Qatar Islamic Bank (Q.P.S.C.) ($QIBK)

Hello, and welcome to Qatar Islamic Bank. Please note that this call is being recorded. [Operator Instructions] I would like to hand the call over now to our moderator. Shahan, please go ahead.

Thank you, and hello, everyone. I want to welcome you to QIB's First Quarter 2026 financial results conference call. So on this call from management, we have Gourang Hemani, the bank's CFO; Vinay Balakrishnan, Head of Business Reporting and Budgeting and IR Officer. 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 Vinay. Please go ahead.

Thank you, Shahan. Good afternoon, everybody, and welcome to Qatar Islamic Bank's Q1 2026 Results Call. Qatar Islamic Bank yesterday announced financial results for the first quarter of 2026. Net profit attributable to the shareholders amounted to QAR [ 96 ] million for the quarter ended 31st March 2026 which is at the same level as compared to the quarter ended 31st March 2025. Total assets of the bank have reached QAR 224 billion, representing a growth of 5.9% versus the first quarter of 2025 and 1.3% against December 2025. Financing and investing activities continue to be the primary drivers for the asset growth. Financing assets have reached QAR 146.4 billion having grown by 11.1% compared to 31st March 2025 and 5.7% compared to 31st December 2025. Investment securities have reached QAR 60.7 billion, having grown by 14% compared to 31st March 2025 and up marginally against 31st December 2025. Customer deposits stands at QAR 140.7 billion, registering a growth of 5.4% compared to 31st March 2025, but marginally down by [ 1.4% ] against 31st December 2025. Financing-to-deposit ratio was [ 94% ] as at 31st March 2026 compared to QCB maximum requirement of 100%, reflecting the bank's strong liquidity position. The net operating income of the bank after the net profit attributable to equity holders is QAR 1.6 billion, which is at the same level of Q1 of 2025. Total operating expenses of the bank was QAR [ 277 ] million for the quarter ended 31st March 2026, which is higher than 3.1% as compared to Q1 of 2025. Strict cost control measures have helped to keep the cost income ratio at 17% for Q1 of 2026 compared to 16.6% for Q1 of 2025, which continues to be the lowest in the Qatar Banking sector. On the asset quality front, QIB was able to manage the ratio of nonperforming assets to total financing assets at 1.56% and maintain a healthy coverage ratio for nonperforming financing assets to 95% as of 31st March 2026. The bank has continued to build up impairment provisions of QAR 236 million in the Q1 of 2026 compared to QAR 247 million in Q1 of 2025. The bank was able to improve its Stage 2 financing coverage ratio to 9% as of 31 March 2026 against 8.5% as of 31st March 2025 and maintaining its Stage 1 coverage ratio at 3%. These actions taken by the bank reflect the bank's strong risk management framework as well as a conservative prevailing policy. The bank is closely monitoring the evolving geopolitical situation, and is undertaking ongoing assessments to evaluate potential implications on its operations. The capital adequacy ratio of the bank completed under the Basel III guidelines issued by Qatar Central Bank is now at 22.9% as against 22.2% as at 31st December 2025. Having taken you through the key highlights of the financials, we can now go on to the Q&A session. I'm handing over to Shahan. Thanks.

We can now go to Q&A, please.

[Operator Instructions] Your first question comes from the line of Jon Peace with UBS.

I just wondered, please, if you had any updates to your guidance. I think at the beginning of the year, you were hoping to see financing and revenue growth of around 5% to 6% alongside a flattish NIM and cost income ratio around 16.5% to 17% level. How do you feel about those now? And in particular, how do you see the cost of risk? Do you think you'll be able to use your high level of Stage 2 provisions to manage that to be relatively consistent this year?

