Investor Relations Presentation December 2018
Contents 1. QNB at a Glance 2. QNB Comparative Positioning Qatar and MEA 3. Financial Highlights as at 31 December 2018 4. Economic Overview Notes: All figures in US Dollars have been converted from Qatari Riyals based on the exchange rate of 1 US Dollar = 3.6405 Qatari Riyals In certain cases, numbers may be rounded for presentation purposes 2
QNB at a Glance
QNB is a strong and highly rated bank with a growing international footprint #1 bank in the Middle East and Africa across all financial metrics International network with presence in more than 31 countries Most valuable banking brand in the Middle East and Africa, worth USD 5.0 Bn 1 Over 29,000 employees serving more than 23 million customers Solid financial strength USD 49.5 Bn USD 3.8 Bn Market Cap. Net Profit Top-tier credit ratings A Aa3 Standard & Poor s Moody s Geographically Diversified Financial Position Key Strengths Leading Domestic Presence Leading Regional Presence USD 236.8 Bn Assets USD 3.9 EPS AA- Capital Intelligence A+ Fitch Experienced Management Team Strong Operating Performance and Financial Position 1 Brand Finance 2019 Source: December 2018 Financial Report Strong Credit Ratings Exposure to High- Value Transactions Strong Qatari Government Support 4
QNB's International Footprint Sub-Saharan Africa Middle East Asia South Sudan: (1 Branch) Togo: (927 Branches 1, 20.1% stake in Ecobank) Indonesia: (37 Branches, 90.96% stake In QNB Indonesia) Singapore: (1 Branch) India: (1 Branch) China: (1 Representative office) Vietnam: (1 Representative office) Myanmar: (1 Representative office) Qatar: (61 Branches) KSA: (1 Branch) UAE: (13 (+1 2 ) Branches, 40.0% stake in CBI) Syria: (15 (+31 2 ) Branches, 50.8% stake in QNB-Syria) Palestine: (15 2 Branches) Iraq: (9 (+1 2 ) Branches, 54.2% stake in Mansour Bank) Oman: (6 Branches) Bahrain: (1 2 (+1 2 ) Branch) Kuwait: (2 Branches) North Africa Egypt: (219 Branches, 95.0% stake in QNB ALAHLI) Libya: (36 2 (+1 2 ) Branches, 49.0% stake in Bank of Commerce & Development) Tunisia: (34 Branches, 99.99% stake in QNB Tunisia) Sudan: (5 Branches) Algeria: (7 2 Branches) Mauritania: (1 Branch) 1: The branch data for Ecobank is as at 30 June 2018 2: Includes the branches / representative offices from subsidiaries and associates 3: Dormant Europe Lebanon: (1 Branch) Yemen: (1 Branch) Iran: (1 Representative office 3 ) Jordan: (129 2 (+3 2 ) Branches, 34.5% stake in Housing Bank of Trade & Finance) United Kingdom: (1 (+1 2 ) Branch) France: (1 Branch) Switzerland: (1 Office, 100% stake in QNB Suisse SA) Turkey: (541 Branches, 99.88% stake in QNB Finansbank) 5
QNB Comparative Positioning Qatar and MEA
Top 5 Domestic Banks December 2018 QNB continues to excel in the domestic market Assets Loans 236.8 168.2 42.1 37.1 26.7 26.4 28.1 23.0 19.8 16.4 Deposits Net Profit 169.4 3.79 27.6 19.6 16.9 15.2 0.76 0.59 0.46 0.23 Note: All amounts are in USD billions Source: Banks December 2018 Press Release or Financial Statements, if available 7
Top 5 MEA Banks December 2018 QNB maintained its position as the leading bank in the region across all categories Assets Loans 236.8 202.6 168.2 148.9 136.2 120.9 96.2 91.4 70.7 69.5 Deposits Net Profit 169.4 126.7 3.79 3.27 2.84 2.74 2.73 94.7 85.5 85.0 Note: All amounts are in USD billions Source: Banks December 2018 Press Release or Financial Statements, if available. Standard Bank s results are as of June 2018 due to unavailability of December 2018 results 8
