Financial Results for the year ended 31 December 2012

Commercial Bank of Qatar (“Commercialbank” or “the Bank”) announces its financial results for the year ended 31 December 2012. The Bank delivered a record net profit for the year, up 7%, to QAR 2,012 million compared with QAR 1,884 million achieved in 2011. The profit for the fourth quarter of 2012 at QAR 447 million was up 19% compared with the fourth quarter of 2011.

The Bank’s draft results for the year ended 31 December 2012 have been announced following approval at a meeting of Commercialbank’s Board of Directors. The Board of Directors is recommending, for approval at the Annual General Assembly, a cash dividend payout of 74% of net profit which equates to QR 6 per share. The financial results and profit distribution are subject to the approval of the Qatar Central Bank.

Key financial highlights

Net profit up 7% to QAR 2.012 billion

Total assets up 12% to QAR 80.0 billion

Customer loans and advances up 17% at QAR 48.6 billion

Customers’ deposits up 9% to QAR 41.4 billion

Earnings per share of QAR 8.13 compared with QAR 7.71

His Excellency, Abdullah Bin Khalifa Al Attiyah, Chairman of the Board of Directors of Commercialbank said, “2012 has been another difficult year for the world economy with slower growth in emerging markets and established economies remaining subdued. Against this backdrop, the Qatar economy has continued to grow. Credit demand has been dominated by the Public Sector with continuing low levels of demand from the Private Sector; however Commercialbank has successfully grown its lending and diversified revenue streams to deliver a record profit for the full year. Qatar’s economy is expected to be driven by the Government’s spending programme in 2013 and Commercialbank is well positioned to support the future economic growth of Qatar and to deliver ongoing value to its shareholders.”

Financial Performance

Mr. Hussain Al Fardan, Commercialbank’s Managing Director, added “Commercialbank has successfully achieved strong earnings in a challenging operating environment. The Bank has protected its core business in 2012 whilst delivering alternative sources of income. Our asset quality remains strong and we remain both well capitalised and funded to target growth sectors of the economy in the year ahead.”

Net operating income increased by 4% to QAR 2.98 billion for the year ended 31 December 2012 up from QAR 2.86 billion achieved in 2011. 

Net interest income was QAR 1.87 billion for the year ended 31 December 2012, 4% lower than in 2011, reflecting growth in lending to customers offset by a reduction in the net interest margin to 2.95% in 2012 from 3.46% in 2011. The decline in net interest margin resulted from lower average yields on lending due to intensely competitive market pricing pressure and the full year impact of regulatory changes, which capped pricing for retail products in 2011, partially offset by a reduction in the average cost of funds; the net interest margin in the fourth quarter of 2012 was in line with the third quarter.

Non-interest income was up 21% to QAR 1.12 billion for 2012 compared with QAR 926 million for the same period in 2011 due to higher gains from the Bank’s investment portfolio and an increase in foreign exchange income, partially offset by lower levels of net fee and commission income.

The Bank’s total operating expenses were up by 17% to QAR 1.028 billion compared with QAR 875 million in 2011. Staff costs were 10% higher reflecting annual increments for staff and investment in staff training and development. General and Administrative expenses, and Depreciation, were also up reflecting continued investment in the development of both the infrastructure and service delivery capability of the Bank. 

The Bank’s net provisions for loans and advances were QAR 140 million for the year ended 31 December 2012, down 42% from QAR 239 million provided in the same period for 2011.  Asset quality remains strong with the non-performing loan ratio reducing to 1.09% at 31 December 2012 compared with 1.20% at the end of December 2011.

Provisions for impairment on the Bank’s investment portfolio reduced to QAR 62 million for the year ended 31 December 2012 compared with QAR 68 million in 2011. 

Net profit was up 7% to QAR 2.012 billion in 2012 from QAR 1.884 billion for the year ended 31 December 2011. The net profit for the fourth quarter was QAR 447 million which is up by 19% from the profit of QAR 376 million achieved in the fourth quarter of 2011.

The Bank’s total assets increased by 12% to QAR 80.0 billion at 31 December 2012 compared with QAR 71.6 billion at the end of 2011.  The increase in total assets from the end of 2011 was due to growth of QAR 6.9 billion in lending to customers and QAR 0.9 billion in balances held with the Qatar Central Bank, partially offset by a reduction of QAR 0.6 billion in Investments.

