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

Good day, and welcome to the Qatar Islamic Bank Second Quarter 2021 Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Gourang Hemani. Please go ahead.

Thank you, John. Thank you. Good day, everybody. Welcome to QIB second quarter results call. We're glad to inform everybody that Qatar economy continues to reopen in the controlled manner, like as the coronavirus gets controlled. Qatar is 1 of the few GCC countries that have opened for visitors albeit with necessary precautions and conditions depending upon the country of arrival and vaccination status. The number of COVID cases continue to be well controlled and very minimal, especially the community spread is very low. This has allowed the economy to continue to benefit from the opening. The latest numbers that are coming in the market appear to be very encouraging. The Qatar's industrial production has increased 6% month-on-month in the month of May, so with the country's industrial production index seeing a 1.7% increase -- yearly increase in May 2021. Qatar's fiscal and external position continues to benefit from the rebound in the hydrocarbon prices that we have seen over the past months. It is now forecasted by different rating agencies that the country will register a current account surplus ranging from 4% to 5% of GDP in 2021, and the budget surplus is forecast at between 3% to 5% of GDP in 2021. Looking to the banking sector. If we look at the -- based on the statistics published by QCB, we can see that the industry -- that the banking sector has really benefited from the improvement in the overall situation. The total credit has grown by 6.7% up to the month of May for the year-to-date for the first 5 months. Large part of the credit growth coming from the public sector, which grew about 13.5% in the first 5 months, and the private sector credit grew by 4.6%. If you look at our 12-month rolling average growth at the end of May, the total credit facilities grew by almost 13.6%. The liquidity position in the system continues to improve as well. The total deposits in the bank have -- banking sector have grown in the first 5 months by almost 6.3%. While the private sector deposits were almost flat, we saw increased deposits coming in from the public sector and especially the nonresident deposits that have benefited from the removal of the embargo conditions, and we see depositors from Saudi and UAE continue to come back to the market. Looking -- having looked into the overall banking sector and economy, we'll quickly jump to the QIB specific results. So at the end of June 2021, the QIB's total balance sheet stood at QAR 183.8 billion. That's a growth of about 10.9% compared to June of last year and 5.4% year-to-date for the first half of the year. The growth predominantly came from the financing book. The financing book has reached QAR 127 billion, growing 13.2% compared to June of last year and 6.7% in the first half. The total deposits have also grown to QAR 125 billion, which is 17.6% compared to June of last year and 6.1% year-to-date growth. QIB continues to have 1 of the best funding profiles. If you look at it from the financing-to-deposit ratio perspective, the financing-to-deposit ratio is at about 101.3%, well below the industry average, especially if you consider the local banking market alone. That is excluding certain banks that have subsidiaries outside the country. The bank's asset quality continued to remain very good. The nonperforming financing ratio was about 1.4%, with an improved coverage to 95.2%. The Stage 1 financing is at about 85%, and the Stage 2 financing has been brought down to about 13.7%. The capital adequacy of the bank continues to remain strong at 18.4%. Looking into the profitability metrices. In the first half of the year, the bank published net operating income, that is a total income less funding cost paid to the depositors and the Sukuk holders, that amounted to about QAR 3.059 billion, up 17.4% compared to the first half of last year. The bank continued its initiatives to control the expenses, and the total expenses stood at QAR 535 million, down 2.8% compared to last year. This allowed the bank to improve its income before provisioning to QAR 2.524 billion, which is up 22.8% compared to same period last year. Taking advantage of the good operating profit, the bank continued to build provisions and notably increasing the financing provision by more than 51% to bring it up to QAR 915 million. Especially in the Q2 with no major incremental NPL formation, majority of the provisioning was allocated towards Stage 1, building up the balance sheet strength. The net profit for the first half of the year was QAR 1.595 billion, up 11.8% compared to first half of last year. Looking specifically into second quarter, the second quarter profit of the bank was QAR 845 million compared to QAR 739 million in the second quarter of 2020. That is up 14.4%. And if you compare to the first quarter of 2021, the growth represents almost 12.7%. So in summary, we can say that the QIB continues to maintain a stable and healthy performance and hopes to continue this as we keep going forward in the year. I think I've finished presenting the synopsis of the bank's performance. Happy to take any questions.