Good day, everybody. Gourang Hemani here, the CFO of the bank. In terms of the guidance, I think we continue believe that, thankfully, we have achieved in terms of the balance sheet growth, et cetera, a large part of the growth that we had forecasted has already been achieved. In the first quarter, our financing growth, excluding the acceptance bit of it. So the real financing book has grown by roughly around 4.75% for the year. And compared to March of last year, it's grown almost 5% compared to the headline number, which is about 6%. So overall, I think the balance sheet growth we have achieved quite decently. We may expect some slowdown as we keep going into the year, but that should still put us in line with what we expect to achieve in terms of the balance sheet growth in terms of the overall funded income growth. I think as of now, we have seen a bit of the impact in the Q1 that came because of the cost of funds. We continue to remain prudent and continue to maintain high liquidity in this scenario and slightly impacting our cost of funds and a bit of the NIM but we believe that this is more transitory. And as things normalize, we should be able to continue to maintain what is our annual forecast. However, it's still a very evolving situation, and we'll keep monitoring. I think as we go into Q2, end of Q2 kind of a scenario, we'll have a much more clarity. In terms of cost of risk, as we have mentioned, that we have been very adequately provided. However, if you have seen that, given the fact that all the uncertainties that are prevailing, we continue to remain prudent, and we have, again, built provisions in the first quarter of the year marginally below the last year levels. But we thought it is prudent to continue to build. I think we build provisions of financing provisions of QAR 236 million in the first quarter compared to QAR 248 [ million ] last year. So almost in line with previous year, marginally lower. But I think we continue to remain a very conservative bank. We want to continue to make sure that we don't want to impact the profitability as we get closer to the year, the asset quality impact will become much more clearer as we go into Q3, Q4. So far, we've not seen any major impact. There were certain initiatives taken by the Central Bank in terms of the payment deferrals for 3 months, et cetera. We've not seen a big number of customers approaching us so far. So far, it looks to be fairly well managed. We'll keep evolving. I think the cost of risk is something that we'll get a better clarity as we get into Q3 and Q4, but we remain prudent and conservative at this point of time.

Your next question comes from the line of [indiscernible] with SICO.

So I have three very quick questions. So first one is, it looks like the NIM pressure has continued. So last quarter, you were saying that it's primarily related to the acceptances. And excluding acceptances, the NIM was still reasonably resilient. So if you can again tell us where does it stand excluding the acceptances part in first quarter? That would be my first question. And also if you can give us some guidance on the NIM sensitivity for a 25 basis point annual movement where you stand. That is my first question. Second is fee income appears to be having a little weaker than what we were expecting. If you can give some color on why is that happening. And third is, again, a little continuation on the previous question is purely on the loan book side of it. Are you seeing any pressure basically a tapering demand from the appliance side, a lower demand form the loan -- from the borrowing side? These are my three question.

On the NIM side, as I said, if I look at my [ 2 in 1 ] financing minus deposit NIMs excluding acceptances, it came to roughly around 3.2%, almost in line, I think, maybe marginally less than 1 basis point impact out there. If I take all my assets and everything -- can somebody put their -- on their -- mute, please. I see a lot of background noise coming. Thank you. Yes. So in terms of the overall NIM, I think there was overall a reduction by 1 basis point, but that's purely because of the fact that we decided to, say, pay a little bit more higher in this scenario and to continue to manage strong liquidity position. So I think that's -- I believe that's more transitory in nature. So overall, the NIMs have been in stable with vis-a-vis Q4 of last year. In terms of the fee income, yes, they've come marginally lower. I think a lot of it has got to do with the fact that with almost one month of lower economic activities, especially in especially the international spending a bit of it, et cetera. That has been a bit of an impact on the fee side of it. But other than that, I think it's -- some of it also in terms of the financing book, et cetera, the upfront fee was -- has come slightly lower. But I think a lot of that has got to do with the fact that it's -- we are in a bit of a scenario where the economic activities have been a bit slower. Once things normalize, we expect them to pick it back all over again. In terms of loan book tapering demand, I think we just finished the quarter, as I explained to you that we have seen our loan book, excluding acceptances has grown by 4.75% to 4.74% compared to December, which is a very, very healthy growth, I can tell in this market. I think if you ask me personally, our Q1 growth has been higher than what we were expecting to happen. A lot of it is carry forward of what was there in pipeline last year. We'll keep seeing, we'll keep monitoring. As I said, our targets have -- we still maintain the growth target of 5% to 6%. So we are well in line with the plan.

