QNB Investor Relations Presentation June 211
Forward Looking Statement This presentation and subsequent discussion may contain certain forward-looking statements with respect to the financial condition, results of operations and businesses of the Group. These forward-looking statements represent the Group s expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Additional detailed information concerning important factors that could cause actual results to differ materially are available in our Annual Report. 2
QNB Group s Profit & Asset Evolution US$ Million Profit US$ Billion Total la Assets Cumulative Average Annual Growth (CAGR) 25 21 = 3.1% Cumulative Average Annual Growth (CAGR) 25 21 = 34.9% 1,8 1,567 61.4 1, 5 1,2 1,3 1,154 6 48 41.8 49.3 9 689 36 31.4 6 549 24 19.7 3 12 26 27 28 29 21 26 27 28 29 21 3
Banking Sector: Overview Qatar has a competitive and vibrant Banking Sector, with 18 Financial Institutions Commercial Banks Qatar National Bank Commercialbank Doha Bank Ahlibank* International Bank of Qatar* Al khaliji Bank* * Partially-owned by GCC Institutions. Islamic Institutions Qatar Islamic Bank Masraf Al Rayan International Islamic Barwa Bank Local Branches of Foreign Banks HSBC BNP Paribas Arab Bank Mashreqbank Standard Chartered United Bank Ltd. Bank Saderat Iran Specialized Qatar Development Bank 1% Government-owned owned 4
Performance Excellence Stable Shareholders Structure since Inception. 5% stake by Qatar Investment Authority, with the remainder by private investors Top MENA Bank with Total Assets of US$72.4 billion in June 211 Sustained Growth in Profitability with Diversified Income Sources Largest Domestic Network 61 branches & offices More than 195 ATMs Best Bank in Qatar Award from Largest International Network The Banker, Euromoney, Global covering 24 countries through Finance, and Asian Banker Branches, Rep Offices, and Associates Dominant Market Share Amongst Qatari Banks (June 211) Assets 48.6% Loans 5.1% Deposits 53.8% 5
Performance Excellence Highest Credit Rating among regional banks Moody s: Aa3 Standard & Poor s: A+ Capital Intelligence: AA- Fitch: A+ Strong Capital Adequacy Ratio 21.5% in June 211 compared with 8% for Basel II and 1% for Qatar Central Bank High Asset Quality with an NPLs Ratio of 1.% in June 211 Comprehensive Banking Activities Retail Corporate Treasury Private Banking Asset & Wealth Management Financial Advisory (QNB Capital) Brokerage & Custody (QNB Financial Services) High Coverage Ratio with Specific Provisions amounting to 126% of NPLs in June 211 First Qatari Bank to launch Local Equity Funds. One of the Largest Fund Managers in the region 6
QNB Regional Peers (June 211) Assets (US$ billion) 1 Loans and Deposits (US$ billion) 7. 8 83.7 78.4 6. 66.9 Loans Deposits 72.4 6 67.1 5. 52.6 54.6 53.9 4 5.8 4. 41.3 41.6 4.1 3. 34.7 37. 2 2. 22. 1.. Emirates NCB QNB NBAD Samba Emirates NCB QNB NBAD Samba NBD NBD Net Profit (US$ million) QNB s Ranking by Net Profit (MENA) 1, 8 6 4 587 781 966 532 593 June 211 June 21 June 29 First Second Fifth 2 June 28 Ninth Emirates NCB QNB NBAD Samba NBD 2 4 6 8 1 Source: Financial statements, June 211 7
QNB Regional Peers (Dec. 21) Assets (US$ billion) Loans and Deposits (US$ billion) 1 7 8 6 61.1 Loans Deposits 6 4 77.9 75.3 61.4 57.6 5. 5 4 3 53.7 54.4 33.5 45.4 36.2 37.3 33.5 35.6 2 2 1 21.4 Emirates NCB QNB NBAD Samba NBD Emirates NBD NCB QNB NBAD Samba Net Profit (US$ million) 1,6 1,4 1,2 1, 8 6 4 2-637 Emirates NBD 1,26 1,567 1,2 1,183 NCB QNB NBAD Samba QNB s Ranking by Net Profit (MENA) 21 Second 29 Third 28 Third 27 Eleventh 2 4 6 8 1 12 Source: Financial statements, Dec 21 8