QNB is the leading financial institution in the MEA region with regards to brand value and market capitalisation Brand value and market capitalisation (USD Bn as at 31-Dec-18) Top MEA banking brands Top MEA banks by market capitalisation 5.04 49.5 4.04 41.7 3.89 38.1 2.92 37.9 2.47 26.0 Source: Brand Finance Bank 500 2019, Bloomberg 9
Financial Highlights as at 31 December 2018
QNB demonstrate sustainable profit growth Financial Highlights (as at 31 December 2018) Growth vs. December 2017 Profit 1 USD3.8 billion +5% Net interest margin (NIM) 2 : 2.61% Cost to income ratio: 25.8% Earnings per share: USD 3.9 ROAA: 1.65% Assets USD236.8 billion assets USD168.2 billion loans +6% +5% NPL (% of gross loans): 1.9% Coverage ratio 3 : 104% Funding USD169.4 billion deposits +5% Loans to deposits ratio: 99.3% Equity USD24.2 billion equity +12% ROAE 4 : 21.0% Capital adequacy ratio (QCB Basel III): 19.0% Source: December 2018 Financial Report 1: Profit Attributable to Equity Holders of the Bank 2: Net interest margin calculated as net interest income over average earning assets 3: Based on Stage 3 ECL provisions 4: RoAE uses Average Equity excluding fair value reserve, proposed dividends and noncontrolling interest and instrument eligible for additional Tier 1 Capital 11
QNB ALAHLI Highlights (as at 31 December 2018) Growth vs. December 2017 Profit 1 USD329.0 million +18% (EGP5.8 billion) (+18%) Net interest margin (NIM) 2 : 5.04% Cost to income ratio: 28.7% ROAA: 2.4% Assets USD14.5 billion assets (EGP259.7 billion) USD7.8 billion loans (EGP140.1 billion) +15% (+16%) +20% (+21%) NPL (% of gross loans): 2.2% Coverage ratio 3 : 193% Funding USD11.3 billion deposits (EGP203.2 billion) +10% (+11%) Loans to deposits ratio: 68.9% Equity USD1.5 billion equity (EGP27.4 billion) +26% (+27%) ROAE: 23.5% Capital adequacy ratio (Basel II): 17.8% Source: QNB ALAHLI under International Financial Reporting Standards 1: Profit Attributable to Equity Holders of the Bank 2: Net interest margin calculated as net interest income over average interest earning assets 3: Based on Stage 3 ECL provisions 12
QNB FINANSBANK Highlights (as at 31 December 2018) Growth vs. December 2017 Profit 1 USD527.4 million +13% (TRY2.6 billion) (+50%) Net interest margin (NIM) 2 : 5.03% Cost to income ratio: 38.0% ROAA: 1.6% Assets USD31.7 billion assets (TRY167.6 billion) USD19.4 billion loans (TRY102.6 billion) -10% (+25%) -18% (+15%) NPL (% of gross loans): 5.2% Coverage ratio 3 : 114% Funding USD17.3 billion deposits (TRY91.7 billion) -9% (+26%) Loans to deposits ratio: 111.9% Equity USD2.8 billion equity (TRY14.7 billion) -22% (+8%) ROAE: 16.9% Capital adequacy ratio (Basel III): 14.8% Source: QNB Finansbank under International Financial Reporting Standards 1: Profit Attributable to Equity Holders of the Bank 2: Net interest margin calculated as net interest income over average interest earning assets 3: Based on Stage 3 ECL provisions 13
Increasing geographical diversification positively contributes to growth Geographical Contribution (as at 31 December) Domestic International % Share of International as percentage of the total Net Profit 1 Loans Deposits USD billion USD billion USD billion 3.40 3.61 3.79 143.0 160.5 168.2 139.2 160.8 169.4 2.14 2.30 2.40 97.9 107.6 119.7 71.7 89.3 95.4 1.26 1.31 1.39 45.1 52.9 48.5 67.5 71.5 74.0 2016 2017 2018 2016 2017 2018 2016 2017 2018 37% 36% 37% 32% 33% 29% 49% 44% 44% Profit from international operations increased by USD135 Mn (11%) from 2016 to 2018 Loans from Intl operations decreased by USD3.4 Bn (8%) from 2016 to 2018 Deposits from Intl operations increased by USD6.5 Bn (10%) from 2016 to 2018 Source: December 2018 Financial Report 1: Profit Attributable to Equity Holders of the Bank 14