Just a follow-up question, sir. International deposit outflow?

There has been hardly any international deposits outflow that has happened compared to what we have seen before. So most of the deposits have been renewed, if I can put a number to it, our total deposits at the end of Q1 was 87% of our -- at 13% outside the country as compared to 12% at the end of December. So our nonresident deposit share has actually gone up compared to December. [indiscernible], there's a lot of noise in your background. You need to keep on mute when you're not questioning.

Your next question comes from the line of Murad Ansari with GTN.

Thanks for the presentation. And so a few questions. I'm sorry, I joined a couple of minutes late so you might have addressed a couple of points here already. But firstly, on loan growth. So you're saying ex acceptance is about 4.75%. So that's roughly about QAR 1.6 billion, QAR 1.7 billion in this quarter, that's incremental, that's coming, if you could confirm roughly the number? And would that be again reflected in the retail portion of the book because that's also increased versus the last quarter. So that's my first question. Second question is...

Just let me answer that one. It's QAR 6.6 billion excluding -- it has grown from QAR 140 billion to QAR 146 billion, excluding acceptances. So it's a QAR 6.6 billion growth, not QAR 1.6 billion growth.

No. I understand. I said that the retail -- sorry, the acceptances that has increased...

Yes, that's [indiscernible]

And that would be reflected in the -- within the segment split and the retail part of the book. Would that be correct?

No that would be splitting in the commercial.

Commercial. So then we've seen some growth on the retail side as well, if you could just maybe say -- give us a high level overview of what you think have been the drivers there? And is this more sustainable?

The personal banking book has grown by roughly around QAR 1.2 billion, which is like a normal growth that we kind of achieved. We usually tend to see a larger growth at the beginning of the year. So the personal banking book has grown by QAR 1.2 billion, and then the rest of it is all coming from different segments, including contracting has been almost flat. So it's real estate, commercial services, et cetera. So it's a mix of different loan book segments.

All right. And just on these acceptances. If I remember correctly, I think you mentioned last quarter as well, but these are generally -- the acceptances growth are also matched by deposits. So the current account increase, is that also a reflection of these acceptances?

Current account is operating accounts. So the deposits would be sitting in what we call the Quasi equity. So that's where it sits and they would be sitting more -- if you look at somewhere our maturity profile, you will see that they're all sitting predominantly in over 3 years category deposits. These are predominantly those deposits. All these deposits are taken by the bank on a very timely basis with a 7-year maturity giving -- putting -- helping the bank significantly have a very stable nonresident funding book. That's all I can say.

All right. And just on the tax -- sorry, just before that, on the deposit side, you've raised $750 million in February. And when we look at your deposit split, there has been a decline in your term deposits increase in your current accounts. Any linkages here? I mean, did you consider dropping -- reducing your term deposits because of the Sukuk inflow?

[indiscernible], right? When you are managing the funding, you don't look at it on a silo basis or a product basis right, you look at the overall funding profile of the bank. We had a very healthy growth in the current accounts, which are the low-cost deposits. So that gives you an opportunity to pay off expensive deposits. A lot of the Sukuk funding was eventually used also to fund the loan book that -- loan growth that had happened in the first quarter. And the remaining was used to pay back deposits. we paid back some of the short-term NRDs when -- through -- using the Sukuk funding as well.

Great. And last question is you might have mentioned this at the start, just on the taxation front. So you restated the last year's provision into tax and you split that up and this quarter, you've booked a tax charge. Would you -- I mean, can you help us get a view on how this is going to progress? My understanding would be that you'd be applying for an exemption on the GMTT rules per transition period? Is that going to determine how long that...