QNB Group Overview Corporate History 1964 1976 1978 27 28 29 21 211 Established as the first Qatari- owned bank London branch opened Paris branch opened Acquired stake in the second largest bank in Jordan Established QNB Capital Acquired 24% stake in CBI - UAE Established Established QNB QNB - Swiss and Financial Services QNB - Syria & acquired 7% of Bank Kesawan Subsidiaries & Associates Entity Country Ownership International Network QNB Capital Qatar 1% QNB Financial Services Qatar 1% QNB Banque Privee (Suisse) Switzerland 1% Ansbacher UK 1% Subsidiaries / Associates Bank Kesawan Indonesia 7% Tunisian Qatari Bank Tunisia 5% QNB Syria Syria 51% Housing Bank for Trade & Fin. Jordan 35% Branches Commercial Bank International UAE 24% Mansour Bank Iraq 23% Al Jazeera Finance Company Qatar 2% Rep Offices 9
QNB Risk Management Group Risk Management Committees Risk Strategy Credit Asset Liability Information Technology Infrastructure Human Capital Committee Committee Committee Committee Committee Committee Credit Risk Market Risk Liquidity Risk Operational Risk Other Risks Diversification of investments, capital markets and lending and financing activities avoid concentration Collaterals (cash, treasury bills and bonds, real estate and equity) used when appropriate Substantial exposure towards high credit quality issues (approx. 9% of bond portfolio is rated AA or better) Credit policy driven by Group Credit Committee which reviews credit applications/limits and approval authority Appropriate monitoring of credit risk robust provisioning policy and recovery processes Regular scenario and stress analysis to manage and monitor market risk Interest rate risk managed primarily via interest rate swaps while limits on currency exposure are in place Daily mark to market and reporting to management negligible trading or open positions Robust risk management system Diversification of funding base Broad portfolio of high h quality liquid id assets and readily marketable securities Constant monitoring of liquidity position Managed centrally by the Group Comprehensive operational risk management policy augmented by sophisticated risk management software Key risk indicators monitored and risk/loss database maintained Strong IT infrastructure and detailed contingency plans/procedures with two Disaster Recovery sites supporting main data center First bank in Qatar with ISO 271:25 Standard Disaster Recovery Operations Certification Regulatory, legal and reputational risks through compliance and risk frameworks with counsel from legal advisers 1
QNB Group Corporate Governance Enhance Transparency and Public Confidence in QNB and its Practices Group Audit and Compliance Committee Consisting of three Board members with meetings attended by senior management Responsible for final approval of financial statements and appointing external auditors Internal control, compliance and reporting responsibilities are also part of its mandate Group Policies, Governance, Development and Remuneration Committee Consisting of two Board members and the Group CEO Mandate is to develop longterm strategy while monitoring quarterly performance Entrusted to develop Group s Corporate Social Responsibility Strategy Monitors changes in local and International governance practice to recommend best practice Oversees the remuneration policy of the Group Group Executive Committee Consisting of five Board members, with meetings attended by the Group CEO Reviews overall credit and investment exposures Approves credit facilities and investments above authorized set for management Reviews the status of litigation matters and recommend action to be taken on impaired loans Oversees and approves Corporate Social responsibility expenditures 11
