Financial Results for the nine months ended 30 September 2013

Doha, Qatar: Commercial Bank of Qatar (“Commercial Bank” or “the Bank”) announces its financial results for the nine months ended 30 September 2013 in which the Commercial Bank delivered net profit of QAR 1.305 billion. The Bank completed the acquisition of a 74.24% stake in Alternatifbank (“ABank”) in Turkey during the quarter and the results of ABank since acquisition are incorporated in these financial results. Commercial Bank has also announced today that it intends to raise QAR 2 billion in Additional Tier 1 Capital, subject to regulatory and shareholder approval.

• Net profit at QAR 1.305 billion

• Total assets up 32% to QAR 105.3 billion

• Customer loans and advances up 34% at QAR 64.9 billion

• Customers’ deposits up 39% to QAR 57.7 billion 

• Earnings per share of QAR 5.27

 

His Excellency, Abdullah Bin Khalifa Al Attiyah, Chairman of the Board of Directors of Commercial Bank said, “We continue to see enormous opportunities for Commercial Bank across our chosen operating markets. Commercial Bank’s intention to raise additional capital will support our clear growth strategy. The significant infrastructure development required in Qatar provides clear opportunity, whilst the strong recovery in the UAE and the growing trade and investment flows between the Gulf and Turkey also supports our strategy of continuing to grow and diversify our revenue streams. The Bank’s Alliance strategy will ensure that we continue to capture a growing share of value in our operating markets.”

Mr. Hussain Al Fardan, Commercial Bank’s Managing Director commented on the financial results, “During the third quarter of 2013, we have seen some improving trends in our financial performance. Despite the historically slower market conditions of the third quarter, lending has increased by 3% since 30 June 2013, supported by a 7% increase in our deposit base, and is up by 10% for the year to date.

“Net interest income has also increased quarter-on-quarter along with a small improvement in our net interest margin. Fees were down compared with the second quarter but have increased overall year-to-date compared with 2012. In addition with reductions in lending provisions and the non-performing ratio in the quarter, we look forward to a continuation of the improving trends in the fourth quarter.” 

Net operating income increased by 11% to QAR 2.419 billion for the nine months ended 30 September 2013 up from QAR 2.185 billion achieved in the same period in 2012. 2013 includes a contribution of QAR 143 million from ABank for the third quarter; excluding this amount, net operating profit income increased by 4%.

Net interest income was QAR 1.556 billion for 2013, 11% higher than in the same period in 2012 reflecting a reduction of 1% in Commercial Bank although the third quarter of 2013 was up 4% over the second quarter and up 3% over the third quarter of 2012; ABank contributed QAR 166 million in the third quarter of 2013. The increase in net interest income at Commercial Bank in the third quarter reflected continuing growth in lending to customers and an improvement in the net interest margin to 2.58% for the third quarter from 2.54% in the second quarter. The net interest margin improved due to a further reduction in the average cost of funds and with similar level of average yields in the third quarter as in the second quarter of 2013.

Non-interest income was up 10% to QAR 863 million in the first nine months of 2013 compared with QAR 781 million for the same period in 2012. The higher level of non-interest income reflected an increase of 13% in Commercial Bank due to improved net fee and commission income up by 9% mainly on higher levels of loan-related and trade service fee income, an increase in foreign exchange income and the realization of gains from the Bank’s investment portfolio which were up by QAR 19 million compared with 2012; in the third quarter of 2013 ABank’s core banking non-interest income was offset by losses sustained in the trading book during the turbulent global market conditions in July and August resulting in an overall loss in non-interest income of QAR 23 million.

Total operating expenses increased to QAR 911 million in 2013 compared with QAR 709 million in the nine months ended 30 September 2012. Commercial Bank’s total operating expenses were up 16% to QAR 822 million reflecting staff costs 8% higher than the same period in 2012, and up by 3% in the third quarter compared with the second quarter of 2013. General and Administrative expenses, and Depreciation, were also up reflecting ongoing investment in the development of the Bank’s business together with the write-off in the Bank of the costs of QAR 39 million associated with the acquisition of ABank; in the third quarter ABank’s total operating expenses were QAR 89 million.

Net provisions for loans and advances were QAR 368 million for the nine months ended 30 September 2013, up from QAR 66 million provided in the same period for 2012; the first half of 2012 included the recovery of provisions of QAR 89 million. In Commercial Bank net provisions in the third quarter were QAR 122 million, 9% lower than in the second quarter of 2013, and included further provision against the major account outside of Qatar that Commercial Bank booked as non-performing in the first quarter. The non-performing loan ratio improved to 3.31% at 30 September 2013 compared with 3.49% at the end of June 2013. At ABank, net provisions of QAR 52 million were booked in the third quarter, mainly against commercial lending.

Provisions for impairment on the Bank’s investment portfolio increased to QAR 77 million for the nine months ended 30 September 2013 compared with QAR 35 million in 2012. The increase was due, mainly, to provisions taken against our emerging market strategic equity investments, in line with international accounting standards, reflecting the downturn seen in emerging market currencies and stock prices during the third quarter.

Net profit was QAR 1,305 million for the first nine months of 2013 compared with QAR 1,565 million for the same period in 2012.

