Qatar International Islamic Bank (Q.P.S.C) (QIIK) Earnings Call Transcript

Hello, and welcome to Qatar International Islamic Bank. [Operator Instructions] Please note that this call is being recorded. I'd like to hand over the call to the moderator, Shahan. Please go ahead.

Thank you, and hello, everyone. I want to welcome you to QIB's Second Quarter and First Half 2026 Financial Results Conference Call. So on this call from management, we have Hossam Khattab, the bank's CFO; and Mahmoud al-Ahmad, Head of Treasury and Investments. 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 Hossam. Please go ahead.

Thank you, Shahan. Good afternoon, everyone, and thank you for joining Qatar International Islamic Bank Half Year 2026 Investor Conference Call. We appreciate your continued interest in QIB and pleased to have the opportunity to update you on our financial performance for the first half of 2026, our strategic initiatives and the strength of our balance sheet. Joining me today, Mr. Mahmoud Ahmed, Head of Treasury and Investment, who will later provide you a detailed update on our funding profile and liquidity position. Following our prepared remarks today, we will be available to answer your questions. Let me begin with a brief overview of our performance for the first half of 2026. Despite ongoing geopolitical uncertainty and a challenging global economic environment, QIIB delivered another strong set of financial results during the first half of 2026. Pal tensions and recent uncertainties surrounding the global interest rate outlook continued to influence financial markets. Nevertheless, Qatar's economy remained resilient, supported by strong fiscal fundamental, healthy hydrocarbon revenues and continued implementation of Qatar National Vision 2030. Against this backdrop, QIIB once again demonstrated the resilience of its business model by delivering healthy profitability, disciplined financing growth, excellent asset quality, strong capital and liquidity positions. These results reflect the strength of our conservative risk management framework, diversifying funding base and disciplined execution of long-term strategy, enabling us to continue creating sustainable value for our shareholders and stakeholders. Turning to financial performance. As of June 2026, total assets increased to QAR 63.8 billion, representing growth of approximately 1.9% compared to year ended 2025. Net financing assets expanded as well by 5% to reach QAR 44.1 billion, reflecting continued customer demand while maintaining our prudent underwriting standards. Customers deposits remained broadly stable at QAR 43.1 billion, demonstrating the resilience and quality of our funding franchise despite an increasingly competitive deposit market. During the period, total equity increased by 2%, further strengthening our capital position. Net profit reached QAR 715 million, representing 3.5% increase compared to the first half of last year. This performance was achieved while maintaining one of the strongest efficiency ratio in the sector, highlighting the quality and sustainability of our earnings. The bank's shareholder structure remains unchanged and continues to provide long-term stability. The Qatar Investment Authority remains our largest shareholder with a 16% ownership stake, while approximately 63.1% of our shares are owned by Qatari companies and individual investors. GCC and other foreign investors collectively hold around 21% of the bank. Our business model also remains well diversified across 3 complementary business segments, corporate banking, personal banking, treasury and investments. During the first half of 2026, corporate banking represented approximately 46% of the total assets and generated 52% of the total revenues. Personal Banking accounted for 32% of the total assets and contributed 26% of the revenues, supported by continued customer acquisitions and successful launch of the new retail products. [indiscernible] Investment represents around 20% of the total debt assets contributed 16% of revenues while continuing to maintain a high-quality investment portfolio focused primarily on sovereigns and investment to create support. Balance -- this balanced business mix continues to provide earnings diversification and enhance the resilience of our franchise across the fund economic cycles. Moving to the balance sheet. QIB continues to maintain a well-balanced and conservatively structured balance sheet. Financing assets now represent approximately 69% of the total assets, while financial investments accounted for 20%, reflecting our continued focus on high-quality liquid investment. Balances with banks represent approximately 5% of total assets with a remaining balance primarily comprising of cash and other cash. Our Financing portfolio also remains well diversified across sectors. [indiscernible] Financing continues to present the largest segment at 42%, followed by Trade Financing 18%, Real Estate at 16%. Government growth -- and government financing growth to be 15%, Contracting 5%, service 3%. The diversification significantly with used concentration risk and reflects our prudent approach to portfolio management. Turning to asset quality. Asset quality as well continue to be one of the QIB's key swings, our nonperforming financing ratio improved further to be 2.5%, down from 2.9% at year-end 2025, remaining comfortably below the market average. Equally important, our Stage 3 financing portfolio continues to be fully proficient maintaining 100% coverage of our expected credit loss. Coverage remains healthy and approximately [ 5.4 ] while these 2 coverage improved significantly to 20.7%, demonstrating our conservative provisioning approach. In addition, the overall quality of our financing portfolio continued to benefit from substantial collateral received against financing exposures providing an additional leg of protection and reinforcing the bank's resilient rated portfolio. Turning to profitability and efficiency. QIB continues to generate stable and sustainable earnings while maintaining disciplined cost management. Our return on average assets improved to 2.3%, while return on average equity increased to 13.1%. At the same time, our cost-to-income ratio remained strong and one of the lowest in the regional banking sector, at only 19.7%, reflecting our ongoing focus on operational efficiency and disciplined expense management. We remain committed to balancing sustainable growth with prudent cost control and continued investment in technology and digital capabilities. Our capital and liquidity position continued to be a significant competitive strength. As of June 2026, our capital adequacy ratio reached 21.4%, substantially above Qatar International Islamic Bank requirement. Our CET1 ratio improved to 16.2%, providing significant capacity to support future business growth while maintaining a conservative a bit of buffer. Liquidity remains exceptionally strong. Our liquidity coverage ratio stands at 168.8%, while net stable funding ratio reached [ 114.8% ], both comfortably exceeding the regulatory minimum requirement of 100%. These metrics continue to demonstrate the resilience of our funding profile and provide considerable flexibility to support future financing growth and the market operations. Looking ahead, our strategic priorities remain unchanged. We will continue to focus on growing high-quality financing while maintaining disciplined risk management, accelerating our digital transformation initiatives, including [indiscernible] launch a digital bank strategy, expanding our retail banking franchise to innovative customer propositions, including successful launch of our new [indiscernible] saving accounts and partnership with Qatar Airways, maintaining our strong capital, liquidity and asset quality metrics, continuing to deliver sustainable returns for our shareholders while supporting Qatar's economic development in conclusion. The first half of 2026, demonstrated once again the resilience of QIB business model despite the [indiscernible] macroeconomic environment, the bank has delivered a stable profitability, continued financing growth, strengthening asset quality and maintain one of the strongest capital and liquidity position within the local market system. We remain confident in our strategy and will position to continue delivering sustainable long-term value for our shareholders, customers and all other stakeholders. This is the end of my part, and I will hand over now to Mr. Mahmoud Ahmad, Mahmoud Ahmad is going to provide you more details about our liquidity and funding profile. Thank you.