Ratings QNB s credit rating is the highest in Qatar and is among the highest in the region. During 21, QNB s rating was affirmed from all rating agencies. In April 211, Capital Intelligence raised the Financial Strength Rating from A+ to AA-, and affirmed all other ratings. In February 211, Moody s affirmed QNB s rating and Outlook. In July 21, Fitch affirmed QNB s rating and Outlook. In March 21, Standard & Poor s and Capital Intelligence affirmed QNB s ratings and Outlook. Moody s S&P Capital Intelligence Fitch QNB Long-Term Rating Aa3 A+ AA- A+ 12
. Financial Results - June 211 13
Income Overview (June 211) Profitability (US$ m) 1,2 1, 8 6 4 2 331 51 568 743 June 27 28 29 21 211 Highlights The Bank has seen continued growth in its revenues 966 on the back of increasing market share and expanded international and domestic network. Net profit increased 3.1% to US$966 million during from same period last year. Despite QNB s growing operations, the Bank has witnessed improving cost efficiencies a testament to its ability to generate synergies. The Bank s bottom line has been growing, driven by a robust net interest margin. Net Int. Income (US$ m) and NIM (%) Operating Income (US$ m) and Efficiency (%) 1,2 1, 8 6 4 2 June 95 2.8% 2.6% 2.4% 2.9% 2.% 74 247 32 486 27 28 29 21 211 5% 4% 3% 2% 1% % 1,4 1,2 1, 8 6 4 2 June 1,264 969 65 75 454 25.1% 21.1% 18.6% 17.2% 15.8% 27 28 29 21 211 1% 8% 6% 4% 2% % NII Net Interest Margin Net Operating Income Efficiency Ratio 14
Net Profit by Quarter Q2 Q3 Q4 Q1 Q2 US$ 21 21 21 211 211 Net Interest Income 377,314314 41,194194 453,649 469,2 481,14 FX Gain 24,784 24,61 25,945 26,311 29,255 Fees & Commissions 78,552 77,217 74,792 78,333 86,694 Invest. Income Dividends 238 1,796 2 9,582 6,7 Invest. Income Capital Gain 13,581 11,131 22,226 21,82 21,786 Invest. Income Associates 18,389 11,854 13,96 12,41 15,99 Other Income 547 1,12 3,243 1,954 3,882 Total Other Income 136,91 127,71 139,33 15,411 163,417 Total Operating Income 513,45 528,265 592,953 619,431 644,432 G&A Expenses (84,19) (89,515) (98,998) (1,55) (1,243) Total Operating Profit 429,215215 438,75 493,955955 519,376 544,189 Loan Loss Provisions (26,641) (32,474) (63,224) (48,691) (57,49) Other Provisions & Taxes (7,652) (7,842) (4,613) (1,685) 9,566 Net Profit 394,921 398,434 426,119 469, 496,346 15
Total Assets Overview Total Assets (US$ billion) Highlights 8. 6. 4. 2.8 41.9 4.4 51.1 72.4 The strong balance sheet growth witnessed by QNB in recent years has sustained with growth of 41.7% from same period last year. This growth has been predominantly driven by increased lending with loans and advances representing 57% of total assets. 2.. June 27 28 29 21 211 QNB s assets are predominantly in Qatari Riyal and US$ (to which QAR is pegged) also constitutes a material portion of assets. Breakdown of Assets by Currency Breakdown of Assets by Type QR US$ 2.6% 4.4% 3.2% 48.7% 19.2% 1.4% 7.7% 14.5% Cash and Balances with Central Bank Due from Banks Euro Loans and Advances STG Investments Others 41.1% 1% 57.1% Fixed & Other Assets 16
