Commercial Bank of Qatar (“Commercial Bank” or “the Bank”) announces its financial results for the year ended 31 December 2013. The Bank delivered a net profit for the year of QAR 1,605 million compared to QAR 2,012million in 2012. Profit for the fourth quarter of 2013 was up 7% to QAR 300 million compared to the third quarter of 2013.
The Bank’s draft results for the year ended 31 December 2013 have been announced following approval at a meeting of Commercial Bank’s Board of Directors. Following the acquisition of Alternatifbank (“ABank”) this year’s financial statements represent the first time that Commercial Bank is consolidating the results of a major banking subsidiary.
The Board of Directors is recommending, for approval at the Annual General Assembly on 16 March 2014, the distribution of a cash dividend of 20% of the share’s nominal value to the shareholders for 2013, which equates to QAR 2 per share, and bonus shares of 20% (one bonus share for every five shares held). The financial results and profit distribution are subject to the approval of the Qatar Central Bank.
Key financial highlights
• Operating income up 15% to QAR 3.4 billion
• Net profit of QAR 1.6billion
• Total assets up 41% to QAR 113 billion
• Customer loans and advances up 38% at QAR66.9billion
• Customers’ deposits up 53% to QAR63.4billion
• Earnings per share of QAR 6.48
• QAR 2 billion Additional Tier 1 capital raised
His Excellency, Abdullah Bin Khalifa Al Attiyah, Chairman of the Board of Directors of Commercial Bank said, “2013 was an important year for Commercial Bank as we continue to build a bank that is capable of delivering long-term value to its shareholders and customers. We invested in our international strategy with the acquisition of ABank in Turkey, which we intend to develop into a market leading Turkish bank. Following the acquisition, Commercial Bank and its Associates in the UAE and Oman are now well positioned to capture the growing trade and investment flows between Turkey and the GCC. Qatar’s infrastructure investment requirement and its rapidly diversifying economy require world-leading banking products and services. The investment we have made in the business and in our people this yearwill ensure that Commercial Bank continues to grow its market share and shareholder value.”
Mr. Hussain Al Fardan, Commercial Bank’s Managing Director, added,”The improving trends witnessed in the third quarter have continued into the fourth quarter of the year and we continue to see good momentum as we enter 2014. The prudent, higher provisioning taken during the fourth quarter, as we indicated as a potential outcome earlier in the year, resulted in net profit of QAR 1.6 billion for the year. However, net profit for fourth quarter 2013 increased by 7% over the third quarter 2013 to QAR 300 million. The improvement in our profitability and lending in the fourth quarter in addition to the continued strong performance of our Associates and the contribution of ABank give us optimism for Commercial Bank’s prospects in 2014.”
Net operating income increased by 15% to QAR 3,434 million for the year ended 31 December 2013, up from QAR 2,983 million achieved in 2012. ABank delivered net operating income for the second half of 2013 of QAR 445 million following its consolidation into Commercial Bank Group.
Net interest income was QAR 2,188 million for the year ended 31 December 2013, 17% higher than 2012, reflecting strong growth in lending activities particularly in the Real Estate and Services sectors. ABank contributed QAR 312 million, 14% of the total net interest income. Net interest margin remained stable compared to the third quarter of 2013 at 2.57%.
Non-interest income was up 11% to QAR 1,246 million for 2013 compared with QAR 1,118 million in 2012 with ABank contributing QAR 133 million. The overall increase in non-interest income was due to higher fee and commission income, higher foreign exchange income combined with lower income from investments securities.
Total operating expenses were up 40% to QAR 1,437 million for 2013 compared with QAR 1,028 million in 2012. Excluding ABank, expenses increased by 11.2% for the year compared to 2012 as Commercial Bank continued to invest in its people and infrastructure. Reported total operating expenses include ABank’s QAR 294 million of expenses following its consolidation and the one-off cost of QAR 49 million associated with the acquisition of ABank.
The Bank’s net provisions for impairment losses increased to QAR 714 million in 2013 compared with QAR 202 million in 2012, and comprised provisions of QAR 604 million for loans and advances and QAR 110 million for financial investments. Although non-performing loan ratio increased marginally to 3.6% in December 2013 from 3.3% at 30 September 2013, the coverage ratio improved to 54% as at December 2013 compared to 48% in September 2013.Impairment provisions on the Bank’s investment portfolio increased to QAR 110 million for the year ended 31 December 2013 compared with QAR 62 million in 2012, reflecting a general decline in the valuations of certain emerging market equities and currency fluctuation.
The Bank also sets aside a risk reserve against its lending as part of shareholders’ equity. At 31 December 2013, the risk reserve was QAR 1,316 million meeting the revised minimum level of 2.5% (2% for end of 2012) set by the Qatar Central Bank for the end of 2013.