The Bank’s total assets increased by 38% to QAR 105.3 billion at 30 September 2013 compared with QAR 76.6 billion at the end of September 2012, and up by 32% from QAR 80.0 billion since the end of December 2012. The increase in total assets from the end of 2012 was due, mainly, to growth of QAR 4.9 billion in lending to customers and QAR 1.8 billion in balances due from banks and financial institutions at Commercial Bank, together with the inclusion of total assets of QAR 16.2 billion at ABank at 30 September 2013.

Loans and advances to customers were up by 34% to QAR 64.9 billion at 30 September 2013 compared with QAR 48.7 billion at the end of September 2012 and QAR 48.6 billion at 31 December 2012. The growth in lending since 30 September 2012 in Commercial Bank has been generated, mainly, in the Services, Contracting and Real Estate Sectors. Loans and advances to customers of QAR 10.6 billion at ABank were included at 30 September 2013.

Customers’ deposits were QAR 57.7 billion at 30 September 2013, an increase of 38% compared with the end of September 2012 and up 39% since 31 December 2012 with the Bank up 21% and the inclusion of QAR 7.5 billion for ABank.

Commercial Bank’s consolidated capital adequacy ratio was 12.5% at 30 September 2013 compared with 17.0% at the end of 2012 reflecting growth in lending during 2013 and the acquisition of ABank, and remains above the Qatar Central Bank’s required minimum level of 10%.

Commercial Bank has announced today that it intends to raise QAR 2 billion in Additional Tier 1 Perpetual Capital Notes to support future growth across the Commercial Bank Group. If approved by the regulator and shareholders, the additional capital will enhance Commercial Bank’s capital ratios by approximately 2.20%.

On 18 July 2013, the Bank completed its acquisition of a 70.84% shareholding in ABank from Anadolu Endustri Holding A.S. (“Anadolu”). The completion followed approvals from the regulators in Qatar and Turkey. Commercial Bank undertook a mandatory tender offer during September and acquired a further 3.40% stake from shareholders; at 30 September 2013 the Bank owned 74.24% of ABank with Anadolu retaining a 25% stake. 

Andrew Stevens, Commercial Bank’s Group Chief Executive Officer, said, “The acquisition of Alternatifbank in July realized an important element of our overall strategy: to diversify our business into attractive, long-term growth markets. With the growing level of trade and investment between the GCC and Turkey, Commercial Bank, together with its regional partners, is now in an excellent position to capture an increasing share of the value of this trade as it supports its customers in their commercial objectives.

“Since the completion of the ABank transaction, Commercial Bank has worked closely with the management of ABank to re-assess the future strategy of the business. Significantly, we reviewed the business, not only in terms of its organic potential, but also how Commercial Bank could deliver additional growth opportunity through strategic initiatives based on the expertise and knowledge of the Commercial Bank Alliance.

“Together with the management team of ABank, we believe that we can create a challenger banking brand for the Turkish market. The position of ABank in the marketplace means it is ideally placed to grow its business by focusing on the SME and Retail sectors. With the right levels of investment, product and service development, and marketing aided by the Alliance, we have agreed on a strategy that will see ABank grow to become a much more significant banking business and brand in the Turkish market. As we build the scale of the business we will also target the opportunities represented by the growing commercial and investment flows between the GCC and Turkey.”

ABank Group delivered profit of QAR 1 million during the third quarter with total assets of QAR 16.7 billion and lending of QAR 10.6 billion at 30 September 2013. ABank has announced a profit after tax of TRY 46 million for the nine months ended 30 September 2013 compared with TRY 57 million for the same period in 2012.

Commercial Bank’s associates increased their contribution to the Bank’s net profit by 27% to QAR 242 million in the nine months ended 30 September 2013 compared with QAR 190 million for the same period in 2012.

National Bank of Oman (“NBO”) delivered a net profit after tax for the nine months ended 30 September 2013 of OMR 31.2 million compared with OMR 30.5 million achieved in 2012.

Operating income at OMR 77.5 million was up by 5% over the previous year and reflected higher net interest income, up 11%, to OMR 55.4 million due to growth in lending combined with a reduction in the 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 1.4 million to OMR 35.6 million for the first nine months of 2013 due to higher staff costs. The net impairment losses for 2013 were OMR 6.4 million, up from OMR 4.6 million in 2012, and relating to new general provisioning requirements on loans to banks and an increase in provisions against the personal loan portfolio.

Loans and advances to customers grew by 12% to OMR 2.11 billion at 30 September 2013 whilstcustomers’ deposits were up by 15% to OMR 2.19 billion compared with the end of September 2012.

United Arab Bank (“UAB”) delivered a net profit of AED 414 million for the first nine months of the year, an increase of 39% from AED 298 million achieved in the same period in 2012. The increase in net profit reflected higher total operating income, which was up by 37% to AED 753 million, partially offset by increased operating expenses. 

The increase in total operating income was due to higher net interest income up 39% to AED 566 million and an increase of 29% in non-interest income to AED 187 million reflecting growth in both Corporate and Retail businesses.

The provision for impairment of loans and advances was AED 110 million for the nine month period in 2013 compared with AED 85 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 its growing asset portfolio.

Loans and advances to customers grew by 48% to AED 14.8 billion at 30 September 2013 and customers’ deposits were up 58% to AED 13.7 billion compared with the end of September 2012.