The Commercial Bank (P.S.Q.C.) Financial Results For the period ended 30 June 2020
Forward Looking Statements • This presentation and subsequent discussion may contain certain forward-looking statements with respect to certain plans and current goals and expectations of Commercial Bank and its associated companies relating to their future financial condition and performance. These forward-looking statements do not relate only to historical or current facts but also represent Commercial Bank’s expectations and beliefs concerning future events. By their nature forward-looking statements involve known and unknown risks and uncertainty because they relate to future events and circumstances including a number of factors which are beyond Commercial Bank’s control. As a result, Commercial Bank’s actual future results or performance may differ materially from the plans, goals and expectations expressed or implied in such statements. • Any forward-looking statements made by or on behalf of Commercial Bank speak only as of the date they are made. Commercial Bank does not undertake to update forward-looking statements to reflect any changes in Commercial Bank’s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. The information, statements and opinions contained in this presentation do not constitute a public offer under any applicable legislation or an offer to sell or solicitation of an offer to buy any securities or financial instruments or any advice or recommendation with respect to such securities or other financial instruments. 2
CONSOLIDATED HIGHLIGHTS AND PERFORMANCE ALTERNATIF BANK PERFORMANCE COMMERCIAL BANK DIGITAL TRANSFORMATION STRATEGIC INTENT 3
Executive summary Strategic Focus Progress • Net profit decreased by 5.0% to QAR 901.2m as compared to H1 2019 • NIMs improved to 2.4% from 2.0% in H1 2019. • Operating profit of QAR 1,527.2 million, up by 17.9% as compared to H1 2019 • Excellence in Leadership in the Middle East award from Euromoney Results • Best Cash Management Bank in Qatar award for the third year in a row, and Best Transaction Banking service in Qatar from “The Asian Banker” • Best Retail Bank in Qatar award for the fourth year in a row and the Best Remittance Product and Service in Asia Pacific, Middle East and Africa from “The Asian Banker” Capital & • CET1 and Total Capital Ratios increased to 11.5% and 17.3% respectively as compared to 11.0% and 16.3% at 30 June 2019. • Funding Total consolidated deposits increased by QAR 0.3bn, up 0.4% in H1 2020 v June 2019. • Low cost deposits have increased by 11.4%, year-on-year. • Consolidated loan book at QAR 87.0bn in H1 2020, up 1.5% v H1 2019. • Reshaping To support our corporate customers and the economy, we have postponed loan installments and interest payments. • Focus remains on re-shaping profile of the lending book, by diversifying risk across a range of sectors including decreasing real estate Loan Book exposure and increasing exposure to government and public sector. Government sector remains at 11% (excluding temporary Government overdraft), while real estate and contracting sectors were down by 3% and 1%, respectively as compared to H1 2019. • NPL ratio increased marginally to 5.0% in H1 2020 compared to 4.9% in H1 2019, while loan coverage ratio (including ECL) decreased to 90% as compared to 96.2% in H1 2019. Provisioning • Gross provisions at QAR 530.9 million is 3.5% higher than that of H1 2019. The provisions are higher mainly on account of higher ECL due to the COVID-19 pandemic. • Cost of Risk reduced to 51bps compared with 100bps in H1 2019 due to strong recoveries. • Consolidated Cost to Income ratio reduced from 29.9% to 23.5% (normalized 26.5%) and in Qatar from 26.6% to 19.2% (normalized 22.8%) Costs by increase in operating income and reduction of costs through digitisation, automation and productivity enhancements. • Decrease in staff costs is on account of IFRS 2 accounting for its share options granted to staff. • Our initial investments in technology and digitization, which have been instrumental in our ability to swiftly adapt to the new • Alternatif bank reported net profit of TL 66.7m (QAR 38.5m), down by 40.0% as compared to H1 2019 (on QAR basis). Subsidiaries • NBO reported net profit of OMR 15.0m (CB’s share QAR 49.6m), down by 40.7% as compared to H1 2019. & Associates • UAB reported net loss of AED 208.9 m (CB’s share of QAR 82.8m), as compared to net profit of AED 35.8m in H1 2019. 4