Commercial Bank delivered strong balance sheet growth in 2013 increasing by 41% with total assets at QAR 113 billion compared to QAR 80 billion in 2012 which includes QAR 19 billion of assets from ABank. Balance sheet growth was driven by QAR 18 billion in lending to customers,higher balances held with Central Banks and other financial institutions which were up QAR 9 billion, combined with an increase of QAR 3.5 billion in Financial Investments.
Loans and advances to customers were up 38% to QAR 66.9 billion at 31 December 2013, compared with QAR 48.6 billion at the end of 2012. The growth in lending in 2013 was generated mainly through credit growth in the Real Estate and Services sectors.Loans and advances to customers of QAR 11.5 billion at ABank were included at 31 December 2013.
Customers’ deposits have grown by53% to QAR 63 billion at 31 December 2013, compared with QAR 41.4 billion in 2012, supporting Commercial Bank’s growth in lending. The increase in deposits has come mainly from higher demand and savings balances and the inclusion of QAR 8.1 billion for ABank. This underpins our strategy to ensure continued diversification of our funding base and focus on growing low cost funds.
In December 2013, the Bank raised QAR 2 billion of Additional Tier 1 Capital Instruments through a private placement which complies with Basel III requirements and Qatar Central Bank guidelines. The Bank’s capital position remains strong with a capital adequacy ratio of 14.1% as at 31 December 2013 which is above the Qatar Central Bank’s required minimum level of 10%.
Andrew Stevens, Commercial Bank’s Group Chief Executive Officer, said,”The investments and strategic decisions we have taken during the course of the year mean that Commercial Bank is now in a stronger position to pursue growth over the long-term to the benefit of shareholders and customers. We have continued to diversify our income streams into attractive, long-term growth markets with the acquisition of ABank in Turkey in July of last year, reflecting the success we have generated with our investments in our Associate banks, United Arab Bank and the National Bank of Oman, both of whom have generated strong returns for the year. We are working closely with the ABank management team, sharing Commercial Bank’s best practice, to create a market-leading Turkish bank. Commercial Bank, ABank, UAB and NBO can now look forward to capturing an increasing share of the value of the increasing trade and investment flows between the GCC and Turkey.”
Abdulla Saleh Al Raisi, Commercial Bank’s Chief Executive Officer, said “We have invested heavily in our Corporate and Retail banking offers, ensuring our customers benefit from a far more integrated range of products and services, whilst continuing to support the development of Qatar’s SME sector with sector specific services, which will help to develop this crucial element of Qatar’s increasingly diversified economy. We continued to invest heavily in our digital platform to ensure Commercial Bank meets the needs of our Corporate and Retail customers as they increasingly interact with us online and on the move. To support this capability and engage with our growing digital customer base, and to differentiate Commercial Bank in an increasingly competitive market, the rebrand of Commercial Bank was successfully launched in 2013.”
Commercial Bank became the majority shareholder in ABank in 2013 holding a 74.24% stake, following the acquisition of ABank shares of 70.84% from the Anadolu Group and a further 3.40% through a public tender offer. The acquisition reinforced the Bank’s strategy to diversify its revenue and growth opportunity in the region and will enable synergies and cumulative benefits for all four Alliance banks in their respective markets.
ABank delivered a net profit of QAR 100 million for 2013 (QAR 161 million in 2012). For consolidation in to Commercial Bank’s financial statements, ABank Group delivered a net profit of QAR 9 million for second half of 2013 in extremely challenging market conditions. From 2014 onwards, full year results of ABank will be incorporated in Commercial Bank’s results.
UAB and NBO have achieved a strong financial performance throughout 2013 with 25% year-on-year improvement in profitability.
National Bank of Oman
National Bank of Oman (NBO) achieved strong results in 2013, with net profit after tax growing 1.8% to OMR 41.4 million, compared with OMR 40.7 million for the same period in 2012. Operating income grew by OMR 5.3 million to OMR 103.9 million, from OMR 98.6 million in 2012, mainly due to an increase in net interest income which was up 11% to OMR 74.7 million. During 2013, NBO grew its customer lending by 8% to OMR 2.07 billion and customers’ deposits increased by 15% to OMR 2.18 billion compared with the end of 2012.
United Arab Bank
UABdelivered a record net profit of AED 552 million for the year ended 31 December 2013 which represents an increase of 35% over the 2012 results of AED 410 million. The total operating income for the year ended 31 December 2013 increased by 36% to AED 1,039 million, from AED 765 million for 2012 with robust underlying performance from both Net Interest Income and Non-Interest Income, up 39% and 26% respectively against 2012. UAB’s loans and advances increased by 40% to AED 15.3 billion as at 31 December 2013, with customers’ deposits at AED 15 billion, up 49% compared to 2012.
Following its strong performance in 2013, the bank is well placed to confidently move into 2014, where it anticipates continued business growth across all segments whilst continuing to introduce and implement best practice risk management techniques.