So just to say that beginning of this year, they published the final executive guidelines, where they have said that everybody has to pay a global minimum tax unless -- and they've given the authority to minister of finance to come out with an exemption if it is. So as of now, we are not aware of any exemptions that are in the pipeline or planned or nothing has been announced yet. So we will continue to build the tax as if we have to pay the taxes. So we'll -- I really would not like to comment whether those exceptions are going to come or not going to come. We are given the fact that there is no official announcement from the Ministry of Finance under the signature of his Excellency, Finance Minister, we assume that we are taxable and we continue to build taxes. The only way out would be for any entity, would we, at this point of time, is if you are able to restructure your businesses, et cetera, whereby you are -- you come out of the taxation guideline, which effectively means you do not have any international presence only in this scenario, you don't pay taxes.

The next question comes from the line of [ Rahul Rajan ] with Bank of America.

A few quick questions from my end. Firstly is on the Central Bank measures, you mentioned that a lot of clients have not really come forward for the [indiscernible] at least until March. Could you also highlight some of the other aspects of the measures in terms of liquidity or in terms of lower capital requirements or some of the other measures, which has announced and how it sort of positively or negatively affects your business? And until when do you think these measures at least the ones you have been announced now until when are they applicable? That's number one. Secondly is on the credit growth perspective, you mentioned you would still stick to the 5% to 6% loan growth sort of a target and we are already at around 4.7% if you exclude the acceptances. So which means from now until the end of the year, next 3 quarters, it's not really a lot of growth or flattish. So why do you have -- or why do you think so? Do you expect more repayments? Is there any specific sector on that sense? And lastly is on the post-war scenario, how do you see credit growth evolving maybe based on government spending based on certain industries? Is there certain industries from whom you think there would be a stronger credit growth? Yes, those are my three.

Okay. The first one, there are two4, I would say, two primary central bank measures that have been announced. First of all, being the 3-month relief for moratorium being given to impacted customers, that's one. As of now, it's just a 3-month announcement. So I -- there is -- unless and until Central Bank comes with a revised guideline, we will assume that it remains what has been announced. The second big measure that has really helped the banking system is a reduction in the reserve requirements by 1%. So that has really helped improve the Qatar real and dollar liquidity in the system. And also basically coming in positively will have a positive impact on the bank's profitability because these were all let's say, profit free placements or the reserves that were there with central banks. So that also has a bit of a benefit. Other than that, it's more about guidelines and communications and monitoring of the positions by the central bank across the system to see where the impacts are, et cetera. Fortunately, from what we have been seeing so far and what we've been discussing I think the primary concern in these situations is the liquidity, but so far, the liquidity positions have been holding up, especially on the international funding side of it. So we're not seeing any much impact coming from there. Credit growth, I have put -- I agree with you that I've put 4.75%. I don't want to change any guidance because I think we are in a period of a bit of uncertainty. If things come back very quickly to normal scenario, I think we can see a better [Technical Difficulty] being from anybody rather than more repayments coming. So I think it's just that all I can say is I don't have enough information at this point of time as to when this uncertainty would end and what would be the post-war scenario looking like for me to be able to comfortably come in give new guidelines. I think maybe end of Q2, we might be in a better position. And that's the only reason we are not changing our guidelines, no reason what for anything else. I think on the third scenario, very difficult to put a comment in terms of where do I see the post-war scenario coming in where the growth could come in. I think a lot of it would depend upon how the public sector guidelines and the government guidelines change in terms of what their priorities are going to be and how does it have an impact going forward. I would refrain from commenting on what scenarios would be because I don't have enough information at this point of time to really be able to make any conclusive comment on this.

Sure. Very helpful. Just one follow-up, please. In terms of exposures, what would be the sort of exposure to some of the segments which are impacted? I see construction, real estate is mentioned separately. But apart from that, see the likes of travel, tourism or some of the other hospitality-related sectors or some of the other sectors which you think are more impacted during this time. What would be the kind of exposure and the coverage ratios for those sectors?

