Qatar National Bank (Q.P.S.C.) (QNBK) Earnings Call Transcript & Summary

Good afternoon, good morning, everyone. On behalf of HSBC, I would like to welcome everybody to the Qatar National Bank's Third Quarter 2022 Earnings Conference Call. With no further ado, I'd like to hand over the call to Mark Abrahams. Thank you.

Thank you very much, Aybek, and HSBC team for hosting our call today. Before we begin, it's important to remind you that this earnings call is for investors and analysts only. And any media personnel, please disconnect now. I will begin by giving an overview of the macroeconomic environment, then I will cover QNB's financial results for the 9 months ended 30 of September 2022; and finally, open the floor to Q&A. Following the recovery from the pandemic, economic activity was gaining traction globally on the back of robust reopening demand. However, the global environment has taken a turn this year as excessive post-pandemic policy stimulus has given way to higher inflation and monetary tightening, which more recently has resulted in a marked slowdown in global growth. Geopolitical rows in Eastern Europe have added further uncertainty and volatility to the outlook. Supply chain constraints and geopolitical concerns have boosted energy prices and significantly propelled Qatar's fiscal and external revenues, further supporting the strong domestic macroeconomic backdrop. While the recent development signaled headwinds for the global economy and oil importers, it is a tailwind for commodity exporting economies, including Qatar. As a result, the economic recovery is in full force locally, while the banking sector remains resilient and healthy, presenting significant growth, ample liquidity, adequate levels of capitalization, high asset quality and robust profitability. Final stage of the preparations for the 2022 FIFA World Cup are driving strong growth in Qatar's nonenergy private sector. Indeed, the Qatar Financial Center's Purchasing Managers' Index or PMI has been indicating a strong expansion since July 2020, which reflects a significant uplift in business conditions. Kicking off in November, the 2022 FIFA World Cup, will be the largest sports event on earth and the largest event ever hosted in this region. This is expected to boost economic growth across the economy. The event will further contribute to consolidate Qatar's position as a regional and international hub of the business, investment, commerce, tourism and culture. In the medium to long term, tailwind for investment in increasing hydrocarbon production will drive economic growth with 6 new LNG trains planned under the flagship North Field expansion project, one of the largest capital expenditure projects in the region and industrial engineering projects in the world. This investment is expected to increase Qatar's LNG production by 64% to 126 million tonnes per annum, contributing to almost 1/3 of global LNG demand. The project will include an equivalent expansion of Qatar's refining, downstream and pet chem capacity. Positive spillovers from these projects will combine with diversification efforts and structural reforms to boost economic activity and spending in the broader manufacturing and service sectors. Qatar is, therefore, laying foundation for continued GDP growth over the medium and long term, through investment, diversification and stronger private sector engagement. I will now move on to QNB's financial results for the 9 months ended 30th of September 2022. Key financial results were as follows: with net profit before the impact of hyperinflation at QAR 12.3 billion or USD 3.4 billion, a robust growth of 20% compared to last year. The accounting for a noncash hyperinflation adjustment impacted profits. Nonetheless, and despite the challenging conditions, reported net profit after the impact of hyperinflation was QAR 11 billion or USD 3 billion, strongly up 7% compared to last year. Robust revenue growth has resulted in an increase in operating income to QAR 25.6 billion or USD 7 billion, up 24%, demonstrating QNB Group's success in maintaining growth across the range of revenue sources despite current market volatility. As a result of higher revenue growth, QNB Group has continued to reduce the cost-to-income ratio, downwards from 22.5% in the last year to 19.3% as of September 2022. Total assets are at QAR 1.135 trillion or USD 311.8 billion, up by 5% from the same period last year. Loans and advances reached QAR 763 billion or USD 209.6 billion. QNB Group remained successful in attracting deposits, which resulted in an increase in customer funding by 1% from September 2021 to reach QAR 794.4 billion or USD 218.2 billion. This improved the group's loan-to-deposit ratio to 96.1%. QNB Group was able to maintain the ratio of nonperforming loans to gross loans at 2.4%, a level considered to be one of the lowest amongst financial institutions in the Middle East and Africa region, reflecting the high quality of the group's loan book and the effective management of credit risk. In addition, the coverage ratio on Stage 3 loans is at 121%. Total equity increased to QAR 106 billion, up by 5% from September 2021. The bank's capital adequacy ratio at 19% is comfortably higher than both QCB and Basel III requirements. Before we begin the Q&A, though we welcome all questions in the interest of time, we would appreciate please if the questions are limited to a maximum of 3 per participant. For any further in detailed discussion on results, you may directly reach out to our Investor Relations team. Thank you very much. We will now turn to questions and answers.