Consistent High Profitability Income Statement Breakdown (USD billion as at 31 December) Net Profit 1 Operating Income 2 Net Interest Income % RoAE % Cost to Income Ratio % Net Interest Margin 3 2.87 3.09 5 yrs: 8% 3.40 3.61 3.79 4.34 4.47 5 yrs: 11% 6.34 6.30 6.74 3.37 3.50 5 yrs: 10% 4.91 4.91 5.23 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 21.4 20.6 21.0 21.1 21.0 20.8 21.5 30.4 29.1 25.8 2.86 2.80 2.89 2.65 2.61 Net profit increased by 5% from December 2017 2013-2018 CAGR of 8% Operating income increased by 7% from December 2017 2013-2018 CAGR of 11% NII increased by 6% from December 2017 Strong NIM with the current size of more than USD235 billion of total assets Source: December 2018 Financial Report 1: Profit Attributable to Equity Holders of the Bank 2: Operating Income includes Share of Results of Associates 3: Net interest margin calculated as net interest income over average interest earning assets 15
Good asset growth driven by lending activities mainly in QAR and USD Assets Analysis (as at 31 December) Total Assets Evolution 2018 Split of Assets (%) USD billion By Type By Currency 133.6 147.9 5 yrs: 14% 197.7 222.8 236.8 Cash and Balances with Central Banks Due from Banks Loans and Advances 7.5 7.1 71.0 QAR USD TRY EUR 38.7 34.0 5.6 9.7 Investments 1 10.9 EGP 4.0 Fixed and Other Assets 3.5 GBP Others 3.8 4.2 2014 2015 2016 2017 2018 Total 100.0 Total 100.0 Assets increased 6% from December 2017 2013-2018 CAGR of 14% Loans and advances represent 71% of total assets USD and QAR currencies account for 73% of total assets Source: December 2018 Financial Report 1: Includes investment in securities and associates 16
Good loan growth Loans Analysis (as at 31 December) Total Loans Evolution 2018 Split of Loans (%) USD billion By Geography By Sector 1 92.9 106.7 5 yrs: 15% 143.0 160.5 168.2 Qatar Turkey Egypt Europe GCC 71.2 11.9 4.7 4.4 3.2 Govt. & Govt. Agencies Services/ Commerce Industry Real Estate & Contracting 42.7 28.0 6.4 11.6 North America 0.6 Individual 10.4 Others 4.0 Others 0.9 2014 2015 2016 2017 2018 Total 100.0 Total 100.0 Loans increased 5% from December 2017 2013-2018 CAGR of 15% Source: December 2018 Financial Report 1: Reported based on Gross Loans Loans denominated in USD represent 38% of total loans Loan exposures are of a high quality with more than 42% concentration to Government and public sector entities 17
High quality lending portfolio is highlighted by low NPL ratios Asset Quality Analysis (as at 31 December) USD million Corporate SME Non Performing Loans (NPL) by Segment QNB has continued to 2,600 2,871 3,348 1,382 975 891 468 1,157 625 706 1,355 1,260 x Total NPL s increase its provisions in response to the global economic situation The bank s coverage ratio has remained robust amidst the economic slowdown, with a coverage of 104% as at 31 December 2018 Past dues are NPL after 90 days default Retail NPL Ratio 1 2016 2017 2018 1.8% 1.8% 1.9% There is an additional risk reserve of USD2,198 million which is greater than the 2.5% QCB requirements Coverage Ratio 2 114% 112% 104% Source: December 2018 Financial Report 1: % of NPLs over gross loans 2: % of provisions over NPLs 18
