Commercial Bank of Qatar financial results for the half-year ended 30 June 2012

Commercial Bank of Qatar (“Commercialbank” or “the Bank”) announces its financial results for the half-year ended 30 June 2012. The Bank delivered a strong first half-year net profit of QR 1,017 million which was up by 6% compared with QR 956 million achieved in the same period in 2011. The profit for the second quarter was 16% higher, at QR 546 million, than in the first quarter of 2012.

Key financial highlights:

• Net profit up 6% to QR 1.017 billion
• Total assets up 8% to QR 73.3 billion
• Customer loans and advances up 10% at QR 43.9 billion
• Customers’ deposits up 17% to QR 40.6 billion
• Earnings per share of QR 8.22 compared with QR 7.92

His Excellency, Abdullah Bin Khalifa Al Attiyah (pictured), Chairman of the Board of Directors of Commercialbank said, “Qatar’s economy has grown steadily this year, led by the Public Sector expansion and underpinned by the increased level of spending announced recently in the Government’s 2012-2013 budget. Whilst there has been a lower level of demand from the Private Sector, Commercialbank has successfully increased its lending in the first half of the year and will continue to look for opportunities to grow the business in the remainder of the year.”

Financial Performance:

Mr. Hussain Al Fardan, Commercialbank’s Managing Director, commented on the first half’s financial performance, “Commercialbank has delivered a positive performance in the first half of 2012 delivering strong profitability in a challenging operating environment. Our balance sheet and asset quality are strong and we are well positioned for continued growth in the second half of the year.”

Net interest income grew by QR 20 million to QR 941 million in the first half of 2012 reflecting an increase in lending of 10% which was partially offset by a reduction in net interest margin to 3.1% compared with 3.6% for the half-year ended 30 June 2011. The reduction in margin was due to continued competitive pricing pressure and the regulatory changes in 2011 which capped pricing for many retail lending products. 

Non-interest income was QR 464 million for the first half of 2012 compared with QR 485 million for the same period in 2011 due, mainly, to a reduction in 2012 in the level of net fee and commission income. The second quarter of 2012, however, saw a continuation in the improving quarterly trend for fee and commission income which was up by QR 17 million to QR 193 million compared with the first quarter.

Net operating income for the half-year ended 30 June 2012 was QR 1.406 billion unchanged from the level achieved in the same period last year.

The Bank’s total operating expenses were up by 10% to QR 455 million compared with QR 415 million in the first half of 2011 due to an increase of 6% in staff costs reflecting annual increments for staff and investment in staff training. General and administrative expenses, and depreciation were also up reflecting the Bank’s investment in the development of both the infrastructure and capability of the franchise. The cost to income ratio increased to 29.7% in the first half of 2012 from 27.8% in the same period in 2011.

The Bank’s net provisions for loans and advances were QR 32 million in the first half of 2012, down 64% from QR 88 million provided in the same period of 2011. The second quarter of 2012 included the recovery of the provision taken in the previous two quarters for a single Domestic, Islamic Banking Corporate account.  Asset quality remains strong with the non-performing loan ratio improving to 0.82% at 30 June 2012 compared with 1.20% at the end of December 2011. 

Provisions for impairment on the Bank’s investment portfolio improved to QR 27 million for the first half of 2012 compared with QR 37 million for the same period in 2011.

Profit for the first half of 2012 was up 6% to QR 1.017 billion from QR 956 million for the same period in 2011. The net profit for the second quarter was QR 546 million, 16% higher than the first quarter of 2012, and up 7% compared with the second quarter of 2011.

Advertisement

The Bank’s total assets increased by 8% to QR 73.3 billion at 30 June 2012 compared with QR 67.7 billion at 30 June 2011 and were up QR 1.8 billion from 31 December 2011.  The increase in total assets from the end of 2011 was driven by growth of QR 2.3 billion in lending to customers and an increase in financial investments of QR 1.1 billion, partially offset by a reduction of QR 2.6 billion in balances due from banks and financial institutions.