Loans Review Loans and Advances (US$ billion) Highlights 45. 3. 15.. June 41.3 1% 32.3 8% 23.2 22.8 5% 14.5.8%.5%.9%.7% 1.% 3% % 27 28 29 21 211 Total Loans NPL % T. Loans Customer financing has grown substantially in recent years. Loans & advances increased to US$41.3 billion up by 28.% from same period last year. NPL as % of loans and advances stood at only 1.%. The Bank s loan portfolio is relatively well balanced, with a concentration in high quality credit exposures (Government & Government Agencies). Being a Qatar focused bank, QNB s loan portfolio is mainly comprised of loans to Qatari entities. Breakdown of Loans by Geography Breakdown of Loans by Industry Qatar 11.2% 2.3% Gov. 22.7% Gov. Agency 2.1% Other GCC 82.5% 16.6% Industry Countries Commerce 11.8% Europe Services 3.6% Real Estate Others 26.2% 16.6% Personal 2.8% 1.6% Others 17
Asset Quality Movement in Recoveries (Provisions) (US$ million) 2 11.5 (2) (1.6) (4) (3.3) (6) (8) (52.) (1) (12) (16.1) (14) June 27 28 29 21 211 NPL Coverage (US$ million) Highlights Since 28, in response to the global financial crisis, QNB has increased its provisions. QNB reported an NPLs ratio of 1.% as at June 211 one of the lowest in the MENA region. The Bank s provisions coverage has remained strong amidst the economic slowdown, with a coverage of 126% reported Q2 211. An additional Risk reserve of US$24.7m was taken to bring total balance to US$412 million representing nearly 2.25% of private lending against QCB requirement of only 1.5%. NPLs by Sector (US$ million) 625 551 5 432367 437 375 254 21 233 25 172 125 86% 19% 118% 126% 28 29 21 June 211 Provisions NPLs Coverage Ratio 5 4 3 2 1 437 367 223 29 21 June 211 Corporate SME Retail 18
Funding Profile Customer Deposits (US$ billion) 6 53.9 5 38.2 4 27.1 28.2 3 2 14.6 1 June 27 28 29 21 211 Breakdown of Deposits by Sector Highlights Customer deposits and unrestricted investment accounts increased to US$53.9 billion up by 41.% from same period last year. QNB s funding is predominantly driven by customer deposits and unrestricted investment accounts. Leveraging g on the Bank s extensive branch network, QNB has attracted the relevant financing to fund its growing balance sheet. In line with its status as the country s leading bank, QNB remains the public sector s preferred bank in terms of deposits. Funding Split Gov. Gov. Agencies Individual 42.6% 15.2% 27.8% 5.4% 3.2% 3.1% 1.% Due to Banks Repurchase Agreements Customer Deposits Other Borrowings Corporate 14.4% 87.4% Other Laibilities 19
Liquidity Highlights QNB s loans to deposit ratio has remained anchored below 1%, providing the Bank with a strong liquidity profile. Loans to Deposit Ratio (%) 1% 96.% 95% The Bank s deposits are also predominantly in the form of time deposits, providing an added buffer. 9% 85% 86.4% QNB s liquid assets also constitute a 8% 79.6% 76.7% substantial portion of the Bank s balance sheet, with the amount of State of Qatar Debt 75% Securities notably increasing since 28. 28 29 21 June 211 Composition of Deposits By Type Liquid Assets (US$ billion) Current and Call Accounts 28.6% Savings 1.3% 2 Accounts Time Deposits 7.1% 4 3 1 28.8 22.7 17.4 12.4 28 29 21 June 211 Cash and Balances with CBs Due from Banks Other Securities State of Qatar Debt Securities 2
Loans & Deposits by Segment December 21 June 211 Loan ns International Banking 18.2% Qatar Operation 81.8% International Banking 17.5% Qatar Operation 82.5% sits Depo International Banking 33.4% Qatar Operation 66.6% International Banking 28.3% Qatar Operation 71.7% 21