Yes. Thank you, Mark, for your presentation. We would like to now start the Q&A session. So if you have a question, please raise your hand. [Operator Instructions] So we have the first question from Rahul Bajaj.

I have 3 questions, basically. The first one is on government repayments that we have seen through this year and just wanted to understand how is the management team thinking about the kind of flow of these repayments in the fourth quarter and into 2023. Should we expect these repayments to continue into the new year? Or do you think these would subside? And kind of linked to this question is how confident is the bank management team around lending momentum picking up post FIFA. Is that something that you are pretty confident about? So that's my first question. My second question is -- would be around 2023 again. So any expectations or kind of early guidance you could provide on how you see 2023 shaping up, that would be very useful, especially if I think about the margin trajectory, which has been quite interesting in 2022? How should we think about the 2023 margin trajectory also in the international business, especially Turkey, where margins have inflated quite a bit in 2022. Should we expect a normalization or you think this kind of run rate will continue? That was my second question. My third and final question is on dividends. How should we think about the dividend payouts in 2022, '23 onwards in view of this hyperinflation accounting. So will the management team recommend dividend post hyperinflation adjusted profits? Or will they -- since this is a noncash item, will they kind of adjust it out and then recommend the usual 40 -- around 40% payout. So that would be my question.

First question, government repayment. It will highly depend -- depending on oil prices. If oil prices continue to be at current level, we expect a continuation on repayment of public sector loans, especially on MOF. In terms of lending momentum, definitely 2023 will be better than 2022. We expected from the beginning of the year, and we have been telling investors that we think this year would be mostly focusing on finalizing the project that started in the last 3 to 5 years. And this is now happening. And 2023, we will see a new momentum of new loans coming to the system. So we are optimistic, and we have been in an extensive discussion when we were talking about the budget for 2023 in order for us to define the momentum that we expect in 2023, which I will mention when we talk about 2023 guidelines. Now I will talk about the dividend, then I will go back to the guidelines. Dividends payout highly dependent on the management -- on the board decision. It's very difficult for us to predict what's going to happen. But what I can say is that hyperinflation will not impact dividend. To us hyperinflation -- a noncash item, which should not impact dividend. Payout ratio will continue to be between the 35% maximum 45% of profitability, excluding hyperinflation. So nothing will change in terms of dividend or the payout ratio. In terms of the guidelines, and these are preliminary guidelines because we have not yet finalized the budget for next year. But in terms of balance sheet, I expect assets to be 5% to 7%, loans to be 4% to 6% and deposits to be 5% to 7%, profitability, 6% to 8%. Again, these are preliminary numbers and not yet final, but roughly, these are the guidelines that we can give today for 2023. In the phone call on December number, I will give a more updated numbers.

Thank you, Ramzi. So we have the next question from the line of Chiro Ghosh. Chiro, please unmute yourself and ask your question. Thank you.

Can you hear me? .

Yes.

Yes.

This is Chiro Ghosh from SICO Bahrain. I have 3 quick questions. The first one is we are hearing there has been a major currency devaluation that is happening in Egypt. So as of now, your asset quality has remained quite robust. So if you can throw some light on what would be the potential impact because of this? That's my first one. Second one is, in the past, you have said that the petrochemical project, despite heavy [chemicals] spending that's happening in Qatar, QNB won't be a big participant in this because the yields are relatively low. If you can throw some light, has it changed? Or what could be loan growth sectors, which will be contributing to your loan growth. And third one is I can see that as you have said, again, in the past, that the provisioning you want to build up on your Tier 1 and Tier 2 to -- in a favorable year. I want to know how much more can you build on your Tier 2 because it's already much better than most of your peers. So, these are my 3 questions.