[Operator Instructions] We will take our first question from Edmond Christou of Bloomberg.

This is Edmond Christou from Bloomberg Intelligence. I have 3 questions, please. The first one, how do you see the cost of funding progressing in the second half of the year, given the internal target, I believe, for the LDR is around 100% or you want to keep it at 100% or below? And how this is tied up with the credit growth outlook for the second half? If I understand correctly, 1Q -- the 5% growth sequentially in 1Q was driven by last year pipeline. So how do you see the rest of the year evolving in term of the public sector growth and demand? The second 1 is, I was a bit surprised to see RWA growing 3.5% sequentially in the second quarter. I usually compare it to the earning asset base. And this is higher than earning asset base. On the other hand, the exposure to public sector has increased. So you will expect that there will be less consumption of capital. So what is the reason for the 3.5% increase in the RWA, if possible? And the last 1 is what is the percentage of the total loan exposure that was subject to deferral? And I still struggle also to understand why you are keeping the high -- the provision buffer -- very high provision buffer on Stage 1. If I compare to the 1 you have, 1.8%, the industry is around 40 basis points. So why are you not building a buffer on the Stage 2? You're building it on Stage 1.

Edmond, thank you. If I look at the questions, I could not struggle to find where 3 questions are. I could get more than 4 or 5 questions. I will try to answer whatever I can remember. So the first question, I believe, was related to the funding cost, where do we see the funding cost going? I think we have continued to work towards maintaining a healthy funding profile, but we can bring -- keeping our loan-to-deposit ratio at -- or the financing-to-deposit ratio at a fairly healthy level. We continue to work on diversification of the deposits as well as we would time to time, depending upon the market condition, look into even the wholesale funding markets as well. Overall, we believe that a large part of the -- or if not majority of the portfolio of the funding book has already repriced. So we do not see any major reduction in the cost of funds coming from the existing book. However, as we continue to diversify, as we continue to have more depositors, especially the nonresident deposits coming into the market and improving the liquidity, there could be some room in the overall deposit costs going down, but not significantly. I think that your second question was related to asset growth.

RWA.

On the RWA, it is a question of the mix of different assets that are there. And it would be sometimes, yes, you could see that there -- we had a growth in the public sector lending. But there were growths in other sectors as well, and that would really change a bit of the mix going -- as we keep going, okay? So there is no specific reason per se, just more about the change in the business mix. The third question you had, I think it was, say, percentage of some total kind of exposure, something you were asking me on that. I...

Yes. Percentage of the total loan that is subject to deferral and why you are building a buffer on Stage 1, not on Stage 2, despite having large Stage 2 exposure?

Well, in terms of the total percentage of total loan exposure, there has been no change. There are no new cases that are being added to the loan deferral program. It is the same set of customers that continue to enjoy the deferral. So there is no major change. It's about QAR 3 billion roughly that we had mentioned to you. That is the same number, around QAR 3 billion is the portfolio that is under the deferral program. In terms of the provisioning, I think as we had mentioned in the past as well, Stage 2 and Stage 3 get more driven by the customer-specific behavior based on the fact that what is the individual credit quality of the customer, what is the underlying collaterals that we are holding, et cetera, we are fairly comfortable with the level of provisioning or the level of ECL that we have built under the Stage 2. And we really do not believe that there is a need to significantly increase the coverage. So that effectively leaves that we continue to build the incremental ECL under Stage 1 with a very specific objective that this would allow us to reallocate them to Stage 2 or Stage 3, if there be specific pressures building on the asset quality under those stages.

Okay. This is very clear. Just a follow-up on the first one. With possible earlier increase in the Fed rate, do you see the nonresident deposit become more expensive on the cost of funding?

Well, if the interest rates are going to go up, it is going to go up across the board and it is nothing specific to 1 type of deposit or not the other type of deposit. From what the indications we get and is to say is that we are not expecting any increase till 2023. So I think there's still some way to go based on what the current market is projecting. So I would not say that there are any impending risks, at least for the second half of the year, related to the increase in interest rates.

We will now move on to our next question from Aybek Islamov of HSBC.