Net Profit by Sector December 21 June 211 International Banking 17.2% Qatar Operation 82.8% International Banking 18.5% Qatar Operation 81.5% 1, 8 613.33 786.9 June 21 June 211 US S$ million 6 4 2 129.3 178.9 Qatar Operation International Banking 22
Strong Capital Growth with Stable Returns Equity (US$ billion) Highlights 12. 9. 6. 3. 29.2% 28.4% 2.9 4.2 25.4% 4.9 28.8% 5.9 1.4 4% 3% 2% 1% In line with the strong surge in the Bank s balance sheet, QNB has also regularly increased its capital base. The last time in March/April 211. QNB s capital is in the form of Tier 1 Capital, and the Bank has maintained its CAR above the 1% as mandated by the Qatar Central Bank.. % QNB continued to enjoy strong ROAE above 25%. 27 28 29 21 June 211 Equity exc. FVR ROAE Eligible Capital (US$ billion) Capital Adequacy Ratios (%) 1. Tier 1 Tier 2 8.2 8. 6. 4.7 4. 3.2 3.7 3.8 2.. 27 28 29 21 June 211 24% 2% 16% 12% 8% Tier 1 CAR Total CAR 21.5% 21.5% 16.2% 15.3% 13.9% 13.2% 15.3% 13.7% 13.7% 13.2% 1% - regulatory requirement 27 28 29 21 June 211 23
. Economic Update 24
Strong GDP growth rate Supported by high energy prices and large investments on projects and infrastructure, Qatar has recorded a very high GDP growth rate in recent years, a CAGR of 21% per annum between 26-2121 and 19.% in Real lterms. ($ Million) 26 27 28 29 21 Oil & Gas Sector 35,77 45,781 59,8 45,419 71,642 Non-Oil & Gas Sector 24,727 34,97 51,632 52,894 56,951 Total GDP 6,497 8,751 11,712 98,313 128,593 % Change 4.6% 33.5% 37.1% -11.2% 3.8% Source: Qatar Statistics Authority. 25
GDP growth rate to remain very strong in 211 Supported by the Natural Gas Sector and growth in the Non-oil and Gas sector Qatar s economy is expected witness strong growth in 21 and 211. ($ Million) 29 211* 212* Oil & Gas Sector 71,642 13,12 112,929 Non-Oil & Gas Sector 56,951 64,67 68,88 Total Nominal GDP 128,593 167,187 181,737 % Change 3.8% 3.% 8.7% Real GDP growth rate 16.3% 2.% % 7.1% * QNB & IMF Estimates. Source: Qatar Statistics Authority. 26
211/12 Budget Current budget is the largest in history, with allocation for capital expenditures up by 33%. ($ Billion) 21/11 P 21/11 B 211/12 B % Total Revenues 38.7 35. 44.6 27.4% Total Expenditures - Current Expenditures - Development Expenditures 34.3 23. 11.3 32.4 2.4 11.9 38.4 22.5 15.9 18.7% 1.2% 33.4% Surplus / Deficit 4.4 2.7 6.2 133.% Budget Oil Price Assumption ($ pb) 55. 55. 55..% Actual Oil Price ($ pb) 84. B: Budget Announcement, P: Preliminary. 27
Planned projects are estimated to reach a budget of over $188 billion with the bulk of investment in infrastructure Budget Value Sector ($ billion) Infrastructure 72.2 Construction 46.9 Gas Processing 16.2 Power 14.8 Petrochemicals 14.5 Water and Waste 7.1 Oil / Gas Production 5.5 Fertiliser 4.4 LNG 2.6 Refining 1.7 Pipeline 1.1 Alternative Energies 1. Industrial.5 Metal.1 TOTAL 188.6 Source: MEED Projects 28
Natural Gas will Fuel and Sustain the Economy LNG Exports are expected to reach 77.4 million tons per annum in 211 Condensate and GTL Production is expected to reach 92k barrels per day by 214 Million tons per annum 77.4 bpd 92 753 8 55.7 623 27 4 3.4 37.1 388 473 14.4 18.4 22.2 25.1 27.4 223 223 174 23 24 25 26 27 28 29 21 211 26 27 28 29 21 211 212 213 214 29
Inflation has been one of the highest in the region up to 28, is negative today and is expected to remain low 2 15 11.8 13.8 15.1 1 8.8 % 5 3.5-5 25 26 27 28 29 21 211* (2.4) (4.9) Source: Qatar Statistics Authority. * QNB Estimate. 3
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