Okay. In terms of the devaluation in Egypt, we went through this 5 years ago. And currently, the book is much better structured than what we have previously. As you know, in Egypt, the bulk of funding and deposits are in Egyptian pound. So the impact is different than Turkey if part of the portfolio is in foreign currency. So in Egypt into the devaluation, considering both sides of the balance sheet is in Egyptian pound, so the impact is materially less. However, in terms of NPL, definitely, it's something that we need to be careful about. We always worked hard to keep coverage ratio in Egypt more than 100% and this is where we stand now. It's something we will continue to focus on in order to ensure no surprises in the operation in Egypt. Loan-to-deposit ratio will continue to be at a modest rate, not more than 60%, again, in order to ensure that no major impact of any devaluation on the operations that we have in Egypt. North Field participation. Again, it really depends on the pricing. Historically, we participated in this project, but not in a very large amount, considering that the pricing of these loans were very, very low. And to us, we prefer to focus on ancillary projects around North Field expansion. These projects can provide to us a better margin. As you know, all banks in the world compete to participate in these projects. And that's why historically, pricing is very, very low. To us, considering liquidity, we prefer to focus on other projects surrounding this project. And from what we have seen in the early stages, in the previous expansion of gas production we were able to capture very good business from the projects that surrounded the expansion of gas production in Qatar. We expect the same this time. Provisions. Stage 2 now coverage is 11%. We moved from 6.5% in December to 11.1% in September. We understand that we are higher than most peer group, but our capacity to continue to grow Stage 3 provision is extremely limited. And that's why we will continue to focus on ensuring that we have enough coverage in Stage 1 and Stage 2. Cost of risk in September [ 104 ]. Do I expect it to be close to that number in December? Yes. We're still keen to ensure we have enough coverage to protect the entity. We fully understand all the challenges that the banking industry around the world is facing. We want to generate good growth in profitability for our investors. In the meantime, we want to be very cautious about the challenges that we have and to ensure that we have enough buffer in our provisions to protect the entity.

Thank you, Ramzi. Thank you, Chiro. We have the next question from the line of Waleed Mohsin. Waleed, please unmute yourself and go ahead .

Three questions from my side as well. And apologies if I've missed some of your comments on these. So first on the margin this particular quarter, it's interesting that the net interest income actually expanded in your domestic business. And the domestic business did well on that front. So if you could please comment on what's driving that. It was a pretty good quarter in terms of domestic net interest margin. . And then linked to this, in Turkey or the international business, we've not really seen much expansion despite that the environment in Turkey, in particular, has remained quite favorable. So if you could comment on the trends in the local and international business would be very helpful. Secondly, you commented on the loan growth expectations for next year. I was wondering if there's a scenario where repayments exacerbate and then there's somewhat of a delay in new projects. Do you anticipate it could -- there is a possible scenario where loan growth domestically could be negative driven by repayments next year? And my third and final question is your expectations for monetary policy in Turkey. I know it's a very difficult topic. But...

No one in the world can project this, Waleed

That's why Ramzi I'm asking you.

No, no, no. I can't give. There's no way anyone can project this. It's extremely difficult and complex situation. And that's why we go back to your question on Turkey expansion. Again, with all the change in the regulation, especially it was very obvious that the regulator who wants to limit the growth in the business. And if you want to grow, that means you need to invest in sovereign bonds. In QNB in the first 6 months of the year, we materially saw excellent growth in loans and deposits. In the second of the year, especially in the third quarter, we felt that it is enough for us in terms of expansion. We still enjoy very strong numbers for the 9-month period. We're talking about loans growth of 80%, funding more than 100%. So there is still growth, but definitely, the second half will not be as strong as the first half. And of course, it's all dependent on the regulation. Now margins, we always said that when fed rate goes up based on the structure of the balance sheet, local business will benefit. And that's why we have seen good momentum in terms of margin, a growth of 10 basis points until September, which we have not projected at the beginning of the year, but we were talking about 5 to 7 basis points. 10 basis points is strong. The question is that -- will this continue? Definitely maintaining that level of margin will be a major challenge for the entity. We are keen to keep it around the 250 basis points, but there are multiple factors that will impact that margin. And that's why I only can see that we will do our best to keep it around the 250 basis points, and let's see what's going to happen. Government repayment can impact our overall growth next year. Of course, if all the projects continue to be [Technical Difficulty] strong, that means the state is very liquid. [Technical Difficulty] their investment in infrastructure projects. The [Technical Difficulty] bulk of it is already completed before the World Cup. So they were keen to repay some of the loans. How aggressive they are going to be? No one knows. But having a negative growth number in loans will be doubtful because we are optimistic that normal growth from the private sector and some government agencies in 2023 will be much better than what we have seen in 2022. But let's wait and hope for the best.

