Dukhan Bank Q.P.S.C. (DUBK) Earnings Call Transcript

Hello. -- and thank you for standing by. My name is Kim, and I will be your conference operator today. At this time, I would like to welcome everyone to Dukhan Bank. [Operator Instructions] . Thank you. I would now like to turn the call over to Shahan. Please go ahead.

Thank you, and hello, everyone. I want to welcome you to the Dukhan Bank's Third Quarter and 9 Month 2026 Financial Results Conference Call. On this call from management, we have same the bank's Group CFO; and Reason, Head of Reporting and Budgeting and IRO. So as usual, we will conduct this call with first management reviewing the company's results followed by a Q&A session. I will turn the call over now to Mr. Same. Please go ahead.

Thank you, Sharon, and good afternoon, everyone. To begin, I would like to briefly frame our performance within the broader macroeconomic and sector developments during the third quarter of 2026. The Geopolitical developments remain volatile with implications on energy markets, trade flows and regional economic activities. Rising oil prices and supply chain disruptions menued inflationary pressures and pushed the U.S. treasury yields to multiyear highs. -- playing on capital markets and liquidity in general and resulting in higher borrowing costs across global markets. Against this backdrop, the group maintained stable operations, supported by a well-established operating framework, strong liquidity levels and persistent progress towards strengthening the bank's risk management profile with prudence. These factors enable the bank to continue providing consistent, secure and reliable services to its customers. while reinforcing the group's financial position and resilience against market volatility. The open banking sector continues to demonstrate sound fundamentals characterized by strong capitalization. During the first 9 months of the year, we made good progress on our strategy with our focus on enhancing liquidity, strengthening risk management and pursuing selective growth. Turning now to the financial results for the first 9 months -- our liquidity position remains strong with all key ratios above regulatory thresholds. Our deposit base remains robust, reflecting continued customer confidence and the strength of the bank's franchise. The group's total assets stood at QAR 127 billion, reflecting a balanced growth across our portfolios. However, Net profit was flat year-on-year at QAR 1.2 billion, mainly linked to building impairment buffers for future volatility. Otherwise, the group reported a 7% year-over-year growth in its net operating profit back by 6% higher net banking income. Our capital adequacy ratio stood at 19.1%, well above the regulatory minimum outlook. Our focus for the rest of the year will remain firmly aligned with our strategy and focusing on building liquidity buffers with continued discipline on capital, liquidity and risk. -- we expect low single-digit balance sheet growth led by wholesale and private banking. We will maintain our conservative providing approach and continue to build offers. Profitability is expected to remain broadly flat, supported by stable NIMs. I will now hand over to Real for a more detailed overview of our financial results.

Thank you, Soma. Let me begin with a brief overview of the group's balance sheet as at 30th of September 2026. Total assets stood at QAR 126.8 billion, of which financing assets accounted for QAR 94 billion or 74% and investment securities amounts to QAR 24.8 billion, that is 20%. On the funding side, we continue to diversify our funding sources. -- leveraging long-standing client relationships and maintaining a balanced maturity profile. Customer deposits grew by 2.5% to reach QAR 90 billion -- the regulatory loans-to-deposit ratio stood at 99%, and both the LCR and NSFR remained comfortably above the regulatory thresholds. -- demonstrating the bank's sound liquidity management. Nonresident deposits remained low at approximately 7% of total deposits in line with our strategy of focusing on stable domestic funding sources. Turning now to profitability. For the first 9 months of 2026, the bank reported a net profit of QAR 1.2 billion, up by 0.1% year-on-year, supported by a 6% increase in the net banking income. The flat bottom line reflects higher impairment charges as continued -- as we continue to build provisioning buffers considering the regional situation. The growth in net banking income reflects the group's continued emphasis on revenue diversification and the strengthening of nonfinancing income streams. -- with prudent management of funding costs in a challenging external environment, providing additional layer of support. We remain committed to protecting our margins and managing the cost of funds efficiently, and our NIMs has stabilized at 2.1%. I Operational efficiency also remained a key strategic focus with continued optimization efforts supporting the group's overall profitability. These results highlight the group's resilience and its ability to navigate an evolving operating environment. Turning to asset quality. The NPL ratio improved to 3.8% from 4.2% at the end of 2025. The Stage 3 coverage ratio increased to 78.5% from 75.7%, including eligible collaterals, the Stage 3 coverage exceeds 100%. And Stage 2 financing represents 8.2% of the gross financing with coverage over 12.4%. Our financing book remained well diversified government exposures account for 20% of the total book, reflecting our strong sovereign linkage, while real estate financing represents 22% and Commercial financing contributes 12% and consumer financing contributes 10%. And contracting remains limited at 4%, and industry and manufacturing together make up 3%, with services and other sectors representing the remaining 29%. And exposures to government-related entities accounted for 15% of the total financing book at the end of September 2026. exposures are reported within their respective sector classes. Our capital adequacy ratio stood at 19.1%, well above the regulatory minimum of 14.63%. In summary, our financial performance reflects the strength of our fundamentals, strategic clarity and prudent financial management. We remain focused on sustainable growth, margin preservation and long-term value creation for our stakeholders. With that, we now open the floor for your questions. Thank you.

[Operator Instructions] We will take our first question from the line of Jon HelifromAia Investment. Please go ahead.

Thank you for the update on the performance. My question pertains to the fee income. -- for September -- the third quarter, 2026, where it was down both year-on-year and Q-on-Q. Could you just elaborate on what was behind that? Second question is on the NIM NIM impact from rising interest rate scenario, is there no positive impact that you may benefit from this? And the third question is on provisions. You said you've continued to build provisioning buffers. Could you give us some guidelines on how far that is going to continue -- thank you.

Yes. Thank you for your questions. I'll start with the first 1 on the fee income. So if you see the sequential move in the fee and commission income, which has actually declined compared to the Q2 of 2026. In fact, it's a significant decline from QAR 130 million, we reduced to QAR 66 million. However, if you remember in the second quarter's investor call, we mentioned that there was some one-offs which was linked to this significant increase in the fee and commission income. So if you exclude those one-offs, which were sitting in -- which are actually sitting in the second quarter, -- the run rate of the fee and commission looks quite straight line, and there has been no significant moves compared to the previous quarters. On the question on the NIMs. I think the NIMs in the current situation have remained stable throughout the year. with so much volatilities around. And I think going forward, the target is to contain the cost of funds as much possible and try to date our loan profiles. -- in a way that -- or try to match our loan profiles in a way so that the repricing on the liabilities gets efficiently managed and the RIM remains stable in the current situation. As far as the last question is concerned, I think we initially mentioned the target to manage the cost of risk or build the cost of risk towards the 60 bps, 60, 65 bps on -- so I think this target will continue, and we'll continue to build buffers to manage any sort of unforeseen volatilities, which we are not aware of at this point of time, but it can come up. this defensive approach or, let's say, a conservative approach will continue, at least in this year. And then we can talk about how the next year will look like in the next call once we finalize our budgets and once we internally assess how the situation looks