum. Will we support -- and the management focus on this one over the last 3 years, and we achieved between 100 to 110 cost of risk over the last 3 years. We achieved a good level of coverage. Now we are at 86.6% and this is a very good coverage ratio. We tend to our policy before the 2021 where we add 53 basis points. So we are expected to continue this one because we achieved almost our target to achieve a very good level of coverage ratio. So we not expect this one to go dramatically to grow in high level over the coming quarters.

It looks like we don't have any questions as of the moment. I'd now like to hand back over to the management for the final remarks.

Thank you, Erie. Go ahead.

Thank you all. Thank you all for joining our call today, and we hope to see you again in Q2 results with a very promising as well financial performance.

Thank you, Hossam. It brings us to the end of our call today. Again, thank you for joining us. I would like to thank the management team for addressing questions from investors. Please enjoy the rest of your day.

Thank you. Appreciate it. Bye-bye.

Thank you. Thank you very much.

Have a good day. Bye-bye.

Thank you for attending today's call. We hope you have a wonderful day. Stay safe.