So we have the next question from the line of Aaron Armstrong

Firstly, on loan growth. Could you talk about government repayments, please? And how significant they have been? And perhaps if you could give an indication for how fast the loan book would have grown if there were no government repayments during the quarter.

Overall, repayment for the government were around -- for the 9 months, we were about QAR 6 billion. But you need to compare that with what we have seen last year in the same period where there were growth in government loans. And this is impacting the comparison between this year and last year. Now most of the repayment took place in the last quarter of this year, and the same, we expect the same to happen in December. So in December, I would not be surprised if the overall drop in government loans, is between the QAR 10 billion to QAR 15 billion. So in overall numbers considering that the weaker growth -- the weak growth in the private sector business, so definitely, we do not expect the loan to strongly grow during the year. We are very close to see that we are going to see close to zero growth in loans in 2022.

We have the next question from the line of Edmond Christou.

Just a follow up. So if I heard correctly, so you expect no growth this year. So we should not expect any strong momentum in the Q4...

In loans. No growth in loans.

In loans. Okay. Perfect. Okay. So the expectation for 2023, if I hear it correctly, it's 4% to 6%. Is this pricing and repayment into the first half of this year -- of next year, sorry.

4% to 6% is based on the projected number for December.

Okay. Okay. I see. Okay, clear. The second question I do have, it's on the hyperinflation, it's around [ QAR 551 million ] It's higher than what I expected based on the CPI reading since June to September. Are you able to give some clarity what's included in the QAR 551 million of adjustment?

This is too detailed for the phone call, Edmond. Please drop an e-mail, and we will answer you directly.

Okay. Perfect. The last one is on the staging. We usually give some kind how the Stage 2, Stage 3 will evolve over the year. Are you able to give any clarity into next year or still early?

It's too early because I'm still working on the book. We have seen increase in Stage 2 during 2022. We started especially in stage 2. In December, we were QAR 43 billion. In September, we are QAR 56 billion. So that QAR 13 billion increase -- sorry, sorry, sorry, QAR 47 billion to QAR 56 billion. So we talk about QAR 9 billion increase during the 9 months. I expect another QAR 1.5 billion to QAR 2 billion to be in the fourth quarter. . Are we going to see the same number next year? I doubt it. As I mentioned before, staging is highly dependent on how much cost of risk we want for the entity, which is again driven by the strength in our operating income. We expect this year -- we ended the year with an operating income growth of close to 26% after being very, very conservative and after our projected 105 basis points in cost of risk. Now next year, if we continue to see these numbers, and of course, it's very, very doubtful to see again another 26% growth in operating profit. Again, you are going to see a cost of risk which is close to 100 basis points because again, we need to try to manage the overall growth in the bottom line in order not to pay the price at a later stage in 3 to 5 years. So for us to be able to have 100 basis point cost of risk, that means that I have to move some loans from Stage 1 to Stage 2 to allow me to build and increase the provision against Stage 2. This is the momentum of how we're managing this. I don't think next year we are going to have the luxury to be as conservative as this year but let's wait and see exactly what's going to happen.

Okay. And the view that from Stage 2 to Stage 3 is possible to see migration into next year because you have built more Stage 2 coverage there. Correct?

From Stage 2 to Stage 3?

Yes.Because you have very good coverage now on Stage 2 and Stage 3 is very high as well for accounting purpose.

True, this will happen, but it will be gradual. Please also note that this year in Turkey, we have seen a major drop in nonperforming loans because when you have very high inflation, especially on Turkish lira loans, most customers will be able to repay their loans. Now next year, if inflation go back to normal, we expect we are going to see a material increase in [their], that's why we were cautious this year, and we strongly focused on increasing coverage ratio in Turkey. We kept coverage ratio for Stage 3, around 120%, which is the highest in the country. More importantly, we increased Stage 2 coverage from 15.8% to 23%. It's something -- a number that I wish everyone to recognize. Today in Turkey, coverage ratio in Stage 2 is 23%. This is a number that is non-existent in Turkey. Again, and this is built because we expect next year in terms of NPL, there will be an increase in Turkey once inflation go back to normal. And that's why we want to be prepared from now for anything that might happen.

