Cost to income ratio of 33.4% reduced from 37.5%
Provisions on loans and advances to customers QAR 927.2 million, down by 45.4%
Total assets of QAR 135.1 billion, down by 2.4%
Customer loans and advances of QAR 83.7 billion, down by 6.1%. Growth in domestic
loans excluding Government temporary overdraft repayment and de-risking.
Best Bank in Qatar award from “The Global Finance”
Best Retail Bank in Qatar for the second year in a row from “The Asian Banker”
Best Remittance Service for the Middle East from “The Asian Banker”
Best Cash Management Bank in Qatar for the third year in a row from “The Asian
Sheikh Abdulla bin Ali bin Jabor Al Thani, Chairman of the Board of Directors of Commercial Bank, said, “Qatar’s economy is developing as the state pushes forward with reforms designed to strengthen the country’s economic future. In 2018 Qatar’s private sector grew by almost 6%, a clear indication that the right initiatives have been put in place to promote sustainable economic growth. This positive momentum is set to continue in 2019, with the IMF forecasting 4% growth for the non-oil sector.
“In December 2018 S&P Global Ratings revised Qatar’s outlook to stable due to the country’s prudent macroeconomic policies, which is an affirmation of the confidence global investors place on the country’s economic prospects.
“Commercial Bank’s position as a leading financial institution enables it to play a significant role in supporting Qatar’s economic transformation agenda by participating in projects that will strengthen and diversify the national economy.”
Mr. Hussain Alfardan, Commercial Bank’s Vice Chairman, added, “In 2018 Commercial Bank started to see the results of its 5-year strategic plan come to fruition. As the legacy loan book provision program comes to an end, the Bank focused on optimising its portfolio and driving efficiencies. Operating expenses were down 11.5% as important investments in digitization and automation created leaner and more effective internal processes. The Bank continued to show significant improved bottom line performance. Consequently, the Board of Directors have recommended a cash dividend pay-out of 15% of par value or QAR 1.5 per share (pay- out ratio of 37%) subject to approval at the Annual General Assembly on 20 March 2019.”
“We remain committed to providing our customers with world class products and services all delivered through multiple channels, including the latest digital channels. In 2019 we will see the rollout of new branches aligned to our client footprint and the latest digital offerings to meet the needs of our clients in both the retail and wholesale banking segments. Commercial Bank has always been a leader in innovation and we will continue to reinforce our market leading position through these new client-oriented initiatives.”
Operating profit for the Group increased by 5.9% to QAR 2,335 million for the year ended 31 December 2018, compared to QAR 2,204 million achieved in 2017.
Net interest income for the Group reduced by 1.4% to QAR 2,482 million for the year ended 31 December 2018 compared to QAR 2,518 million achieved in 2017. Net interest margin
remained at 2.2% as margins have been managed through active loan book re-pricing and diversifying liquidity sources to minimize the increasing cost of funding.
Non-interest income for the Group increased by 1.5% to QAR 1,026 million for the year ended 31 December 2018 compared with QAR 1,011 million. The overall increase in non-interest income was mainly due to Increase in fee-based income mainly on credit and transaction banking and foreign exchange gains.
Total operating expenses were tightly managed at a Group level, down by 11.5% to QAR 1,173 million for the year ended 31 December 2018 compared with QAR 1,325 million in 2017. Costs reductions were primarily driven by lower staff and administrative expenses.
The Group’s net provisions for loans and advances decreased by 45.4% to QAR 927 million for the year ended 31 December 2018, from QAR 1,697 million in 2017. The non-performing loan (NPL) ratio decreased to 5.6% in December 2018 compared to 5.7% in 2017. The loan coverage ratio has reduced to 78.9% in December 2018 compared to 81.0% in 2017.
The Group balance sheet declined by 2.4% for the year ended 31 December 2018 with total assets at QAR 135.1 billion, compared to QAR 138.4 billion in 2017. The reduction was mainly due to lower loans and advances.