I wanted to ask you a couple of things. First 1 is, well, many Qatari banks -- they mentioned that they're active in the public sector. And if you look at the loan growth, everyone is growing in the public sector, including yourself. Is there some sort of differentiation, so to speak, within the public sector business for Qatar Islamic Bank? Are there particular projects in the public sector you specialize in? Or do you deal with particular GREs compared to, let's say, Commercial Bank of Qatar or QNB, et cetera? Could you just give some color on this landscape in the public sector business? That's the first thing. The second thing is the interest income in case of Qatar Islamic Bank continues to impress from 1 quarter to another. It's quite strong, right? And I believe it's your proprietary pricing model, how you price loans. But if you take an assumption that interest rates are going to stay for long very low, will there be a point where your yield on loans may decline, right? So I want to know about repricing of your loans. How longer it will take to reprice your loan book? And that's it.

So going to the first question in terms of is there a differentiation of the customers within the public sector? Well, no, unfortunately not. We all compete with the same set of customers out here, unlike some banks that predominantly focus on public sector and have got certain GREs, et cetera, they deal with. We have been working with all the different areas, so which would include both directly the government, government-related entities, semi-government related entities, et cetera. So no, there is no specific, let's say, subsector within the public sector that we are focusing on. We focus on all areas, including whether it be directly to the government, whether it be the hydrocarbon-related projects or whether it be through other government initiatives, et cetera. So nothing on that front. Answering your second question in terms of -- it's very interesting that one -- your previous colleague asked me about increasing interest rates suddenly, and you are now asking me about a prolonged reduction in interest rate. But yes, I would go and say, well, so far, for the time being, we believe that it is not purely related to the proprietary model that we have. It's also related to the way those financings have been structured. I think we feel that there is no immediate pressure on the net interest margin or the net profit margin at this point of time coming from the repricing. However, there are always cases where we do -- as we have been telling you in the past that we do accommodate certain customers, depending upon our relationship, the business profile, et cetera. So yes, there is no such specific factors that come to my mind that could have a direct impact on the net profit margin that we have. But yes, we are cognizant of the fact that there are situations where clients are approached by other banks offering them attractive terms, et cetera. However, we try to see that in cases how we can retain them, et cetera. But in general, we are fairly comfortable with the net profit margins that we are seeing at this point of time. While our income have -- if you look at it, but the primary driver has not been the asset yield, but it has been more about how we've been able to control our cost of funding.

We will now move on to our next question from Chiro Ghosh of SICO.

This is Chiro Ghosh from SICO Bahrain. We see that in most parameters, you are kind of outperforming your peers in the GCC market, so not much to ask on that. Just want to get a sense of how sustainable these things are. So if you can throw some light on how sustainable is your cost-to-income ratio. It's extremely low compared to peers, which is good, but how sustainable it is? Similarly, loan growth -- these kind of loan growth for our models going forward, how sustainable would that be? And only 1 thing is about the noninterest income. That seems to have tapered down a bit. So do you expect it to rise back?

So going -- answering your 1 question after another, so I'll take the first 1 on the cost-to-income ratio. So if you see that it's -- our cost-to-income ratio has benefited from the fact that our revenues have been growing and revenues have been -- I would say, operating revenues have been growing, let's say, asset yield minus the cost of funds. That have gone up. While at the same point of time, we've been able to contain our cost -- operating cost. So I think the -- if you will see that our cost-to-income ratio has again marginally gone up in second quarter compared to the first quarter. That's predominantly driven by the fact that what -- the point that you mentioned in the sense is that the fee and the ForEx income had come down, and that's why bringing down our operating income. But in general, we are fairly confident that we should be able to maintain our absolute cost base at within fairly manageable levels. There are different initiatives that we continue to do, including investing in human resources, investing in technology, et cetera. But we try to make sure that those investments are bringing in efficiencies to be able to control other costs that could be there. So well, I would not be able to give you a absolute guidance in terms of where we see our cost-to-income ratio. But I believe if we are able to maintain anywhere up to 18%, 19%, we should be fairly comfortable at those levels. The second question that you asked was on the fee and the FX income. I think I'd already mentioned in the first quarter results that please do not take a quarter-by-quarter view because there are fee income that could be, let's say, transaction-driven, et cetera. And in those cases, you could see some quarters it can be improving. And in some quarters it may not be that great. But in general, if you look at the overall trend, I think in the first half of the year, we still are above last year by about 13.2%. So we still see a healthy growth in the fee and for fee income. If we look at it, 13.2% growth I talked to you was about the fee income. ForEx income has also been pretty strong. So I would say that, yes, the levels are showing the positive trends. However, please do not read into quarter-by-quarter number too much. Is there any other questions...