So we have a follow-up question from Aaron Armstrong. Would you like to go ahead, Aaron?

Two follow-up questions from me, please. Firstly, on the net interest margin side. Could you talk about the different moving parts, please? So you mentioned kind of maintaining around the 250 basis points level. Could you talk about the impact of rising interest rates and the benefits that, that creates to NIM versus what the headwinds are that has led you to give a kind of steady 250 bps or to keep it around 250 bps as the kind of base case. And then secondly, could you talk a bit more about the cost of risk that you mentioned being conservative and kind of managing that cost of risk as best you can, say, through the cycle. Could you talk about how you get to the right number. So why should it be 105 basis points this year? Is there a certain kind of provision coverage that you have in mind a certain number in terms of the provisions that you want to have on the balance sheet, just kind of what you're working to? Or what kind of you're solving for that leads you to this kind of 100, 105 basis points cost of risk numbers.

Being able to project your net interest margin under current conditions, that was in Turkey and Egypt or in the third countries where we operate. And considering what's taking place on interest rates around the world, it's probably one of the most complex issues that any CFO has these days. There are several factors that impact margins. And when you operate in several countries, some will be -- an increase in Fed rate will be positive. And in other countries, it will be negative. And that's why projecting exactly what's going to happen is extremely complex. But we always told investors that an increase in Fed rate, improved margin for the group especially for local operations and our operations in the GCC because how the book is structured. And we always said that 100 basis point increase, you can generate more than QAR 500 million additional interest income. But of course, that's in the first increases. So that doesn't mean that if 200% increase over a year, that means the QAR 500 million will become QAR 1 billion and if there is a 150 basis point increase that QAR 1 billion would be a QAR 1.5 billion, of course not, because after the first increases, other factors start to kick in, but at the end will impact the overall because there will always be a lag between the pricing of your assets and liabilities and there will always be challenges in many cases of increasing your rates on all your loans in the same momentum that we are seeing Fed rate going up without impacting the capacity of these customers to repay the loan in the longer term. And that's why you try to manage that increase especially if it was quick in a way to ensure that the customers will be able to absorb that increase. And that's why we need to take all these factors in consideration because you need to work loan by loan, deposit by deposit based on the maturity of the deposit, when it's going to mature, whether you need it, how cost it's going to be, what -- how long you need this deposit for. All these factors make it extremely complex for me. Next year, we are going to have 250 or 260 basis points. But what I said and what we are -- we aim to is to manage our margin in a way that we don't drop below the 260 basis points. It is a materially challenging and very difficult and this put a lot of load on the treasury for them to be able to manage cost of funding, the rate of some of the cost of deposit to ensure that this link [syncs] the maturities of funding sources. Please note when rates go up, the bulk of the customers prefer short-term funding in order to take advantage of the increase in rate. Again, this puts pressure on treasury to manage the overall funding profile event. That's on margin, cost of risk. Now we said cost of risk will be close to 100 basis points. Next year, in the budget, I'm not budgeting 100 basis points because definitely, I'm not budgeting an increase on operating income of 25%, but what I tried to explain to investors, that cost of risk for the group is highly dependent on the engine. If the engine of revenue is strong, and we have the luxury to be conservative, we will -- we don't want to issue a growth in profitability of 15% next year and the year after a growth of 5% and then 20% and the next year, minus 5%. This is not QNB. QNB, I always said, is a very boring story. You are going to see a growth in profitability year-on-year, of course, and that growth will be managed very carefully between the 6% to the 8%. This is the growth you're going to be. In a good year, you are going to see 9%. In perfect, you are going to see 10%. That's it. This is the way QNB is structured. We are a very conservative financial institution. At the same time, we do not like to give bad surprises to our investors. It's a very stable operation, steady, very well structured, very conservative. Coverage ratio will continue to be more than 100%, now it's 120%. This is where we wanted it to be. And this is how we are structured and how -- this is how we are going to continue to operate.

We have the next question from the line of Sawsan Ali.