The Group’s loans and advances to customers reduced by 6.1% to QAR 83.7 billion in December 2018 compared with QAR 89.1 billion in 2017. This was mainly due to the depreciation and the revaluation in government temporary overdraft.
The Group’s investment securities increased by 12.6% to QAR 22.1 billion in December 2018 compared with QAR 19.6 billion in 2017. The increase is mainly in Government bonds.
The Group’s customer deposits reduced by 8.1% to QAR 71.3 billion in December 2018, compared with QAR 77.6 billion in 2017, as we let go expensive deposits.
Mr. Joseph Abraham, Commercial Bank’s Group Chief Executive Officer, commented, “Commercial Bank posted a strong set of results in 2018. Our consolidated operating profit was QAR 2,335 million, an increase of 5.9% whilst net profit increased by 175.5% to QAR 1,663 million compared with 2017. Our team’s strong commitment and diligent execution of the Bank’s 5-year strategic plan is designed to cement Commercial Bank’s status as a leading financial institution in Qatar.
“The increase in net profit was driven by the reduction in loan provisioning compared to the previous year. Gross loan provisioning was down 45.4% as the legacy loan book provision program started to tail off. Operating profit was supported by a strong focus on efficiency, with the benefits of digitization also flowing through to the income statement. Consequently, our cost to income ratio is 33.4% for 2018 compared to 37.5% for last year.
“Consolidated net interest income was down by 1.4% to QAR 2,482 million for the year 2018. The slight reduction was a result of the weakness in the Turkish Lira as reflected in Alternatifbank’s financial reports. Similarly, loans and advances were QAR 83.7 billion in 2018, down 6.1% compared to last year due to the depreciation of the Turkish Lira and a contraction in Government borrowing following Qatar’s sovereign bond issuance in April 2018. Weakness in the Turkish Lira and efforts to dispose of high cost deposits resulted in customer deposits of QAR 71.3 billion.
“The Domestic Bank reported an increase of 4.0% in net interest income to QAR 2,102 million,
despite a 4.4% decrease in loans and advances compared to last year, through a combination of asset pricing and strong focus on cost of funding. Customer deposits decreased by 7.7% to QAR 62.4 billion, which was the effect of a conscious decision to let go of expensive deposits bearing high interest rates.
“The Turkish economy and currency have gone through some volatility over the last year but we remain convinced of the long term potential of Turkey and are committed to our Turkish subsidiary. We are confident that we have the right management team and right strategy in place to proactively seek opportunities with the right risk profile for growth. Alternatifbank reported an increase in net profit to QAR 90.6 million for the year, up 85% compared with last
year. In Turkish Lira, Alternatifbank grew customer deposits by 26% and loans and advances by 23%, however in terms of Qatari Riyals, currency depreciation led to a 15% decline in loans and advances to customers and a 10% decline in customer deposits.
“Our Associate, NBO reported a net profit of OMR 50.6 million for the year, 15% higher than the previous year. We continue to classify UAB as an Asset Held for Sale and we remain focused on improving the performance of the entity as per our corporate strategy.
“In 2018 S&P revised Commercial Bank’s rating outlook from negative to stable which is a positive reflection of the execution of our 5-year strategic plan. We were honoured to receive several awards including ‘Best Retail Bank in Qatar’ for the second year in a row and ‘Best Remittance Service for the Middle East’ from The Asian Banker, together with ‘Best Bank in Qatar’ from Global Finance Magazine. Our one year old subsidiary Commercial Bank Innovation Services (CBIS), which brought onshore to Qatar technology and operations roles previously outsourced to a Business Process Outsourcing company in India, received recognition from the Qatar Financial Centre (QFC) as their ‘Best Partner of the Year’ by creating over 300 onshore jobs in support of Qatar’s vision of making the QFC and Qatar a world class location for the establishment of companies. CBIS will deploy world-class technologies to our banking operations and platforms. These awards from prestigious providers are a clear sign that Commercial Bank has the right strategy and strong execution, which is being recognised by our customers and the external market.
© Press Release 2019