Thank you, Hossam. So turning now to our funding profile. QIB continues to maintain a stable and predominantly customer-funded balance sheet. As of end of June 2026, customer deposits represented approximately 68% of our total fund, comprising 57% and it was our equity deposits and 11% in current accounts. This was complemented by capital at 16%, [indiscernible] financing at 8%, amount banks at 6% and 2% for other liabilities. The customer deposits stood at approximately QAR 43.1 billion, remaining broadly stable compared with QAR 43.3 billion at the end of sorry -- yes, at the end of 2025 and above the QAr 41.4 billion recorded in 2024. The composition of our [indiscernible] equity deposits also remained stable. Individual customers accounted for 64% of the total followed by government and semi-government entities at 27%, corporate customers at 8% and [indiscernible] banking of at 1%. We continue to expand our deposit base through our branch network, corporate leadership and alternative banking channels. QIB maintains an approximately 11% share of Qatar Retail Islamic Banking market. Our deposit stabilization strategy is also supported by total product innovation. This includes the [indiscernible] saving accounts and during 2026 the launch of Avios saving accounts and strategic partnership with Qatar Arway, enabling customers to earn obvious points on the saving balances. Overall, our funding structure remains stable with customer deposits continuing to represent the principal source of funding for the bank. Moving to the credit rating. QIB continues to maintain strong disintegrated rating in the category from such Moody's and Capital Intelligence, which rates the bank at A, with a rating currently placed on rating [indiscernible] negative. This action is aligned with Fitch broader rating action on the state of Qatar and it's not specific for QIB. Moody's rates, the bank at A2 with a stable outlook, [indiscernible] has signed a blast rating, also stable outlook. Overall, QIB, we continue to maintain a solid and working on this integrated profile. So this is the end of our presentation, and we are happy to hear Q&A.

