Commercial Bank of Qatar Financial Results for the half-year ended 30 June 2010

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Second quarter earnings up 23% on 2009
Commercial Bank of Qatar ("CommercialbankCommercialbank" or "the Bank"), the largest private sector bank in Qatar, announces its financial results for the half-year ended 30 June 2010. The Bank delivered a net profit of QR 818 million in the first half of 2010, 13% lower than the same period in 2009.

Net profit for the second quarter was QR 408 million, 23% higher than the same period in 2009, and in line with the first quarter of 2010.

Key financial highlights
Net profit of QR 818 million
Operating income QR 1,243 million
Net interest income at QR 801 million
Earnings per share of QR 3.64
Customer loans and advances at QR 33.3 billion
Customers' deposits at QR 30.4 billion

His Excellency, Abdullah Bin Khalifa Al Attiyah, Chairman of the Board of Directors of CommercialbankCommercialbank said, "Despite the continued slow and uncertain pace of recovery in global markets, the Qatar economy has grown in 2010 and is set to continue to grow steadily in the year ahead led by Government spending. The Bank's half-year results reflect the underlying strength of the Qatari economy under the visionary leadership of His Highness, the Emir, Sheikh Hamad bin Khalifa Al Thani and the heir apparent His Highness Sheikh Tamim bin Hamad Al Thani."

CommercialbankCommercialbank

CommercialbankCommercialbank

Net operating income was QR 1.243 billion for the six months ended 30 June 2010 compared with QR 1.496 billion in the first half of 2009 which included an exceptional gain of QR 165 million arising from the sale of a real estate asset and dividend income of QR 56 million from the local equities which were sold to the Government of Qatar.

The Bank's operating expenses were up 3% at QR 384 million from QR 373 million in the same period in 2009. Staff costs were 2% lower, but general and administrative expenses were up QR 12 million due to higher communication, occupancy, repairs and maintenance costs and depreciation was up QR 3 million due to investment in the retail network. However, ongoing tight cost control has delivered a 4% reduction in operating expenses in the second quarter resulting in an improvement in the cost to income ratio to 28% compared with 31% the first quarter.

The net provision for loans and advances reduced to QR 61 million in 2010 from QR 202 million in the first half of 2009 and comprised QR 28 million against the retail lending book, QR 20 million for corporate banking and QR 13 million for Islamic banking; the Bank now classifies its non-performing loans on a 90 day past due basis compared with 180 days in prior periods. Asset quality remains strong with the non-performing loan ratio, on a 90 day basis, reducing to 2.67% at 30 June 2010 from 3.56% at 31 December 2009. The loan loss coverage was 91% at 30 June 2010. The Bank also sets aside a risk reserve against its lending as part of shareholders' equity; at 30 June 2010 loan loss coverage was 161% inclusive of the risk reserve.

The Bank's investment provisions have declined to QR 47 million in the half-year ended 30 June 2010 compared with QR 52 million in 2009. However, although there has been a general gradual improvement in global financial markets, there has been a softening in underlying asset values in certain investment categories which has resulted in an increase of QR 4 million in impairment losses on the Bank's investment portfolio in the second quarter compared to the first quarter of 2010.

The Bank's capital adequacy ratio was 19.2% as at 30 June 2010 compared with 18.9% at the end of 2009. During the first half of the year the Bank issued 10.3 million new ordinary shares to Qatar Holding, a subsidiary of the Qatar Investment Authority, following approval at an Extraordinary General Assembly held in February 2010 which increased Qatar Holding's shareholding in CommercialbankCommercialbank to 9.1%. The Bank's capital position remains strong and well above the Qatar Central Bank's required minimum level of 10%.

Andrew Stevens, CommercialbankCommercialbank's Group Chief Executive Officer, said, "This is a solid performance reflective of the re-alignment of the business undertaken towards the end of last year and the gradual improvement in the strength of the Qatar economy in 2010. We have managed the bank prudently, ensuring that we maintain good asset quality, continuing strong balance sheet management and securing a low cost base for both funding and expenditure. We are seeing some opportunities in the market, particularly in the Public Sector, which are helping to deliver some positive trends in the business such as the 4% growth in loans and advances and the increase of 16% in customers' deposits since the end of December last year.

"The Bank has diversified its lending and funding activities in the first half of the year and this, alongside the continued development of synergies across our regional alliance, will remain our focus for the second half of the year."

Associates
CommercialbankCommercialbank's associates National Bank of OmanNational Bank of Oman ("NBONBO") and United Arab BankUnited Arab Bank ("UABUAB") contributed QR 68 million in the first half of the year which represents 8% of CommercialbankCommercialbank's net profit for the period compared with QR 75 million for the same period in 2009. The associates' contribution in 2010 has been reduced by a late adjustment in NBONBO's 2009 financial results for an increase in provisions of RO 5 million following a recommendation from the Central Bank of Oman. The impact for CommercialbankCommercialbank was a QR 17 million reduction in net profit in the first half of 2010.

NBONBO delivered an improvement in its financial performance in first half of 2010 with net profit increasing by 8.5% to RO 14.6 million compared with RO 13.5 million for the same period in 2009. Whilst total income declined slightly year on year, lower levels of provisions were necessary against both the lending books and the investment portfolio.

Loans and advances to customers grew by 3.8% to RO 1.41 billion from RO 1.36 billion at 31 December 2009. The credit quality of NBONBO's lending portfolio remained stable with the non-performing loan ratio at 3.7%. Customers' deposits increased by 3.6% to RO 1.31 billion compared with the end of 2009 reflecting growth, mainly, in low cost deposits.

The near-term focus for NBONBO will continue to be to maintain steady and consistent progress with selective growth in lending.

UABUAB produced a good first half performance to deliver a record net profit of AED 141 million, up 5.3% year on year from AED 134 million in 2009. The higher net profit reflected total operating income up AED 2 million to AED 233 million together with a reduction in lending provisions of AED 7 million, partially offset by higher operating expenses. Increased net interest income resulted from an improvement of 0.6% to 5.4% in the net interest margin through mobilization of low cost deposits despite increasing competitive pressure on yields. Loans and advances to customers grew by 8.4% to AED 5.2 billion and customers' deposits were up by 4.2% to AED 4.6 billion since the end of December 2009.

UABUAB will continue its cautious approach to lending, maintaining its good asset quality alongside its plans to expand business in retail, corporate and Islamic banking.

-End-

For more information please contact:
Abdulla Al-Mosallam
Manager, Investor Relations
Commercialbank
Tel: +974 4420 2626
Email: abdulla.almosallam@cbq.com.qa

Hugh Barker
Jon Earl
Financial Dynamics
Tel: +974 6644 1426
Tel: +973 39300851
Email: hugh.barker@fd.com
jon.earl@fd.com

© Press Release 2010