Commercial Bank of Qatar Financial Results for the quarter ended 31 March 2013
17 April 2013
Commercial Bank delivers first quarter net profit up 7% to QAR 506 million
Doha, Qatar: Commercial Bank of Qatar (“Commercial Bank” or “the Bank”) announces its financial results for the quarter ended 31 March 2013. The Bank delivered a solid increase in net profit of 7% to QAR 506 million compared with QAR 471 million achieved in the first quarter of 2012, which was up by 13% over the fourth quarter of 2012.
Key financial highlights
• Net profit up 7% to QAR 506 million from QAR 471 million
• Total assets up 22% to QAR 85.6 billion
• Customer loans and advances up 22% at QAR 51.4 billion
• Customers’ deposits up 22% to QAR 46.2 billion
• Earnings per share of QAR 2.04 compared with QAR 1.90
• Total assets up 22% to QAR 85.6 billion
• Customer loans and advances up 22% at QAR 51.4 billion
• Customers’ deposits up 22% to QAR 46.2 billion
• Earnings per share of QAR 2.04 compared with QAR 1.90
His Excellency, Abdullah Bin Khalifa Al Attiyah, Chairman of the Board of Directors of Commercial Bank said, “Qatar’s economy is expected to grow strongly in 2013 with an increasing contribution from the non-hydrocarbon sector. The recent budget demonstrates the Government’s continuing strong commitment to infrastructure development as well as increasing investment on education and health. Commercial Bank has made a strong start to the year with growth continuing in both the Wholesale and Retail businesses; we will remain focused in 2013 on growing our core domestic businesses whilst developing our international alliance businesses in Oman and in the UAE, alongside our future new partnership in Turkey.”
Financial Performance
Mr. Hussain Al Fardan, Commercial Bank’s Managing Director, added “Commercial Bank has had a positive first quarter despite the continuing competitive operating environment. The Bank has successfully targeted opportunities for growth in lending, maintained the delivery of alternative sources of income and expanded its deposit base. The Bank is well positioned and well funded to target new opportunities during the remainder of the year.”
Net operating income increased by 11% to QAR 753 million for the first quarter of 2013, up from QAR 680 million achieved for the quarter ended 31 March 2012.
Net interest income was QAR 454 million for the quarter ended 31 March 2013, 5% lower than in the same period in 2012, reflecting growth in lending to customers offset by the impact of a reduction in the net interest margin which declined to 2.64% for the first quarter of 2013 compared with 2.75% for the fourth quarter of 2012. The decline in the net interest margin resulted from a reduction in average yields on assets due to competitive market pricing pressure on lending and lower returns from other financial instruments, partially offset by a reduction in the average cost of funds.
Non-interest income was up 48% to QAR 299 million for 2013 compared with QAR 202 million for the same period in 2012 due to higher levels of loan-related and trade service fee income, improved gains from the Bank’s investment portfolio and an increase in foreign exchange income.
The Bank’s total operating expenses were up by 15% to QAR 244 million for the first quarter of 2013 compared with QAR 211 million in 2012, but were down compared with the fourth quarter. Staff costs were 11% higher than the first quarter and in line with the fourth quarter of 2012. General and Administrative expenses, and Depreciation, were also up reflecting investment made in the Bank’s infrastructure.
The Bank’s net provisions for loans and advances were QAR 59 million for the three months ended 31 March 2013, up QAR 14 million from QAR 45 million provided in the same period for 2012. Asset quality remains strong with the non-performing loan ratio increasing to 1.39% at 31 March 2013 compared with 1.22% at the end of March 2012 and 1.09% at 31 December 2012.
Provisions for impairment on the Bank’s investment portfolio were QAR 10 million for the quarter ended 31 March 2013 compared with QAR 6 million in 2012.
Net profit was up 7.3% to QAR 506 million in the first quarter of 2013 from QAR 471 million for the same period in 2012 and up by 13% compared with the profit of QAR 447 million achieved in the fourth quarter of 2012.
The Bank’s total assets increased by 22% to QAR 85.6 billion at 31 March 2013 compared with QAR 70.1 billion at the end of March 2012, and up by 7% since the end of December 2012. The increase in total assets from the end of 2012 was due to growth of QAR 2.8 billion in lending to customers and QAR 2.9 billion in balances due from banks and financial institutions.
Loans and advances to customers were up by 22% to QAR 51.4 billion at 31 March 2013 compared with QAR 42.2 billion at the end of March 2012, and up by 6% from QAR 48.6 billion at 31 December 2012. The growth in lending in 2012 has been generated, mainly, in the Commercial, Real Estate and Services Sectors and across both the Wholesale and Retail businesses. Due from banks and financial institutions increased due to higher placements with, and lending to, banks.