Can you hear me?

Yes.

Just a quick question from my side. We saw a corporate interest income was quite strong in this quarter. I would appreciate if you could shed some light on that.

You talk about local net interest income increase?

Yes.

Okay. Again, this is a reflection of the increase in Fed rate and success of the treasury and the business units to manage cost of funding and our ability to charge the customers with some of the increases that we have seen in Fed rate. If you have seen that the QCB did not follow the Fed rate, there was over the -- in every single increase, there was a gap of around 25 basis points. And we followed the QCB. And this is what we will -- this is the momentum that we want to keep. We still believe that interest income next year in local operation will continue to be strong. But to what extent we will be able to continue to charge the customer with the full increases. It is something that we need to be -- without impacting NPL ratio in the longer term, it is something that we need to be careful about. And that's why we take all these parameters into consideration when we go, increase rates on corporate business.

Okay. If you don't mind me asking another question. In addition to your strong core business, periodically, you have gone for inorganic growth. Do you have any such plan, especially considering that the capital adequacy ratio is not substantially higher than the regulated levels as in the past?

As of today, we are not looking at anything specific, which is material that will materially impact our capital adequacy ratio.

We have the next question from the line of Valentina Stoykova. Please go ahead. Valentina, I'm afraid we cannot hear you. Right. I think while we wait for Valentina to check her audio connections, I'll hand over the next question to Saanil Jain.

Am I audible?

Yes.

This is Saanil Jain from JPMorgan. I just had 1 question on costs. So in the first 9 months, cost control has been very solid and cost-to-income ratio has dropped below 20%. How should we think about cost efficiency next year? I'm guessing there would be some slowdown in revenue growth. So what kind of cost-to-income ratio we should be looking at next year 2023?

I will tell you how -- based on the models that I have for the budget. Next year, I expect efficiency ratio to be between the 20.5% and the 21.5%. So there will be an increase but whether we are going to reach the 22%, I doubt it next year. So we aim to continue to be around 21.5% and less.

Thank you, Saanil. But we have 1 question from participants, which is in the Q&A room. I will ask you, Ramzi. So the question is about what influenced the increase in the Stage 2 coverage this quarter relative to the previous quarter? That's the first part of the question. The second part of the question is about your expectations about hyperinflation and monthly losses in the coming quarters? And the question is coming from Pushpitha Ramalingam.

Stage 2 -- very increased this quarter is extremely simple quarter to answer. The auditor did not allow me to increase our coverage ratio for Stage 3 above the 120% and based on the discussion that we had with them, we had to move to focusing more on Stage 2. Next -- even next quarter, I don't think our coverage ratio in Stage 3 will continue to be 120%. I need -- the auditors will not allow this. I think -- I hope I will be able to convince them. I will keep it around 115%. If that happens, that means that I need to move and focus more on Stage 1 and Stage 2. Very simple answer. Expectation of hyperinflation, who can -- it's impossible for anyone to project what is going to happen. But if you take what happened in the third quarter are the base for the fourth quarter, you are going to be -- you should be close.

Thank you, Ramzi. So we have another question, which came in from participants. That's Valentina Stoykova, I'll read out the question to you. So there are 2 parts of the question. The first part is about your liquidity position? What is it like as well as what are your issuance plans for the next year? The second part of the question is about the regulatory changes on the treatment of non-resin deposits, which impacted liquidity coverage ratio and NSFR calculations. Can you talk us through these ratios, LCRs and NSFRs? Where are they at the moment? And how do they look versus the thresholds in the third quarter of 2022? And there's a follow-up from Valentina as well. Can you also comment on your issuance plans for this year and perhaps 2023? Shall we expect any green senior Eurobonds from QNB similar to what we saw at some of the UAE peers recently?

I will answer on the LCR and NSFR and then I will leave Mark to answer the second half of the question. LCR, based on the new regulation [ 106 ], so we are continuing to be more than 100%. NSFR, the changes that the QCB did materially impacted -- negatively impacted the ratio. Today, we stand at close to 96%. As we note today that the ratio is currently not Basel-based, QCB was extremely conservative in the new ratio and it materially penalized banks on nonresident funding. For the last 6 months, since the regulation came out, we have been working hard to improve QNB ratio, but it will take time. It will not be something that we are not going to be able to reach -- to reaching 100% in a month's time. But hopefully, by December, we should be close to the 100%. But again, this is not Basel-based ratio. If we run the ratio based on Basel requirement, we are going to be more than 100%. This is a QCB ratio, and we fully understand where the QCB is coming from. They want to manage overall number of funding. And it's something that we are working on in order to ensure that we meet QCB regulation. I will leave it Mark to answer the first half of the question. .

