Commercial Bank's net profit rises 47.3% to QR1.3bn in first half

July 29, 2021

The Commercial Bank (P.S.Q.C.) (the Bank), its subsidiaries and associates (Group) reported a net profit of QR1.327bn for the half year ended 30 June 2021 as compared to QR901.2m for the same period in 2020, representing a growth of 47.3 percent.

Sheikh Abdulla bin Ali bin Jabor Al Thani, Chairman of the Board of Directors of Commercial Bank, said: “Qatar’s economy is expected to enter a period of accelerated growth, supported by a robust policy response from the government to mitigate the economic impact of COVID-19, the expansion of LNG production capacity and the upcoming football World Cup.”

“At Commercial Bank we are committed to championing Qatar’s position as a place for innovative world-class banking solutions in the region. During Q2 2021, we received the ‘Visa Global Service Quality Award 2020’ and the ‘Most Innovative Customer Service Bank for 2021’ from International Finance Magazine - both awards being testament to our continuous efforts to providing the latest, most innovative banking solutions to our customers.”

Hussain Alfardan, Commercial Bank’s Vice Chairman, added, “We continue to see strong investor confidence in our business. The resilience of our business strategy and our continued focus on prudent risk management was recognised by Moody’s which re-affirmed our ‘A3’ rating for long-term deposits with a stable outlook for the long-term. We look forward to seeing growing investor demand in the region with the continued roll-out of vaccines and further stabilisation of markets to normal levels.”

Operating profit for the Group increased by 11.6 percent to QR1,705m for the half year ended 30 June 2021, compared to QR1,527.2m achieved in the same period in 2020.

Normalized net interest income for the Group increased by 14.1 percent to QR1,779m (13.3 percent on reported basis) for the half year ended 30 June 2021 compared to QR1,558.8m achieved in the same period in 2020. On normalized basis, net interest margin increased to 2.6 percent for the half year ended 30 June 2021 compared to 2.4 percent achieved in the same period in 2020. Although asset yields have reduced, the increase in margins is mainly due to effective management of the cost of funding.

Normalized non-interest income for the Group decreased by 2.8 percent to QR505.0m (56.4 percent on reported basis) for the half year ended 30 June 2021 compared with QR519.3m achieved in the same period in 2020. The overall decrease in non-interest income was mainly due to lower FX and trading income in our subsidiary Alternatif bank due to the challenging conditions in Turkey. This was partly offset by the recovery of investment income following the unprecedented volatility in global markets due to the COVID-19 pandemic, which adversely affected the comparative period in H1 2020.

Normalized total operating expenses increased by 5.1 percent to QR578.9m (57.6 percent on reported basis) for the half year ended 30 June 2021 compared with QR550.9m in the same period in 2020 due to continued investment in technology for operational efficiency.

The Group’s net provisions for loans and advances increased by 84.4 percent to QR415.2m for the half year ended 30 June 2021, from QR225.2m in the same period in 2020. The increase in provisions was mainly due to continued prudent provisioning. The non-performing loan (NPL) ratio decreased to 4.1 percent on 30 June 2021 compared to 5.0 percent in June 2020. The loan coverage ratio was at 112.1 percent in 30 June 2021 up from 90 percent in June 2020.

The Group balance sheet has increased by 12.8 percent on 30 June 2021 with total assets at QR162.1bn, compared to QR143.7bn in June 2020. The increase was mainly due to loans and advances.

The Group’s loans and advances to customers increased by 15.6 percent to QR100.6bn on 30 June 2021 compared with QR87bn in the same period in 2020. The increase was mainly in the government & public sectors.

The Group’s investment securities decreased by 5.6 percent to QR25.3bn on 30 June 2021 compared with QR26.8bn in the same period in 2020. The decrease is mainly due to maturities in Government bonds.

The Group’s customer deposits increased by 6 percent to QR82.3bn on 30 June 2021, compared with QR77.7bn in the same period in 2020. Low cost deposits have increased by 23.1 percent due to the various cash management initiatives and digital products that the bank offers.

All 3 rating agencies have affirmed Commercial Bank’s ratings with a Stable outlook.

Joseph Abraham, Commercial Bank’s Group Chief Executive Officer, commented: “Commercial Bank continued to deliver positive results for the six months ended 30 June 2021, reporting consolidated net profit of QR1.3bn for the period up 47.3 percent compared to the same period last year which reflected positive business momentum and also impairments of UAB in the comparative period last year which impacted results. The positive business growth was reflected in operating profit before provisions which increased by 11.6 percent to QR1.7bn for the first half of 2021.

“Profit before associates and taxes increased by 2.4 percent to QR1.3bn during the period, contributing positively to our earnings for the first half of 2021. We continue to focus on improving the performance of our associates by driving operational efficiencies.

“Group net interest income increased by 13.3 percent to QR1.8bn compared to the same period last year. The improvement was driven by asset growth and a strong focus on net interest margins which continued to improve from 2.4 percent to 2.6 percent particularly through effective management of our cost of funds.

“Normalized total fees and other income for the Group was QR505.0m, a decrease of 2.8 percent compared to the same period last year primarily due to challenging market conditions in Turkey, impacting our subsidiary, Alternatif Bank.

“The domestic bank reported a 15.3 percent increase in total fees and other income on a normalised basis, driven by a recovery in our investment income.

“On a normalised basis, the Group's cost to income ratio improved to 25.3 percent in H1 2021 compared to 26.5 percent for the same period last year, which enabled us to increase our income whilst maintaining a stable cost base.

“Net provisioning increased by 50.2 percent to QR444.6m, compared to the same period last year mainly on account of continued prudent provisioning which has further improved the NPL coverage ratio to 111.2 percent compared with 90.0 percent for the comparative period, despite lower recoveries in H1 2021 as compared to H1 2020.

“Business momentum was reflected in growth in loans and advances which were QR100.6m at the end of H1 2021, up 15.6 percent compared to the same period in the previous year due to increased loan demand from new and existing customers. Our customer deposits grew 6.0 percent at QR82.3bn whilst our focus on low cost deposits continued to yield results, with consolidated low-cost deposits increasing by 23.1 percent during the period, contributing to the improvement in NIMs.

“Our associate banks NBO and UAB contributed positively to our earnings for the first half of 2021. We continue to focus on improving the performance of our associates by driving operational efficiencies.”

“Alternatif Bank returned to profit during Q2 2021 which reduced the Q1 2021 loss of QR20.7m which was caused by interest rate volatility to a lower loss of QR13.8m for H1 2021.

The Board of Directors of the Bank decided, during the meeting held on July 27, 2021, in accordance with the laws and decisions applicable to foreign investment ownership in Qatar shareholding companies, to make a recommendation to the shareholders to hold an extraordinary general assembly, on a day and time to be announced at a later stage, in order to amend the Articles of Association of the Bank to increase the foreign ownership threshold to 100 percent, subject to the approval of the concerned authorities and the extraordinary general assembly.

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