In the sense, right? So in the sense, yes, what you are mentioning in terms of the tourism and retail segments are the ones that are the other ones where especially the hotels and all would be there. But fortunately, I think we also saw a bit of a lull coming in post FIFA World Cup, et cetera, where the hotel occupancies had gone down, et cetera. But we saw that the sector came out quite successfully out of it. So I think these are more short-term impact. I really don't think so that there is going to be a major impact unlike some of the regional countries, I think, while tourism and all are key -- are important to the sector, but I think they do not carry that much weight vis-a-vis some of our, let's say, other regional countries which are more heavily dependent on tourism and other things. So I would say it is an area that we will continue to keep looking at it, both, I would say, hospitality and the retail side of it. But as of now, we are not significantly worried. I think domestic retail demand continues to remain fairly strong. We will -- as of now, we have not seen any major impact on the employment side sector, employment of expatriates, et cetera. We've not seen any major actions coming in. I think a lot of it is going to depend upon how long this is going to last and how quickly the bounce back is going to happen. I think still in the early phase. I think we need to cross the bridge to really be able to get an assessment of what is the medium-term to longer-term impact. As of now, as I told you, not very many customers have approached us to do any deferrals. So I think so far, so good. That's all I can say.

Your next question comes from the line of Olga [indiscernible] with Bank of America.

Thank you for hosting this call. I have two clarifying questions. One is on interest rates on deposits. During Q&A, you mentioned that you pay a little bit more on deposits, so what was the magnitude of interest rate increases in the first quarter, maybe in April as well? And my second question is on Central Bank support measures. This lower reserve requirements by 1 percentage point, will they also lower it or are they also lower for 3 months? Or is this until further notice?

Well, on the interest rates paid on the deposits, it is -- there's no major increase in the interest rates paid on the deposits because the domestic liquidity is still the [indiscernible] we've not seen a major outflow. What I mentioned was the fact that we tried to keep excess liquidity with us, and that has a negative carry impact that has got an impact on the NIM rather than increase in the cost of deposits. So we've not seen any major increase in the deposits. I think all banks are prudent in the system to make sure that there are enough liquidity windows also available with Central Bank in terms of the repo and other facilities so that even if there are any bank facing shorter-term liquidity issues, you have access to funding rather than pushing up the overall cost of funds. So it's more about negative carry from surplus liquidity you carry rather than cost of deposits. In terms of the reserve requirements, there is no time line. These are not time line-driven. Central Bank has the prerogative to increase or decrease the reserve requirements as and when they want. But as of now, they have been reduced without any indication that when they were going to be increased back again.

Your next question comes from the line of [ Ali Al-Nasser ] with [ Regent ] Asset Management.

I'm asking questions on behalf of my colleague, Dan. Just in terms of -- and sorry, if this may have been discussed, but in terms of just explaining the loan growth in Q1 and the pricing on that because the observation is it appears the pricing on that is kind of lower than what the exit rate was in Q4. Is that the right conclusion to draw? And if so, can you comment on why pricing would be soft on that book?

Well, it's the pricing softening on the -- compared to Q3 to -- compared to Q4 of last year, and this is more got to do with how the repricing of the rate cuts happen because it just doesn't happen. Maybe it is not an instantaneous cut in the rate. Similarly, if you look at it, the cost of funds also don't come down instantaneously. It's all about maturity and repricing profile. The new booking has not been done at, let's say, I would say, a significantly lower rates than what have been done in the past, maybe depending on the asset quality or the underlying risk, you do price it up and down, it depends on the party, but it is not a generic, I would say, a comment that the asset growth has come at a lower [ rates ]. I hope that answers you.

That does. So that suggests that if you think about NIMs for the rest of the year. And if you were to think about the idea that the Central Bank has lowered the reserve requirement by 1%, which you can deploy now. How do you think about NIM for the rest of the year?

