Qatar International Islamic Bank (Q.P.S.C) ($QIIK)

Hello, everyone, and welcome to Qatar International Islamic Bank Conference Call. Please note that this call is being recorded. I'd now like to hand over to Shahan Keushgerian, our moderator for today, for opening remarks.

Thank you, Eli, and hello, everyone. I want to welcome you to Qatar International Islamic Bank's First Quarter 2026 Financial Results Conference Call. So on this call from management, we have Hossam Khattab, the bank's CFO; and Mahmoud al-Ahmad, Head of Treasury Investments. 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 Hossam.

Thank you, Shahan, and thank you, everyone, for joining our first investors conference call for 2025 (sic) [ 2026 ]. Today, as usual, I will start my presentation by providing a high level overview of our financial performance for Q1 2026. Then this will be followed by an update for our funding and liquidity position with outlook to be presented by my colleague, Mahmoud al-Ahmad, our Head of Treasury and Investment. Thereafter, we will be happy for you, as usual, to answer any further questions. . Now I will start with Q1 2025 -- Q1 2026 snapshots. QIIB continues to deliver a stable financial performance despite the ongoing durovolitical uncertainties. [indiscernible] in the region, including the evolving situations between United Stats and Iran have introduced volatility in the global market. particularly in energy prices and comment for sure the outlook -- on outlook. However, the bank remains well positioned, supported by a strong balance sheet, high-quality financing portfolio and solid liquidity level. If you notice our Q1 [ 2025 ], we ended Q1 with almost total assets at -- reached QAR 61.725 billion, represents slightly declined from 2025 year-end by almost 1.4%. On the other hand, total financing is up by 4.5% from QAR 41.9 billion to QAR 43.9 billion. We have a major development as well in customer deposit with -- up from QAR 43 billion to be QAR 43.8 billion. Major development as well in the performance ratio to be down from 2.9% by year-end 2025 will be only at 2.6% in Q1 2026. Net profit [indiscernible] by 3.2% to QAR 368 million in Q1 2026. Earnings per share up to [ AED 0.24 ], capital -- market capital equity as well above the minimum acquired at 20.8%. Total market capitalization up to QAR 16.8 billion. [indiscernible] fluctuating as our Qatar Bank rating was negative, Modis A2 stable outlook. The QIIB shareholder structure in Q1 2026 remains stable with Qatar invest Asit QE as the largest single shareholders with about 16% share. [indiscernible] foreign shareholders collectively hold about 21%, while the majority of our shares is 63% held by other category shareholders. In Q1 2026, QIIB maintains the same 3 major business model as we maintain the same business model segregated into 3 major business segments, corporate banking, personal banking and treasury and investment. As of 31 March 2026, the distributions of the total assets and revenues across the 3 major segments were consistent with last year. Corporate Banking represents about 48% of the total assets, while the share of the revenue or net revenue is about 49%. Personal Banking represents about 27% of the total assets and generates about 33% of the total -- of the net revenues. Earlier investments as well hold about 25% of the total assets, while contributing above 18% of the net revenues. QIIB balance sheet mainly primarily driven by financing assets, which account approximately about 71% of the total assets. This one was up from 67% in December 2025. It's followed by the financial investments with about a 3% share of the total assets, mainly driven by high-quality sovereign [indiscernible] placement with banks declined to be only 4%, down from 9% in December 2025. The bank maintained a well-diversified financing asset portfolio across different industry segments. In Q1 2026, consumer financing remains the largest segment with 41% of the total financing assets. Trading related financing assets as well stable at 90% of the total financing asset portfolio while we have a measure -- or continue to enhance or to develop our share of government or public sector financing assets to be up from 10% in year-end 2025 to be at 14% by March 2026. Asset quality as well, well-maintained over the Q1 which demonstrate the strong asset quality mix, reflecting the bank burdened credit risk management framework and conservative provisioning policy. The NPL ratio, as we highlighted before, further improved to be only 2.6% in Q1, down from 2.9% at December 2025, outperforming the market average and reinforcing the resilience of QIIB credit portfolio. Stage 3 as well. I mean we maintained to issue cattage, coverage ratio at 100%. ensuring full provisioning against all credit impaired exposures. These 2 exposures account for 10.6% of the total financing assets with covered ratio up to 16.8%, comfortably above that 15% debt target, as we mentioned earlier. The overall expected credit loss is a covered ratio for financing assets at 5.3%. The Bank of profitability metrics as well in Q1 2026 continue to deliver a stable profitability while maintaining outstanding performance above operating efficiency. The net profit up to QAR 368 million, representing about growth quarter-over-quarter. Profitability and efficiency metrics further enhance it with retain on assets up to 2.4%, return on equity up to 14.7%, cost-to-income issue at 19.4%. On the regulatory and retential issue as well, QIIB well and above the minimum acquired by the QCP with capital adequacy ratio stand at 20.8% with CET1 ratio at -- up to 15.6% from 14.8% in December 2025. Liquidity coverage ratio, the LCR, up to [ 312 ] net stable funding ratio in [ 114 ], loan-to-deposit ratio as well at a very well comfortable level with 92.7%. That is the end for my section. I will hand over now to my colleague Mahmoud to give you an overview.