Sorry, 1 part you missed is the loan book. I mean, what kind of loan book growth...

On the loan book, as I said, I already mentioned in the beginning on the overall industry trend, right? So I don't think so that we are doing anything significantly different than the industry trend. If you would see in the first half of the year, the public sector growth has been very strong, while the private sector growth has still been strong, I would say, 4%, 4.5% for 5 months. So I think I would say, roughly around 5% for the first half of the year, if I can extrapolate marginally. So in general, the growth has been there. I have always mentioned that public sector credit is very difficult to project, given the fact that, at any point of time, you could see a sharp reduction as we have seen in the past as well. That if government goes and does its own asset liability management exercise going and tapping into the market, et cetera, then you could see them coming and repaying their domestic facilities. However, from -- if you ask me my personal opinion, looking at the trend, we saw that -- which is the trend that we are seeing in the GCC capital markets is that the national champion, which is basically the hydrocarbon companies, are now going to the market rather than government going directly. So we'll have to wait and watch that now with QP raising these funds to see whether they are channelized in some form to the government and they end up repaying the financing or whether this financing or the borrowing that they have done will be used directly for their own expansion purposes, which looks to be more the case rather than what I was mentioning. So unless and until we see government going back into the market again and raising debt externally, I would not say that we would see this kind of growth again, but I would say whatever we would have seen, I think, a large part of it would be maintained until the end of the year. Does it answer the question that you're asking?

Yes. Yes, it does. So overall, you're seeing -- still seeing reasonable appetite for the rest of the year?

I would say we still maintain that in -- there could be some pockets of repayments coming from public sector that could pull down the growth. I would say we had started the year giving indication of about 4% to 5% or 5% growth in the credit book in the industry. I would now take it to somewhere 8% to 9%. Maybe we could end up higher. But we tend to always work on a more conservative models rather than on -- looking for some continuous high level of growth. I think we have -- we see ourselves as a management team and the bank whereby we work towards more moderate growth rates. And if something better happens, we will benefit. But we want to be working more towards the fact that the growth will be more moderate rather than more strong compared to what we have seen.

We will now move on to our next question from [ Meet Hath of Axioms ].

My name is [ Meet ]. So my question is again on the loan growth side. So if we compare the sequential loan growth for Q2 '21, it is around 1.5% Q-on-Q. And it is lower as compared to the past 2 quarters, which was somewhere around 5% in Q4 '20 and Q1 '21. I just wanted to check what are the reasons for this lower growth rate. This is my first question. My next question is with regards to the ECL. So basically, it looks like you have transferred a part of the Stage 3 ECL into Stage 1 during Q2. So should we expect a similar trend going forward?

So [ Meet, ] answering your question in the sense is I think it would be extremely difficult for me to comment if you are looking into quarter-by-quarter growth and asking me to give reason. But one of the reasons that we had given in the Q1 is that we had seen a high level of growth in Q1 because we had a lot of carryforward from 2020 that were more, let's say, booked in 2021. So that gave us a bit of the benefit in the first quarter. I would say, second quarter, 1.5% is more for a normal growth, and we are happy to take it if it keeps coming on a sequential basis from now until the end of the year. So we are definitely not worried in terms of the kind of growth that we've seen in Q2. We are fairly happy with that one. Answering on the ECL, I don't think so that we've moved anything from Stage 3 to Stage 1. So I'm really not able to properly understand your question. Only thing I can say is that, yes, there were no major new NPL formations in second quarter. So majority of the ECL charge that we took in Q2 was allocated towards Stage 1.

Understood. Understood. Just 1 last question. So value -- when you lend money, is there any benchmark? Or is there any threshold net profit margins which you have in your mind below which you will not lend?