So regarding our base liquidity, it remains very robust. The reason for that is a combination of very, very diversified foundation that we've laid over the last few years. And secondarily, obviously, we are benefactors of the very significant revenue that's coming in through the elevated energy pricing at the moment in terms of State of Qatar as well for QNB. So in terms of our kind of base liquidity position, very strong indeed. That has an impact again on the second part of the question regarding issuance and specifically green issuance. QNB has always been an opportunistic issue. We've never been a bank that has laid out a formal funding program under the MTM program. That hasn't changed. And the reality is that over the last few months and even today, it is a very, very volatile market. And whilst, as you correctly point out, some of our regional peers have come into the market in a green format recently, they have paid significant new [indiscernible] for that. And as Ramzi alluded to earlier in the call, we are very, very focused indeed on being as efficient as possible indeed in managing our cost of funding. So with regard to issuance this year and into next year, it's possible we could do something at the back end of this year, but unlikely. It really depends on the market and then the available windows in that regard. And the same goes really for next year. I do think things will normalize to a degree next year. I do think it's likely that you will see QNB come to the market in some format next year and most definitely due to having a strong established ESG framework in place, a green option would be viable potentially for us next year as well.

Thank you, Mark. So once again, I'd like to remind everyone, if you have a question, please feel free to raise your hand. [Operator Instructions] We'll pause for a moment to see if there are any questions. I think in the meantime, while we're waiting, I'd like to again raise a question about the asset quality. Obviously, a lot of attention here from the investors. Looking at your write-offs, Ramzi, I mean, they tend to be quite low in the last 5 years. Now given that you've raised your provision coverage so well, are you expecting to sort of accelerate some of your write-offs in the medium term? Where do you see the write-offs standard coming?

This is one item that's materially penalized QNB against the peer group. If you compare our write-off versus those of the peer group in the region, everyone will realize that our write-offs is extremely small comparing to the peer group. And this is -- this helps our NPL ratio. We have been -- and the reason for that is that the Central Bank is extremely conservative and very hesitant to allow any write-offs. But we have been in continuous discussions with the Central Bank to allow us to start writing off some of the provision that is fully covered. And we are very hopeful that this discussion will allow us to move forward with writing off some of the loans, especially the old ones, which is 100% covered for. This will not impact our ability to continue to follow the customer for repayment and to take all legal actions needed against these customers. But it will allow us to free some of the NPL ratio so that we can move forward with proper classification of our loans among the 3 stages. So again, hopefully, how much I expect write-off to take place, it is extremely difficult to project because we don't know how the Central Bank will decide on this matter.

And one another follow-up question for me. We definitely had some regulatory changes in Qatar, right? Well, favoring domestic deposits, over non-resin deposits is one of them. In terms of the regulatory landscape, what are the sort of important changes should we be aware of?

In the last year, under the new management in the Central Bank, we have seen several changes in regulation. And there was a lot of focus on the funding profile of banking sector. more focused on local funding. And that way, we have seen major shifts in the funding profile for banks. In QNB alone, we have seen a 20% drop in numbers on funding, an 18% increase in funding -- on resident funding. So a major shift and more focus on resident funding and decrease on non-resident funding. I'm not aware of any new regulation that would come very soon that I can talk about at this stage.

Thank you, Ramzi. So it appears we don't have any other questions at this stage. So I guess I would like to thank the Qatar National Bank management team and all the investors who dialed in for their participation. And I would like to hand over the call back to Ramzi and Mark for any closing remarks.

I want to thank everyone that participated in the phone call. This year was a very good year in terms of maintaining very strong momentum in operating income. We still believe there's still a lot of capacity for the group to grow operating income next year. And hopefully, we will continue to generate a good number for our investors. Thank you, everyone, for joining us.

Thank you, Ramzi.

Thank you. Have a good day. Bye.