High quality investment portfolio with 88% of securities rated AA or Sovereign Investments Analysis (USD million as at 31 December 2018) Fair Value Through Other Comprehensive Income Amortised Cost Quoted Unquoted Fixed rate Floating rate State of Qatar Sovereign Debt 0 5,780 State of Qatar Sovereign Debt 0 3,025 Other Sovereign Debt 1 2,147 Other Sovereign Debt 1,333 8,639 Other Debt Securities 0 355 GCC Corporate & FI Debt Securities 0 1,645 Funds & Equities 42 324 Other Debt Securities 7 432 Quoted securities account for 99% of FVOCI Investment securities Majority of the Amortised Cost Investment Securities are Government Guaranteed Source: December 2018 Financial Report and QNB 19
Robust growth in customer deposits and funding Funding Analysis (as at 31 December) Total Customer Deposits Evolution 2018 Split of Deposits (%) USD billion By Sector By Type By Geography 98.2 5 yrs: 13% 160.8 169.4 139.2 108.6 Govt. & Govt. Agencies Corporates 30.6 50.9 Time Deposits Saving Accounts 81.2 2.4 Qatar GCC Europe Turkey 56.3 2.1 17.8 9.8 Individuals 18.5 Current and Call Accounts 16.4 Egypt MENA 7.1 1.2 2014 2015 2016 2017 2018 Total 100.0 Total 100.0 Others Total 5.7 100.0 Deposits increased 5% from December 2017 2013-2018 CAGR of 13% QNB remains the public sector s preferred bank USD, EGP and TRY denominated deposits represent 50%, 5% and 6% of total deposits respectively Source: December 2018 Financial Report 20
Solid liquidity profile Liquidity Analysis (as at 31 December) Loans to Deposits Ratio Evolution 2018 Sources of Liquidity % % of total liabilities 94.6 98.3 102.7 99.8 99.3 Due to Banks 9.4 USD billion 2014 2015 2016 2017 2018 Liquid Assets 1 Evolution % Share of Total Assets Customer Deposits Debt Securities Other Borrowings Other Liabilities 79.7 3.4 3.2 4.3 35.3 35.7 46.4 53.2 58.3 Total Liabilities 100.0 2018 Liquidity Ratios 2014 2015 2016 2017 26% 24% 23% 24% 2018 25% LCR: 124% Source: December 2018 Financial Report 1: Liquid Assets calculated as the sum of Cash and Balances with Central Bank, Due from Banks and Investment Securities 21
Strong capital adequacy ratio maintained above both QCB and Basel III requirements Capital Analysis (as at 31 December) Total Equity 1 Evolution Basel III Capital Adequacy Ratio USD billion x Gearing 2 % 18.4 20.2 22.7 16.5 19.0 15.4 (QCB) 2016 2017 2018 2017 2018 10.7 11.1 10.4 Capital base has been regularly increased in line with the strong performance of QNB s balance sheet Capital adequacy ratio is above QCB and Basel III requirements including the applicable DSIB buffer of 1.875% Source: December 2018 Financial Report 1: Total Equity excludes fair value reserve, proposed dividend and non-controlling interest 2: Defined as total assets to total equity 22
Diversifying business mix will bolster sustainable growth Business Mix Contribution (% share as at 31 December 2018) Lines of Business Net Profit 1 Op. Income Loans Deposits Group Corporate 85 78 89 77 Maintain dominant domestic market share Grow international contribution Nurture SME business in Qatar Group Asset and Wealth Management 8 6 5 9 Ensure positioning as Qatar's leading private bank Maintain positioning as Qatar's leading fund manager Preferred Institutional Broker Maintain domestic market share Group Consumer Banking 7 16 6 14 Continue to enhance global affluent offering Selectively expand retail offering across international network Source: QNB 1: Profit Attributable to Equity Holders of the Bank 23