Operator, we can go to Q&A.

[Operator Instructions] We will take our first question from the line of [indiscernible] from Ryan Investment.

I was wondering if you can just give a bit more color on the strong loan growth that was up 13% year-on-year and 5% year-to-date, that brought your LD ratio to a little bit over 100%. So at the same time, there was some margin compression in notice because your net financing income was lower, and that affected your overall income. I wonder if you could just share a little bit of color on the 3 points I raised earlier about the loans, the margins and the LD ratio.

Thank you for your questions. But I was going to start first with the total assets. As you mentioned, we achieved almost like 13.1% year-on-year average asset growth, financing asset growth. This mainly was driven a strong asset growth butyrate to the public or governmental sector, which is consistent with our strategy. We highlighted a few quarters few meetings before. That's our main first -- now is to expand our market share in terms of the public government real sector, which we be able to achieve by end of Q1 and Q2 as well. The share of the public or government sector is about 15%, up from 10% by December 2025 and from 4% as of December 2024. This definitely is supporting the total asset growth to be at 5%. And in the meantime, we have a good -- we achieved a good growth in our financial investments, by almost like 78% compared to December 2025. In terms of the NIMs, we definitely as about from the system pressure on our NIM. We have built almost like between 60 to 70 basis points in terms of return on our assets -- the [indiscernible] assets. How the cost of fund is only dropped by about 25 basis points, that's -- at the end of the day, we have a drop of [indiscernible] compared to year-over-year and between June June '25 to June 2026. While if we compare with Q1, we're only have about additional 5 bps drop, which means that we almost now consistent. And do we reach a level of stabilize our NIMs of the compression of our names. We expect as well to have further little pressure on the few quarters till the year-end, but it will be in line with our expectation. The NIMs would be between [ 275 to 280 ], which was the same position before 2023. I don't recap what last 2 questions you asked. If you can repeat this to one again.

Sure. I suppose if I can elaborate firstly on your questions on your answers. So just to be sure, are you saying that your 15% market share, you are going to continue at this rate? And what is the target? Because you mentioned that there will be a bit more NIM compression to the for a few more quarters. So just to recap, I do recall you saying in the past that you do an increased government financing to the government and GREs, but just to be sure, is this going to extend it beyond 2026 into 2027?

Yes. Basically, the 15% of our financing assets, not from the market, they got 14% from like be very huge for our bank. So my point is before you wouldn't focus much on governmental public sector business. Now we changed our strategy since last few to achieve between 20% to 25% of our financing assets relating to public or government sector. Now were achieved 15%, so we expect -- or targeting actually between the end of 2026 to end of 2027 to achieve that milestone. Definitely this one puts more pressure on our margins because definitely, the pricing of government or government-related entities is lower than or cheaper than what is the [indiscernible] SME pricing. And we consider this one, but about from diversifying our financing assets going to the more to public or government business. That's what we expect are targeting for the next 2 years.

Does that also apply then to deposits in terms of exposure to the government?

Our main focus from the deposit side actually on the item other than the wholesale government or corporate even. So our most strong position we have in the retail deposits other than the government, definitely, government to be open. We are targeting to acquire additional government deposits. But this one is a bit tricky, I believe Mamoud can give more colors on this one, but we are more focusing on retail deposits. Mahmoud, if you have anything?

Yes, sure. As Hossam has mentioned, yes or men actually targeted or more stabilized deposits as well as on more diversification. This is something we have started about 3 years ago, [indiscernible] we have executed that continuous basis. So even though that some of these GREs are having bit large deposits compared with the overall funding base. We were deliberately from time to time, switching from those to multiple clients. And over a big time, are you using that on a successful basis.

The next question comes from the line of Abhinav Sinha from Lesha Bank.

I have a couple of questions. One is, so now that you have already achieved 5% loan growth. So what is the loan guidance for the full year? And then you said we can expect 275 to 280 bps margin. So for the full year, what does that mean for the NIM? On the second question, so I can see the provisions have declined year-on-year. So what was the reason behind that? And what is your guidance for the provisions for the full year '26?