There is -- you never work on absolute targets. You have to look into the kind of customers that you are dealing with, what is the tenor of the loan, tenor of the facility, et cetera. No, it would be completely, let's say, impractical even to implement as well if I go with some floors that I need to work on. Yes, there are certain guiding parameters depending upon the risk profile of the client and the kind of facility, whether it be in terms of the currency, whether it be in terms of the maturity profile, be it in terms of the type of collaterals. But yes, it's a -- at least on the corporate side, et cetera, they tend to be judged on each individual basis, at least, especially on the big ticket ones. In terms of the retail side, they're all driven by the caps that are already in place established by the QCB. So yes, however, what we do is -- what we tend to see is that in terms of our retail side, we -- our large part of the portfolio tends to be booked around the higher end of the rate, higher end of the caps there and not -- with no significant, let's say, reduction compared to the caps established by the Central Bank.

We will now move on to our next question from Vikram Viswanathan of NBK Capital.

You had mentioned that you have around QAR 3 billion of exposures, which have been deferred. My question is what proportion of this QAR 3 billion are facing repayment issues and, therefore, expected to migrate into Stage 2 and Stage 3 over time?

Well, Vikram, I don't think so that anybody has a clarity in terms of what would be the problem he would be facing. I could only find out if he is a problem when -- if the amount is due and he's not able to pay, right? As of now, he is benefiting from -- these people are benefiting from the government program. So we will only find out when the moratorium ends and when they have to start repaying it to see whether they are able to repay or not. But in general, if you look -- if you go by the way the overall economy is performing, I would see many of them or, let's say, more -- I would say large part of it, we expect that are not facing any systemic issues but are benefiting from the support that is being extended by the government. However, we'll only find out when we cross the bridge, right?

Okay. Okay. No, the reason why I'm asking this is some of the regional banks, they had tried to split the deferred exposure into 2 parts. One is group 1 and group 2. And group 1 loans are those loans -- those customers who are facing temporary issues in repaying loans, whereas group 2 set of customers are those customers who may face a permanent issue in repaying loans, which is why I was trying to find out what proportion of these are temporary and what proportion is permanent. But clear. You're right.

Yes. But Vikram, you may be talking about jurisdictions where the different programs have finished. And now they are already in the stage where their people are required to repay and are not able to repay. But we, as in Qatar, they are -- we are still in the situation where they are still benefiting from the government program. So it would be extremely difficult for us to really judge or even to prejudge, I would say. I would not say judge. I would not like to prejudge any or preempt any issues without actually realizing what they are, right?

Okay. And when does the program end?

September -- 30th September, for the time being. We need to -- we've seen government extending it quite more than 2 to 3x. So as of now, the date is 30th September.

We will now move on to our next question from Belal Sabbah of Jadwa Investment.

I'm hoping you could give us some feedback on how much growth opportunity remains from infrastructure spending on the World Cup and other government projects until the end of 2022.

Well, I think if you ask honestly, in the sense is the government -- the infrastructure-related projects related to 2022 World Cup are almost coming to an end. I think what is left is the execution bit of it and nothing much, if I say directly from the banking sector perspective. I think whatever the financing, et cetera, would have been done is majority has already been done. So I don't think so there is much coming from -- much left from the 2022 World Cup bit of it. What you could see is more now coming is operating expenses for the -- even rather than infrastructure-related expenses coming in. However, as I said, the growth story for Qatar is not limited to 2022 World Cup. That's just 1 of the milestones. I think it's the 2030 vision and the government plan to significantly increase the LNG capacity by almost 50% to 60% by 2024, 2025, by which -- so I think those are the key drivers. I think 2022 is more of an event that anybody in Qatar would just want to watch and enjoy rather than something that would really give a growth at least to the banking sector.

Right. And is there any update on the FOL situation? And is there kind of like a time line that you expect it to be concluded?

For which one?

For the change in foreign ownership to 100%. When would that be fine?

Well, in a sense is we are working to get -- to change the foreign ownership limit. We need to hold an extraordinary general assembly meeting. So we are working on it. Given the fact that this -- we are now coming to the summer season where a lot of people would be traveling, we are trying to find out what is going to be the most appropriate time. But all the necessary internal approvals and et cetera have been taken -- have been done. We are just in the final stages of getting the agenda, et cetera, to be approved by the ministry, et cetera. Having done all the things, then we will find an opportune time to hold the EGM. So I would say it should -- we expect it to conclude it in the third quarter.