Customers’ deposits were QAR 46.2 billion at 31 March 2013; an increase of 22% compared with the end of March 2012 and up 12% since 31 December 2012, as the Bank continues to manage its balance sheet to optimise its funding mix.
The Bank’s capital position remains strong with the capital adequacy ratio at 16.2% as at 31 March 2013 compared with 17.0% at the end of 2012, well above the Qatar Central Bank’s required minimum level of 10%.
On 18 March 2013, the Bank announced that it had agreed to acquire a 70.84% shareholding in Alternatifbank A.S. (“ABank”) from Anadolu Endustri Holding A.S. for two times the book value at 30 June 2013. The acquisition is subject to relevant regulatory approval and is expected to be completed in the second half of 2013. As part of the transaction, Commercial Bank will launch a public tender offer to acquire the 4.16% of ABank’s shares held in the public domain.
Andrew Stevens, Commercial Bank’s Group Chief Executive Officer, said “Commercial Bank has delivered strong growth in lending and profitability in the first quarter of 2013. In line with our expectations, the Qatar market has seen limited growth in either the Public, or Private, Sector during the period with competitive pricing dynamics continuing to place pressure on margins. Despite this, the Bank has been successful in growing its lending and continues to diversify its income sources to offset pressure on core income.
Our affiliate banks in the UAE and Oman have delivered solid first quarter performances with an increase in their contribution to the Bank’s profit compared with the previous year.
The first quarter saw a milestone in the execution of the Bank’s strategy with the intended acquisition of a majority stake in ABank in Turkey. ABank is a commercial bank that focuses on small and midsize enterprises (SMEs) and is the fifteenth-largest lender in Turkey, offering a suitable entry point for the Bank with scope to develop the existing footprint. We are extremely pleased to have been able to enter into an attractive market in which opportunities are increasingly rare.
The combination of a fast growing and stable economy, increased foreign direct investment from the GCC into Turkey and the rising importance of MENA as an export market for Turkey should offer considerable opportunity for long-term growth. The integration of ABank will increase the scale of the Bank’s international operations, diversify our revenue streams and continue to build the domestic business, strengthening the Group’s business position over time. We are looking forward to working with our partners, Anadolu Endustri Holding A.S., in the development of ABank’s business.
We are optimistic that domestic demand will increase in the latter part of the year. Our strategy remains to focus on developing and diversifying our income, and position the Bank to continue to grow both domestically and internationally.”
Associates
Commercial Bank’s associates increased their contribution to the Bank’s net profit, by 25%, to QAR 67 million in the first quarter of 2013 compared with QAR 53 million for the same period in 2012.
National Bank of Oman (“NBO”) delivered a net profit after tax for the three months ended 31 March 2013 of OMR 8.6 million compared with OMR 9.6 million achieved in the same period in 2012.
Operating income was down by 1% to OMR 24.4 million reflecting higher net interest income, up 8%, to OMR 17.4 million due to growth in lending and a reduction in cost of funds, offset by lower referral fee income following the regulatory changes to personal loans introduced by the Central Bank of Oman in May 2012.
Operating expenses increased by OMR 0.6 million to OMR 11.6 million for the first three months of 2013 due to higher staff costs. The net impairment losses for 2013 were OMR 3.0 million, up from OMR 2.6 million in 2012 due, mainly, to new general provisioning requirements on loans to banks.
Loans and advances to customers grew by 10% to OMR 1.97 billion at 31 March 2013 whilst customers’ deposits were up by 21% to OMR 2.07 billion, compared with 31 March 2012.
United Arab Bank (“UAB”) delivered a net profit of AED 120 million for the first three months of the year, an increase of 60% from AED 75 million achieved over the same period in 2012, and the highest ever quarterly net profit reported by UAB. The increase in net profit reflected higher total operating income, which was up by 37% to AED 226 million, partially offset by increased operating expenses.
The increase in total operating income was due to higher net interest income, up 37%, to AED 169 million and growth of 39% in non-interest income to AED 57 million reflecting growth in both Corporate and Retail businesses.
The provision for impairment of loans and advances reduced to AED 34 million for the three month period in 2013 compared with AED 37 million in 2012, and continues to reflect a prudent and proactive approach to general provisioning adopted by UAB with regard to its management of risk and growing asset portfolio.
Loans and advances to customers grew by 29% to AED 11.7 billion at 31 March 2013 and customers’ deposits were up 41% to AED 11.2 billion, compared with 31 March 2012.