IFRS 9 Implementation: Additional buffer for long term earnings stability Financial Impacts QNB implemented IFRS 9 with effect from 1 January 2018 based on the QCB guidelines. As per QCB instructions, ECL impact has been treated as Tier 2 Capital for CAR purposes with no amortisation of the transition impact. Impact of Classification and Measurement (C&M) requirements are not significant to the QNB. Coverage ratio 1 As of 31 December 2018 Stage1 Stage2 Stage3 (NPL) Due from Banks and Balances with Central Banks 0.1% 3.3% - Loans 0.3% 8.3% 104.1% Investments 0.1% 5.3% 116.1% Cost of Risk 2 31 December 2018 Stage1 Stage2 Stage3 (NPL) Total Cost of Risk 5bps 6bps 39bps 50bps Source: QNB 1: Coverage ratio is calculated as impairment allowance over gross exposures subject to ECL 2: Cost of Risk is calculated as Annualised ECL charge on Loans & Advances over Average Gross Loans 24
QNB Group Financials Key data (as at 31 December 2018) QNB QNB incl. QNB ALAHLI QNB incl. QNB Finansbank % Contribution of QNB AA % Contribution of QNB Finansbank Financials Ratios Presence USD billion 2.85 3.15 3.79 209 197 237 168 169 149 152 141 141 23.7% 20.2% 19.0% 100% 104% 91% 16,486 29,959 1.9% 1.5% 1.5% 9,943 422 641 1,183 Profit 1 Total Assets Loans & Advances Customer Deposits Capital Adequacy (QCB Basel III) NPL Coverage Ratio Branches Staff 8.3% 6.1% 4.6% 6.7% 13.9% 13.4% 11.5% 10.2% Results finalised under International Financial Reporting Standards (IFRS) Capital Adequacy Ratio: 19.0% Source: December 2018 Financial Report 1: Profit Attributable to Equity Holders of the Bank 25
Economic Overview
Qatar s hydrocarbon wealth makes it the world s richest country Oil and gas reserves per capita (2017) GDP per capita (2017) k barrels of oil equivalent (boe) k USD PPP Qatar 62.8 Qatar 125 Kuwait 25.3 Luxembourg 106 UAE 13.1 Singapore 94 Venezuela Saudi Arabia Libya Canada Iran Iraq Russia 10.8 9.7 8.8 4.9 4.4 4.3 2.2 Brunei Ireland Norway UAE Kuwait Switzerland 78 76 72 68 66 62 Kazakhstan 2.0 US 60 At current extraction rates, Qatar s proven gas reserves would last for another 141 years Development of the hydrocarbon sector has made Qatar the world s richest country Sources: British Petroleum, International Monetary Fund (IMF), Ministry of Development Planning and Statistics (MDPS), QNB Economics analysis 27
Qatar accumulated large reserves during its hydrocarbon expansion and is now using these reserves to diversify the economy through major investments Real GDP Growth by Sector %, year-on-year Hydrocarbon Non-Hydrocarbon 30% Hydrocarbon Phase 25% 20% Diversification Phase 15% 10% 5% 0% Qatar s National Vision 2030 aims to create a knowledge based and diversified economy -5% Sources: MDPS, QNB Economics 28
Qatar s National Vision 2030 is supported by a large infrastructure investment programme Major Projects Pipeline as of September 2018 Construction Transport Oil Project Lusail Mixed-Use Development Ashghal Expressway Programme Budget (bn USD) 45.0 20.0 End 2022 Education City 8.8 2019 FIFA World Cup Stadiums Qatar Integrated Rail 40.0 2026 Hamad International Airport, Phase I, II & III Ashghal Local Roads & Drainage Hamad Port, Phases II & III Bul Hanine Oilfield Redevelopment 4.0 23.5 14.6 9.4 11.0 2020 2020 2020 2022 2025 2021 Comments New investment sectors are opening up to support self sufficiency and long-term growth Focus areas for investment are the transport, construction, logistics and manufacturing sectors In parallel to the diversification phase, new investment opportunities are expected to arise from the increase in LNG production over the medium-term Sources: MEED Projects, QNB Economics analysis 29