Right. And is there kind of like an updated time line from authorities because I believe it's still a draft law that still needs final approval? Correct me if I'm wrong.

Yes. The law is a draft law, but even there are -- let's say, even the existing law does allow you. It was just a question of how we are going to work on it. So as I said, so we are working on the few aspects of it. I think passing of the law would -- let's say, in completion would really help, but that's not a hindrance at this point of time.

Right. So all you would essentially need the approval at the EGM that would, in theory, be sufficient to push through with 100% FOL?

There are certain other steps that need to be taken as well, right? So there are some -- we need to go and have our Articles of Association updated, et cetera. So there are a few legal steps that need to be carried forward beyond the EGM approval. But the primary aspect is that, first, we need to have the EGM being held, right? So we are working on it to find out what will be the most suitable time from the bank's perspective to hold that. And as of now, we are targeting any time before Q3. If not, maybe it might go -- drag into Q4, but we are definitely hoping it will be finished before the end of the year.

We will now move on to our next question from Waruna Kumarage of SICO.

I have 2 questions. The first 1 on the nonresident deposit the points you alluded to earlier that nonresident deposits have started rising. What would you think would be the optimal level of these deposits will be? Because right now I think it's reaching around 30% level. Do you think what -- on your opinion, what would be -- like the healthy and optimal level for nonresident deposits for the system?

I think you would say that I believe that the current level is a fairly healthy level. I think definitely, if we see that the deposits continue to go up, that could be well, let's say, the rating agencies, et cetera, may not like it and may consider it as a risk. So at some point of time, I think each organization will have to look into their portfolio and try to say what is the optimal level for each individual banks. From our bank perspective, I can tell you the number of the various measures that we have taken to make sure that we are not exposed to serious systemic risk coming from the nonresident deposits is that we have established limits in terms of counterparty, in terms of country, in terms of maturity in each month, et cetera, and have been clearly provided to our treasury and funding desk, so that we ensure that we are not exposed to significant withdrawals. The target is predominantly to look into longer-term ones, et cetera. Yes, it comes with a little bit extra price, but I think it's not purely about the absolute level of external deposits. I think it's how each bank is going to manage those deposits is going to be more critical, at least from the individual bank perspective. On the system perspective, I would say we are almost around the levels where I think should be more optimal. It may go up slightly. I don't see it coming down significantly, but it may go up slightly, but I don't see it going up significantly as well. I think what you see more trend if you have seen in the recent past is that there are a lot more banks that are approaching capital markets, international capital markets or going on the syndicated borrowing, et cetera, which are more longer term to be able to ensure that there are no significant external funding risks that come in. But yes, answering your question, in summary, I would say, I think we are around that level, maybe marginally a little more room to go but not significantly more.

As far as entire liquidity concern, my question -- again, second question is, if you look at the last 6 to 9 months, the deposit growth has -- in system deposit growth has primarily been driven from nonresident deposits, whereas domestic deposits hasn't really grown. So is that something -- I mean going forward, do you see more liquidity coming from within Qatar? Why is that is kind of -- the growth has dried out from the domestic front?

I would say that you need to split the domestic front into 2 aspects, which is the private sector deposits and the public sector deposits. I would agree that the private sector deposits have kind of remained flattish, right, for at least for the first half of the year. On the rolling 12-month basis, they've grown by 1.5%. But if you look at on the public sector side, there has been a fairly healthy growth as well. If you see the public sector deposit, which constitute almost 40% of the domestic deposits or maybe slightly more as well, 40% to 45%, they have grown by almost 8.7% in the first 5 months, right? So it's not that there has not been domestic growth. There's not been much growth in the domestic liquidity. It has been. So if you look at it in a sense is that domestic credit has -- growth has been quite driven by the public sector and then as well as the domestic deposit growth has also been driven by the public sector. So if you look at it on a consolidated basis, yes, you could see the impact being marginalized, but as we all know that the large part of the liquidity in this part of the world in GCC gets driven by public sector. So if we continue to see a good public sector deposits coming in, we will continue to say, yes. And again, what it does is it's also a question of the fact that when you have these nonresident deposits coming in, it also helps in bringing down the cost of domestic liquidity as well. So in general, what you would see is that overall reduction in the interest rate level. So in a sense is we did see a sharp increase in the cost of funds following the significant withdrawal of deposits in 2017, et cetera. And that continue to remain in the domestic market for the time being. And then once now that the overall global liquidity situation has improved that we see more liquidity -- external liquidity coming back into the country, I think it's just helping the overall funding profile for the banks in general.