[indiscernible], as of now, we should be able to hold the NIMs. I wish I had a crystal ball and I could recheck but -- so as of now, as I said, so far, the cost of funds have really not gone up. We really don't expect any major interest rate cuts in this scenario. So we expect the financing book to continue to hold the yields. So based on that, we believe our NIMs should continue to remain stable. If the liquidity improves or deteriorates dramatically, then it could be a different scenario. But I think if you have looked at almost 45 days have been -- more than 45 days have passed. And I think we are in a comfortable situation at this point of time. So I don't see it further worsening and now that we are much more better prepared, we see a lot more international deposits starting to come back via some of even the longer-term deposit players I'm sure if you are monitoring the market, if you look at it, there have been significant transactions on the capital market, but more on a private placement basis [indiscernible] side, you have sovereigns like Qatar, Kuwait, Abu Dhabi, they've all gone into the market. National champions in almost every country like QNB, [indiscernible], ENBD and [indiscernible], they've all gone into senior or even in the Tier 2 space. So I think if you look at it, yes, is international funding as easy as it was in the -- prior to the war? No. But has it completely dried up? I would say, no, if I take a quick count of it, I think in the last 45 days or so, there will be more than $10 billion to $15 billion raised on the capital markets by the GCC sovereigns and the banks. Maybe I'm [indiscernible] the number, but I think it will be more than that. So I think everybody understands that the overall economies remain very strong. It is a bit of short-term challenges, which will be overcome. But I really don't think so it really impacts the medium-term to long-term outlook of the region in general or [indiscernible]

I got you. Makes sense. On the fees point, I appreciate what you said about March being, for obvious reasons, quite soft. But there's a clear disconnect between the loan growth that you've achieved and the direction of fees and commissions. So would you say most of the fees and commission softness would have come from non-loan related activities to explain that and payments and things like that?

Yes. Plus also a bit on the lending side as well because not every lending does command a fee, et cetera. So it's -- I would never look fee in isolation or at least on the financing book of it because -- it's -- sometimes it's always about all-in pricing when you take the fee as well as the rate that you charge to the customers.

Yes. I appreciate that. That makes sense. Last one is on the tax rate. Sorry, I know you answered this already, but you're expecting the same tax rate as you already realized in the financials in Q1. Is that right?

Yes. So we will continue to build unless some announcement comes. We presume that we will have to pay taxes for this year as well.

Okay. And that's about 11.5%. Is that right?

Something around that, yes.

Last question comes from the line of Murad Ansari again with GTN.

Just on the acceptance [indiscernible], do you see this as -- because when we saw that in the fourth quarter last year, I know it was more of one big kind of a one-off kind of transaction, but that's kind of continuing into first quarter as well. Do you see that something that will continue to grow over the course of this year? And just from a readability perspective, would you consider splitting it out from your loan book in the financials to show it separately from the loan book just to have in this [indiscernible]?

So Murad, in [ sense ] is the acceptances are purely dependent on the fact that first week get the deposits longer-term deposits and then we issue acceptances against those, right? So I'm sure you understand that there has been a bit of -- with all these geopolitical challenges that are there, there has been a bit of slowdown. We look into it. We are not again also going to overly rely. We may see. We saw some growth coming back in this segment. There are various set of niche depositors who we deal with, with strong liquidity and a strong business model in this format. So we might see something growing, but it will be slower, I think once the geopolitical situation evolves, you might see them coming back more. But until that point of time, it will continue to remain slow. In terms of showing it separately, I think if you look at it, it kind of give away if you look at my other liabilities growing up by similar context as well. So we will look into it. I think maybe we will try to see if we can put a note or something like that to clearly highlight how much the acceptances are. But I still will have to classify it as a financing because that's how the Central Bank disclosure requirements work out here. But your point is we'll see how we can improve the transparency, but this will have to be taken in line with auditors and how they look at it across the disclosures across the sector, right? It's not a QIB specific disclosure, it's [indiscernible] segment. So I think we'll try to see what we can do to improve the readability. But again, it's something that not completely in what the bank can do in isolation. It's likely to be coordinated with the auditors, who will have to coordinate across the entire system across the banking system in Qatar. However, we are very transparent. And when we come to these investor calls, we are very clearly highlighting what the growths are excluding and [indiscernible].

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

All right. If there are no more questions, we can wrap up this call. I'd like to thank management for giving us an update on the results, and we will pick this up again in the coming quarter. Thank you.

Thank you, Shahan. Thank you, Gail, for organizing the call. Thank you very much.

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