Thank you very much for Hossam. I will be taking you through the [indiscernible] review. Broadly, our funding continues to operate on a stable base anchored by customer deposits, secure financing and capital. In terms of funding mix stability as of March 2026, our funding profile remains resilient with card accounts to at 11% of total funding unchanged from last year. I mean end of 2025. On secure financing, it remained stable at 8%. Capital stable at 16% and under liabilities held us to person. Meanwhile, due to banks reduced from 5% to 3%, while [indiscernible] equity increased from [indiscernible]. That is further reinforcing this device of our funding structure and reducing the reliance on tutoring. It is also worth to note that the remaining [indiscernible] to bank balance is mainly linked to money market operations where II remains an limit. Within net as equity, the composition remained well balanced and broadly unchanged with individuals representing 62%, government 29%; corporate 8% and nonbank with 1%. . On customer deposits, we continue to see gradual positive growth with 1.2% approximate increments from 2025 year-end balances. This reflects continued confidence in the bank and the strength of our franchise, supported by ongoing product and channel development, which further enhanced customer engagement tangible this stickiness. On the liquidity metrics standpoint, as mentioned by our CFO, already. So the OCR was at [indiscernible] and time get have at 13.8% as [indiscernible] almost 22%. So the overall solution is positions us with a strong liquidity caution and the sound funding profile. The rating -- the credit rating. Our core ratings remained unchanged in Q1 2026, which has not changed demand longer IRSA and short-term 1. The only point to note here is a fixed position to let the bank on [indiscernible], which was a system-wide action for Dana Bank a Security and Exchange Meanwhile, Moody's and Capital Intelligence trading remained unchanged at A2 and enable us respectively, with a stable outlook. That's it from our side, and thank you for [indiscernible].

[Operator Instructions]

Hossam, I have a question for you. I know it's still early days, but can you give any kind of guidance with the current situation like what can we expect in the coming quarters or for the year on your financials?

Yes. Thank you for your question, Shahan. You know this, as you mentioned, it's too early to predict now. But as normal, our policy is very conservative. And we are watching -- we are trying to navigate within this uncertainty or tough times, as you highlighted and towards mainly focusing into first of all, definitely, to ensure the quality of our financing portfolio not being impacted, which is mainly supported by the Qatar Central Bank. The Qatar Central Bank should some measures here to support the banks and the customers to continue to deliver 0 payments at [indiscernible] with a feel of instruments up to 3 months. On the other hand, as well on the liquidity side, the KCP as well reduce section or the requirement of the cash reserve from 4.5% to be only 3.5%, which supports a lot the system with liquidity. So we keep monitoring the position. We are very supportive to our customers to ensure they are performing well, ensure that we have good and enough liquidity to manage any uncertainty. But as an outlook for the end still we maintain our projection at the same between 4% to 5% total asset growth finding asset between 4% to 5% as well, customers [indiscernible] between 5% to 6%. That is still the same our projections or our targets for 2026. Definitely, this one will be viewed and updated once this exclusion of this conflict is ended and we can predict a bit on the government and the Central Bank and [indiscernible] comes on how you're going to deal with the account positions. Then we will update our projections and our budget for this one accordingly.

We do have 2 questions. We have 1 question from Mohammed Adnan of Aviat Investments.

Yes. Sorry, my question is, thank you for the guidance. No change in guidance at least for your growth in financials and your deposit. What about -- could you give maybe some color on where you see NIMs going and yields on both the financing and the -- on the funding side?

Yes, definitely, we are seeing some pressure on NIMs in Q1. due to this uncertainty. Some of the liquidity has been dropped in Q1, which has impacted our cost of fund not -- we have definitely a good amount of drop in cost of fund or net interest expense but not in the same line with the -- what we was expecting on the other hand, the asset as well or return on assets down by slightly talking about like [ 40 ] bps while the net interest expense or interest expense down by only 20%. I was expecting in between 45% drop in cost of fund. That ended in only as about 20% drop in our net interest margin from level of 300 basis points in December to be at 280 in Q1. As I mentioned earlier, we still monitoring this one and definitely will be some measures by the bank to ensure that we're maintaining the good amount of liquidity. On the other hand as well to ensure that the cost of the overall pool cost of fund is in line with what we are anticipating in 2026. [indiscernible], if you have any updates...

Thank you, Hossam. I believe what you have said is enough there is a specific detail in the question.

Our next question comes from the line of [indiscernible].

Actually, my question was the same. Maybe could you remind us just in terms of of funding and looking at the deposit base. Can you remind us the mix of resident nonresident deposits? And has there been any change recently? Any activity there, please?