Yes. Okay. Yes. One last question, if I may ask, on the public sector, the demand for loans. The thing is, I mean, given the current level of oil prices and natural gas prices, the government is -- I mean hydrocarbon revenue, I'm not -- I think it's probably much better compared to the previous years. But yet the public sector is borrowing aggressively. I just want to understand. I mean, are these for infrastructure projects or are these kind of recurring spend? Or is it used for repaying any of the liabilities that are falling due? Do you have any thoughts on this?

It's a part of the overall asset liability management from the various, let's say, public sector enterprises, in general. So I would say I think most of the entities have enough funding to carry on their regular operating expenses. So I don't think so that given the overall, let's say, revenue profile and the asset profile of the country, I think they have enough to take care of the operating expenses. If you look at we are -- Qatar is 1 of the few countries that is consistently running on budget surpluses, right? So if you -- so it will be very difficult for me to say that they are running for operating expenses. So what you would see is that yes, they are borrowing for their infrastructure requirements and also for their own liability management. Part of it paying -- you go -- they go and repay during a point of time the external funding that is there. And then at some point of time, they would go back -- that's exactly what I was trying to tell in the beginning as well to say that public sector borrowings are very difficult to predict and project because the fact that they get driven by how -- what the opportunities are there and what is the overall plan for the sovereign as a whole, right? From our perspective, what we can say is that we've been working to build our share of public sector lending. And I think so far, we've been fairly successful over the last 3 to 4 years.

We will take our next question from Janany Vamadeva of Arqaam Capital.

I just have a quick follow-up on the FOL approval you just discussed. Just wanted to see whether I got it right. So say the draft law is not even approved as a final piece of legislation, but the banks approve it at the EGM and also amend their AA, do you think they can still go ahead and implement the 100% FOL or they still have to wait until it's sort of approved as -- passed as a final piece of legislation?

We're still trying to get all the aspects of it in place. As of now, we are working towards getting the EGM piece out. I think, as I said, we still have some little time before we can hold the EGM, given the fact that we are running -- we are going into the summer holiday break, et cetera, where a lot of the investors, et cetera, would not be available. So we would like to hold it at a point of time where it makes sense. We've had discussions with various regulatory bodies out here, which would include the Ministry, Qatar Exchange, QFMA, et cetera, and just trying to work out how would we finally go about implementing it with or without the draft law being finalized. So I would not be able to give you the firm answer because I'll have to -- there are a few more steps to go through. But we see that it is not 100% essential for the law to be passed. There are ways and means by which you can increase, even within the current legislation. We are just trying to figure that out with the firm -- maybe by next quarter, I will be able to give you a firm answer if we have not been able to increase the limit by that point of time. But yes, we are working to see that how we can increase even within the existing laws.

Okay. So there is a chance, even if the law is not like passed, like finalized, still banks will be able to work around that?

As I said, this is what is the assessment that I'm gathering at this point of time. But as I said, the proof of the pudding is in eating, right? So I'll have to really go there and see how we can execute it. But there appears to be a way in which it can still be done. That's all I would like to put it.

And it appears we have no further questions over the audio at this time. I'd like to turn the conference back for any additional or closing remarks.

So thank you very much, everybody, for joining us today afternoon. Hope to meet or catch up with all of you again next quarter. If anybody has got any follow-up questions, please do write to us either to me personally or to our Investor Relations Officer or the Investor Relations dedicated email or whichever way you would like and we'll be happy to answer you. Thank you very much. Bye-bye. Have a nice day.

Go ahead, sir. My apologies.

No. Thank you. You can conclude the call now.

Thank you, sir. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Thank you.