Loans and advances to customers were up by 10% to QR 43.9 billion at 30 June 2012 compared with QR 39.8 billion at the end of June 2011 and were up by 6% from 31 December 2011. The growth in lending in 2012 has come from both the Corporate and Retail businesses. Financial investments increased to QR 12.8 billion at 30 June 2012, 1% higher than at the end of June 2011 and up 9% from the end of 2011.  The increase since the end of 2011 reflects increased investment in Government bonds, Qatar Central Bank Treasury Bills and other fixed income securities.

Customers’ deposits were QR 40.6 billion at 30 June 2012, an increase of 17% compared with the end of June in 2011, and up QR 2.6 billion since 31 December 2011.  The increase in 2012 has been achieved despite a low level of growth in deposits across the banking sector, and is a testament to the strength of the Bank’s customer relationships whilst positioning the Bank to fund future growth in lending.

In February the Bank repaid a syndicated loan facility of USD 650 million whilst arranging a new USD 455 million term loan with a club of international banks. In April the Bank issued USD 500 million five-year unsecured fixed rate notes in the international capital debt markets under its Euro Medium Term Note Programme.

The Bank’s capital position remains strong with the capital adequacy ratio at 17.7% as at 30 June 2012 compared with 17.9% at the end of 2011, well above the Qatar Central Bank’s required minimum level of 10%.

Andrew Stevens, Commercialbank’s Group Chief Executive Officer, said “Commercialbank has delivered strong first half results. Whilst Public Sector lending has grown in the second quarter, Private Sector credit demand has remained subdued and at a lower level than the first half of 2011. Despite this, we have grown both our loan book and our deposit base and have further diversified our sources of funding.

Our affiliated banks in the UAE and Oman have delivered outstanding performances in the first half of the year with strong growth in lending and improved profitability.

In April we returned to the international debt capital markets and issued USD 500 million in five-year fixed rate notes under our EMTN programme. The offer was more than six times oversubscribed demonstrating the continued confidence of global fixed income investors in Commercialbank’s strategy, financial strength and management.

In the second half of the year, we will continue to focus on growing our domestic business and supporting the development of our affiliate banks whilst ensuring proactive balance sheet management, strong asset quality and vigilant risk management.”

Associates:

Commercialbank’s associates, National Bank of Oman (“NBO”) and United Arab Bank (“UAB”), contributed QR 124 million to the Bank’s net profit in the first half of 2012 compared with QR 89 million for the half-year ended 30 June 2011.

NBO’s net profit after tax grew by 17% to RO 19.9 million for the six months ended 30 June 2012 compared with RO 17.1 million for the same period in 2011.

Operating income grew by RO 5.0 million to RO 50.6 million from RO 45.6 million in 2011 due, mainly, to higher net interest income up 17% to RO 33.2 million compared with RO 28.3 million in the first half of 2011 reflecting both growth in lending and a reduction in the cost of funds.

The net impairment losses for 2012 were RO 5.2 million, RO 0.3 million higher than the first half of 2011 with the non-performing ratio improving to 2.65% at 30 June 2012 from 2.94% at 31 December 2011. During the half-year, loans and advances to customers grew by 11% to RO 1.86 billion from RO 1.67 billion at 31 December 2011 whilst customers’ deposits were up by RO 228 million to RO 1.83 billion at 30 June 2012.

UAB delivered a record half-year net profit of AED 193 million, up 45%, from AED 133 million in the six months ended 30 June 2011 reflecting increased operating income which was up 35% to AED 349 million in 2012.

The increase in operating income reflected higher net interest income up 41% to AED 257 million and growth of 23% in non-interest income to AED 92 million driven by expansion of the Corporate and Retail businesses. UAB’s operating expenses were up by 19% to AED 105 million from AED 89 million in 2011 as a result of investment in branch expansion and in infrastructure. 

Provision for credit losses increased to AED 50 million compared to AED 36 million for the half-year ended 30 June 2011 due, in part, to the implementation of the revised provisioning guidelines issued by the UAE Central Bank. Loans and advances to customers grew by 45% to AED 9.6 billion at 30 June 2012 and deposits were up 54% to AED 8.4 billion compared with the end of June 2011.