Loans and advances to customers were up by 17% to QAR 48.6 billion at 31 December 2012 compared with QAR 41.7 billion at the end of December 2011. The growth in lending in 2012 has been generated in both the Corporate and Retail businesses. Financial investments reduced to QAR 11.2 billion at 31 December 2012, 5% lower than at the end of December 2011.  The decrease since the end of 2011 reflects, mainly, the maturity and sales of Government Bonds and Qatar Central Bank Certificates of Deposits offset by investment in Qatar Central Bank Treasury Bills.

Customers’ deposits were QAR 41.4 billion at 31 December 2012, an increase of 9% compared with the end of December 2011. 

In February, the Bank repaid a syndicated loan facility of USD 650 million whilst arranging a new USD 455 million term loan with a club of international banks. In April, the Bank issued USD 500 million five-year unsecured fixed rate notes in the international capital debt markets under its Euro Medium Term Note Programme.

The Bank’s capital position remains strong with the capital adequacy ratio at 17.0% as at 31 December 2012 compared with 17.9% at the end of 2011, well above the Qatar Central Bank’s required minimum level of 10%.

Andrew Stevens, Commercialbank’s Group Chief Executive Officer, said “Commercialbank has maintained the progress seen in the first half of the year to deliver a record full year profit. The Qatar market has been extremely competitive in 2012 and the Bank has worked hard to maintain market share in a lower margin environment in which pricing pressure has remained. Commercialbank’s performance demonstrates the Bank’s agility in broadening its client relationships as well as the ongoing diversification of its income streams to capture new opportunities for growth. 

Our affiliated banks in the UAE and Oman have delivered outstanding financial performances throughout 2012 with strong growth in lending, operating income and profitability.

On 24 December 2012, in line with our strategy, we announced that the Bank had commenced negotiations with Anadolu Endustri Holding A.S. for the acquisition of a majority stake in Alternatifbank A.S. in Turkey. The acquisition of a majority stake in a commercial bank of an appropriate size, operating in a stable economy with good growth prospects, in a country that is strategically and culturally aligned presents a natural next step in the execution of our international expansion. The negotiations for the acquisition of 75% of the shares are ongoing and are planned to be completed during March 2013.

Although global economic forecasts for the year ahead suggest that conditions will continue to be challenging, Qatar’s economy remains relatively well insulated and will be driven mainly by the Government’s spending programme and services sector.

In 2013, we will build on the success of 2012 by capturing market growth, developing core income across our Wholesale and Retail businesses and broadening the strength of our international presence whilst delivering solid returns to our shareholders.”

Associates

Commercialbank’s associates increased their contribution to the Bank’s net profit by 27% to QAR 259 million in the year ended 31 December 2012 compared with QAR 203 million for 2011.

National Bank of Oman (“NBO”) delivered strong results in 2012 with net profit after tax growing by 19% to OMR 40.7 million compared with OMR 34.2 million for the same period in 2011.

Operating income grew by OMR 6.4 million to OMR 98.6 million from OMR 92.2 million in 2011 due, mainly, to higher net interest income which was up 16% to OMR 67.2 million compared with OMR 58.2 million in 2011 reflecting both growth in lending and a reduction in the cost of funds.

The net impairment losses for 2012 were OMR 5.3 million, OMR 4.8 million lower than in 2011 with the non-performing loan ratio improving to 2.54% at 31 December 2012 from 2.94% at the end of 2011.

During the year to 31 December 2012, loans and advances to customers grew by 14% to OMR 1.9 billion from OMR 1.7 billion at 31 December 2011 whilst customers’ deposits were up by OMR 0.3 billion to OMR 1.9 billion.

United Arab Bank (“UAB”) delivered a record net profit of AED 410 million, up 24%, from AED 330 million achieved in 2011 reflecting increased operating income which was up by 32% to AED 765 million in 2012.

The increase in operating income reflected higher net interest income, up 32%, to AED 567 million and growth of 32% in non-interest income to AED 198 million due to growth from both the Corporate and Retail businesses. 

Provision for credit losses increased to AED 122 million compared with AED 71 million for the year ended 31 December 2011 due to growth in the business and the implementation of the revised provisioning guidelines issued by the UAE Central Bank.

Loans and advances to customers grew by 35% to AED 10.9 billion at 31 December 2012 and deposits were up 29% to AED 10.1 billion. ​