Sure, sure. If you followed our profile, you will notice that over the last few years, our loan to deposit ratio will never exceed 90%. Nowadays, we talk about 92% to 95%, which we are trying to maximize the liquidity of the funding we have with adding any additional costs on our bank. The majority of our deposits is broadly local or domestic [indiscernible] 99% of our deposit is local or domestic deposits. The other source of funding we rely on is debt capital market. Last year, we did few 1 in QAR and in dollar in last quarter on Q4, which support our funding profile. Meanwhile, as I mentioned, we're still picking in terms of the wholesale deposits to ensure that what all deposits will bring into the bank is well little [indiscernible] and within our margins, we set internally to not have a negative impact on all net interest margin in general. As I mentioned, we faced some difficulties in Q1. But thank you, thanks to the regulations went this reserve or cash reserve, it's impacted system by almost like between QAR 9 billion to QAR 10 billion which is sometime in some way is supported the local liquidity. We expect as well to have to once this escalation or this conflict ended, we -- to have some positive or some good impact on our liquidity on the system liquidity, which we definitely are going to maintain a good impact on our net interest margin.

[Operator Instructions] Your next question comes from the line of Mohammed Adnan of Investments.

This is Zohaib Pervez from Arran Investment. So my question is on -- you mentioned that you were not able to -- the cost of funding that you thought will reduce was not -- you were not able to achieve that. Could you tell us why you were not able to get your targeted cost of funding? Was it liquidity issues? Was it customer -- I mean, could you give us more color on that? And how will you rectify that so that you can achieve the cost of funding target that you have. Secondly, is it safe to say that most of your funding -- most of your financing growth is towards the government sector because that's the one sector that has grown and if you see the distribution quarter-over-quarter? And is this going to be the growth play the government sector is going to be the growth play going forward for 2026? Or do you see a revival in the corporate segment also personal and corporation sector.

For the funding, again, as I mentioned, we were expecting the drop in our interest experience to be in line with what we were predicting or projecting for basically in 2026. But due to this conflict expense, especially in last month, we've seen, I believe, barley can give you more feedback or more updates about it, but we've seen some pressure on the [indiscernible]. That's why some of the rates is being requested or some customers requested higher and just higher than what was expected and to maintain the funding position of the bank, we're trying to accommodate those deposits. That's why we have some little impact on our interest expense and cost of fund. For second one about the government. Yes, it is in line with our strategy as well. in last year, as I mentioned last year, we changed our business objectives to be no focus on the government business since we -- our share of the share of the bank in the public sector is very small, very little. It was almost like 4% into December 2024. We ended 2025 with 10%. Now we're at 14%. We are, as I mentioned in last year's presentation, we are targeting to be between 20% to 25%. That was our target last year, and we expect to achieve this one over, as I mentioned as well last between 2026 and 2027 to reach the position of at least 20% to 25% of our balancing assets within that kind of business between semi government or semi government business.

Okay. Sounds good. And so this -- I mean, you want to achieve nearly 1/4 of your asset book in government-related -- government to government-related assets, the financing book. So do you have a strong...

So let include our [indiscernible], sorry.

Including, sorry?

[indiscernible].

Okay. Yes. So do you have a clear pipeline of when demand from these -- from government and government-related? Do you see a pipeline that this will change. And by what time do you think you will be able to achieve this version into 1/4 of your bank financing assets?

As I mentioned, we have 3 time line. I mean between -- we had this kind of objectives in 2025 or by end of 2025. So by -- in Budget 2025, we had these objectives. And by end of 2025, we achieved a good amount of our target, which is almost like 10%, as I mentioned. This quarter, we achieved 14%. And there's some [indiscernible] is in pipeline right now. We expect to include those deals within Q2, Q3, which it will enhance as a ratio of public sector as well to be in line with what we are targeting.

Just one last question. Your investment activities income has declined year-over-year, even though the portfolio has doing well, -- is it because of lower yields? Or is it because the trading income -- correct me if I'm wrong, the trade income and the Sukuk trading income and the Sukuk coupon income yield income is part of is in the investing -- net income from investing activities, correct?

Yes. But just to highlight the interest investment income is basically split into 3 different lines. one line is due [indiscernible] Bank, which is [indiscernible] banks. The other side is Sukuk financial investment. The last one is the real estate investments. So as you can see, if you notice that for March 2025 to March 2026, we have about QAR 5.6 billion drop in placements banks on level of QAR 8 billion plus in 2025 to be at only QAR 2.7 billion in Q1 2026. Definitely, that was -- that has a good impact on our interest income. On the other hand, we enhanced our investment mainly with Sukuk to be only -- to be up by almost QAR 4 billion. So the net drop in our investing activities is about QAR 1.5 billion that it has a good amount of impact on our investment income in line with the definitely that drop in the margins of the REITs in the system.

As of right now, we don't have any pending questions. I'd like to hand the call back to Shahan for closing remarks.

I'd like to thank management for giving us an update on the quarter. And we'll pick this up again in the coming quarters. Thank you.

Thank you, Shahan. Thank you, everyone.

Thank you for attending today's call. You may now disconnect. Goodbye.