Qatar s fundamentals resilient despite the blockade Qatar (USD bn, 12-month sum) Financial Soundness Indicators (2015-2017, %) 9 8 7 6 5 4 3 2 1 0 Exports Imports Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Capital Adequacy 2015 2016 2017 Tier 1 capital/ risk-weighted assets 15.2 15.7 16.5 Regulatory capital/ risk-weighted assets 15.6 16.1 16.8 Asset Quality Non-performing loans/ total loans 1.6 1.3 1.6 Liquidity Liquid assets/ total assets 28.5 29.6 28.2 Total loans/ total deposits 112.4 113.7 108.8 Total loans/ total assets 67.5 66.7 67.1 Profitability Return on assets 2.0 1.7 1.5 Return on equity 16.2 14.6 13.9 Imports have recovered since the blockade New trade routes have been established Exports have grown despite the blockade Financial system remains resilient and healthy Capital adequacy and liquidity metrics improved in 2017 while asset quality was steady Robust public-sector deposit mobilization helped drive overall deposit growth at 13.2% in 2017 Sources: IMF, MDPS, QCB, QNB Economics 30
Qatar is one of the highest rated sovereigns in the world, ranking above a number of advanced economies Moody s Sovereign Ratings 1 Investment Grade AAA Aa1 Aa2 Aa3 A1 A2 A3 Baa1 Baa2 Baa3 US, Germany, Canada, Australia, N Zealand, Switz nd, Norway, Sweden, Denmark, Neth lands, Lux bourg, Singapore Austria, Finland UK, France, South Korea, Hong Kong, Isle of Man Qatar, Belgium, Taiwan, Macau, Cayman Islands, Faroe Islands Chile, China, Japan, Saudi Arabia, Estonia, Czech Bermuda, Slovakia, Poland, Botswana, Ireland Iceland, Mexico, Latvia, Lithuania, Malaysia, Malta, Peru Spain, Thailand, Slovenia, Mauritius India, Indonesia, Uruguay, Philippines, Bulgaria, Panama, Colombia Italy, Portugal, Oman, Hungary, South Africa, Kazakhstan, Bahamas, Romania Non-Investment Grade Ba1 Ba2 Ba3 B1 B2 B3 Caa1 Caa2 Caa3 Ca C 1/ Non exhaustive as of January 2019 Sources: Moody s, QNB Economics analysis 31
Disclaimer By attending the meeting where this presentation is made, or by reading the presentation slides, you agree to be bound by the following limitations: These materials contain statements about future events and expectations that are forward-looking statements. These statements typically contain words such as "expects" and "anticipates" and words of similar import. Any statement in these materials that is not a statement of historical fact is a forward-looking statement that involves known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. None of the future projections, expectations, estimates or prospects in this presentation should be taken as forecasts or promises nor should they be taken as implying any indication, assurance or guarantee that the assumptions on which such future projections, expectations, estimates or prospects have been prepared are correct or exhaustive or, in the case of the assumptions, fully stated in the presentation. Past performance cannot be relied on as a guide to future performance. The Bank assumes no obligations to update the forward-looking statements contained herein to reflect actual results, changes in assumptions or changes in factors affecting these statements. The opinions presented herein are based on general information gathered at the time of writing and are subject to change without notice. The Bank relies on information obtained from sources believed to be reliable but does not guarantee its accuracy or completeness. 32