Progress against our 5-year plan : QAR Million Q4 2019 Q1 2020 Q2 2020 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 (Normalized) (Normalized) (Normalized) Operating Income 900 947 1,006 1,494 907 1,090 1,010 1,002 1,076 Costs 278 274 272 404 177 293 286 272 279 Operating Profit 622 673 734 1,090 730 797 724 730 797 Net Provisions 221 208 197 29 189 107 191 189 107 Associates Income 50 49 4 (524) (134) (187) 4 (134) (187) Net Profit 440 509 531 542 402 499 542 402 499 Lending Volume 86,023 85,745 89,095 88,009 88,773 87,000 88,009 88,773 87,000 Deposit Volume 82,054 77,364 74,294 76,297 77,364 77,709 76,297 77,364 77,709 NIM 2.0% 2.1% 2.4% 3.2% 2.4% 2.4% 2.6% 2.5% 2.4% C/I Ratio 30.9% 28.9% 27.1% 27.0% 19.5% 26.9% 28.4% 27.1% 26.0% COR (bps) - gross 126 112 95 40 94 144 111 94 144 COR (bps) - net 102 98 71 2 83 19 63 83 19 NPL Ratio 5.6% 4.9% 4.9% 4.9% 5.0% 5.0% 4.9% 5.0% 5.0% Coverage Ratio 80.3% 96.2% 95.2% 82.2% 84.6% 90.0% 82.2% 84.6% 90.0% CET 1 10.9% 11.0% 11.0% 11.1% 11.1% 11.5% 11.1% 11.1% 11.5% CAR 16.1% 16.3% 16.2% 16.4% 16.6% 17.3% 16.4% 16.6% 17.3% EPS (annualized) 0.37 0.44 0.46 0.47 0.34 0.43 0.47 0.34 0.43 5
Group Financial Performance – Half year ended 30 June 2020 Group Profitability Consolidated Balance Sheet QAR Million H1 2020 H1 2019 % QAR Million % H1 2020 H1 2019 Net interest income 1571 1218 29.0% Total assets 143,675 141,180 1.8% Non-interest income 426 629 -32.2% Loans & advances 87,000 85,745 1.5% Total costs (470) (552) 14.9% Investment Securities 26,770 23,463 14.1% Net provisions (296) (428) 30.8% Customer Deposits 77,709 77,364 0.4% Associates income (321) 99 -424.2% Total equity 21,684 20,477 5.9% Net profit after tax 901 948 -5.0% Capital Performance Ratios H1 2020 H1 2019 QAR Million H1 2020 H1 2019 ROAE 8.2% 9.4% RWA (QAR million) 113,106 112,173 ROAA 1.2% 1.4% CET 1 ratio (Basel III) 11.5% 11.0% NIM 2.4% 2.0% Total Capital ratio (Basel III) 17.3% 16.3% 6
Commercial Bank response to COVID-19 • 80/20 work from home • Critical functions split across sites to ensure business continuity • Branches: electronic appointment system and • Accelerated digital transformation strategy protective health measures in place • Focus on digital tools that reduce the need for human interaction Customer • Launched new digital products and Staff Safety • De-risking and de-emphasized concentration in certain sectors • Digital Risk Focus on government and public sector • Prudent new business origination • Postponed loan installments and interest payments • Supporting • Uptake of virtual meeting technologies SMEs receiving concessionary interest • our Advisory Bank interactions becomes more advisory (risk rates in affected sectors Customers outlook / wealth management) • Supporting National Response Guarantee • Opportunity to extend relationship Programme management model to a wider base • Increased customer communication 7
Earnings Performance – Half year ended 30 June 2020 Profitability Net interest margin Net interest income up by 29.0% to QAR 1,570.8m in H1 2020 v H1 2019. 2.5% 2.4% 2.2% 2.2% 2.1% 2.0% NIM increased to 2.4% in H1 2020 v 2.0% in H1 2019. Increase in margins is a result of proactive management of the cost of funding both in Qatar and Turkey. 2016 2017 2018 2019 H1 2019 H1 2020 Non-interest income reduced to QAR 426.4m compared to QAR 628.8m in H1 2019. Net interest income as a % of average interest earning assets, including (i) Loans and advances to customers (ii) bonds and (iii) loans to other credit institutions The overall decrease in non-interest income was mainly due to an adverse unrealized mark to market movement in investment and trading income as a result of the Operating Profit unprecedented volatility in the global markets. 3,119 2,335 2,204 1,942 1,527 1,295 2016 2017 2018 2019 H1 2019 H1 2020 8
Cost to Income Ratio improves as cost efficiency measures take effect Operating Expenses Cost to Income Ratio Consolidated Cost to income ratio lower at 23.5% (Normalized 26.5%) in H1 2020 v 29.9% in H1 2019 driven by a reduction in staff cost. 45.7% Staff costs reduced by 26.4% to QAR 247.3m in H1 2020 v H1 2019 mainly on account of the IFRS 2 impact of the performance 37.5% rights scheme due to the movement in CB share price. 33.4% Continued focus on digital processes and tight expense management. 29.9% 28.3% In Qatar, C/I Ratio reduced from 26.6% in H1 2019 to 19.2% 26.5% (Normalized 22.8%) in H1 2020. 2016 2017 2018 2019 H1 2019 H1 2020* Cost to Income Ratio Domestic 40.2% 33.0% 28.5% 26.6% 25.3% 22.8% 2016 2017 2018 2019 H1 2019 H1 2020* *H1 2020 represents Normalized C/I ratio 9
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