INTERIM CONDENSED CONSOLIDATED FINANCIAL FOR THE THREE MONTH PERIOD ENDED 31 MARCH 2018
CONTENTS Independent auditor s review report Page(s) -- INTERIM CONDENSED CONSOLIDATED FINANCIAL Interim condensed consolidated statement of financial position 1 Interim condensed consolidated statement of income 2 Interim condensed consolidated statement of comprehensive income 3 Interim condensed consolidated statement of changes in equity 4 Interim condensed consolidated statement of cash flows 5 Notes to the interim condensed consolidated financial statements 6 22
INTERIM CONDENSED CONSOLIDATED STATEMENT OF INCOME Three Months Ended 2018 2017 QR 000 QR 000 Notes (Reviewed) (Reviewed) Interest income 425,286 377,805 Interest expense (219,317) (175,468) NET INTEREST INCOME 205,969 202,337 NET FEE AND COMMISSION INCOME 41,808 43,134 Foreign exchange gain 5,073 4,028 Income on investment securities 1,108 2,653 Other operating income 6,894 1,519 13,075 8,200 TOTAL OPERATING INCOME 260,852 253,671 Staff costs (45,603) (44,999) Depreciation (6,043) (6,902) Net impairment loss on loans and advances to customers 2.1.d (6,593) (4,236) Net impairment on investment securities - (3,088) Other expenses (26,528) (24,425) (84,767) (83,650) PROFIT FOR THE PERIOD 176,085 170,021 Earnings per share (QR) 8 0.84 0.81 The attached notes 1 to 13 form an integral part of these interim condensed consolidated financial statements. 2
INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Three Months Ended 2018 2017 QR 000 (Reviewed) QR 000 (Reviewed) Profit for the period 176,085 170,021 Other comprehensive (loss)/income for the period Items that are or may be reclassified subsequently to profit or loss Movement in fair value reserve (debt instruments IFRS 9) Net change in fair value (4,592) - Movement in fair value reserve (Available-for-sale financial assets-ias 39) Fair value gains/(loss) during the period - (1,456) Impairment loss transferred to profit or loss during the - 3,088 period Realised during the period - (138) Amortised during the period on reclassification to loans and receivables - 17 Net change in fair value of equity measured at FVOCI (IFRS 9) 165 - Other comprehensive (loss) / income for the period (4,427) 1,511 Total comprehensive income for the period 171,658 171,532 The attached notes 1 to 13 form an integral part of these interim condensed consolidated financial statements. 3
INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Three Months Ended 2018 2017 QR'000 QR'000 CASH FLOWS FROM OPERATING ACTIVITIES (Reviewed) (Reviewed) Profit for the period 176,085 170,021 Adjustments for: Net impairment loss on loans and advances 6,593 4,236 Impairment loss on investment securities -- 3,088 Depreciation 6,043 6,902 Net gain on disposal of property and equipment (5,360) - Net loss on financial investments 1,364 - Profit before changes in operating assets and liabilities 184,725 184,247 Change in due from central bank (157,901) (26,463) Change in loans and advances to customers (1,598,552) 210,251 Change in other assets (41,440) (11,838) Change in due to banks and central bank (559,130) 1,081,932 Change in certificate of deposits and commercial paper (3,397) (140,206) Change in customer deposits 546,091 (2,924,734) Change in other liabilities 52,761 (70,504) Net cash used in operating activities (1,576,843) (1,697,315) CASH FLOWS FROM INVESTING ACTIVITIES Net proceeds from sale / (purchase) of investment securities 107,632 (1,521,528) Net proceeds on disposal / (acquisition) of property and equipment 5,861 (4,720) Net cash generated from / (used in) investing activities 113,493 (1,526,248) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of debt securities - 1,810,565 Repayment from other borrowings (37,429) (37,429) Dividends paid (200,343) (190,803) Net cash (used in) / generated from financing activities (237,772) 1,582,333 NET DECREASE IN CASH AND CASH EQUIVALENTS (1,701,122) (1,641,230) Cash and cash equivalents at 1 January 3,297,822 3,977,475 CASH AND CASH EQUIVALENTS AT 31 MARCH 1,596,700 2,336,245 Cash and cash equivalents comprise: Cash and balances with Qatar Central Bank (i) 380,724 239,016 Due from banks maturing within three months 1,215,976 2,097,229 Total 1,596,700 2,336,245 (i) Excludes the mandatory cash reserve requirement by Qatar Central Bank. The attached notes 1 to 13 form an integral part of these interim condensed consolidated financial statements. 5
1 LEGAL STATUS AND PRINCIPAL ACTIVITIES Ahli Bank Q.S.C. ( the Bank ) was incorporated in the State of Qatar in 1983 as a public shareholding company under the Emiri Decree No. 40 of 1983. The Bank is engaged in commercial and retail banking services and operates through its registered Head Office located at Suhaim Bin Hamad Street, Al Sadd Area in Doha (P.O. Box 2309, Doha, State of Qatar) and fifteen branches established in the State of Qatar. The principal subsidiaries of the Bank are as follows: Company s Name Ahli Brokerage Company L.L.C. Country of incorporation Company s capital Qatar QAR 50 million Company s activities Percentage of ownership 2018 Percentage of ownership 31 December 2017 Brokerage 100 100 ABQ Finance Limited Cayman Islands US $ 1 Debt Issuance 100 100 The Bank and its subsidiaries are together referred to as the Group, throughout these interim condensed consolidated financial statements. The interim condensed consolidated financial statements of Ahli Bank Q.S.C. for the three months ended 2018 were authorised for issue in accordance with a resolution of the Board of Directors on April 18, 2018. 2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES Basis of preparation The interim condensed consolidated financial statements of the Group are prepared in accordance with International Accounting Standard ( IAS ) 34, Interim Financial Reporting and in conformity with the applicable provisions of Qatar Central Bank regulations and Qatar Commercial Companies Law, and have been presented in Qatari Riyals thousands (QR 000) unless otherwise mentioned, which is the Group s functional and presentation currency. These interim condensed consolidated financial statements should be read in conjunction with the 2017 annual consolidated financial statements of the Group, except for the effects of adoption of IFRS 9 as described in Note 2.1 to these interim condensed consolidated financial statements. The preparation of this interim condensed consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. The significant judgments made by the management in applying the Group s accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended 31 December 2017, except for the effects of adoption of IFRS 9 as described in Note 2.1 to these interim condensed consolidated financial statements. All material intra-group balances, transactions, income and expenses and profits and losses resulting from intragroup transactions are eliminated on consolidation. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual consolidated financial statements and should be read in conjunction with the annual consolidated financial statements of the Group for the year ended 31 December 2017. In addition, results for the three month period ended 2018 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2018. 6
2 BASIS OF PREPARATION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Significant accounting policies The accounting policies used in the preparation of these interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group s annual consolidated financial statements for the year ended 31 December 2017, and the notes attached thereto, except for the effects of the adoption of IFRS 9 as described in Note 2.1 which may result in additional disclosure at year end. The following standards and amendments to standards have been applied by the Group in preparation of these interim condensed consolidated financial statements. The adoption of the below standards and amendments to standards did not result in changes to previously reported net profit or equity of the Group, except for the changes mentioned in Note 2.1 on adoption of IFRS 9, but they may result in additional disclosures at year end: (i) New Standards and amendment to Standards IFRS 9 - Financial Instruments IFRS 15 - Revenue from Contracts with Customers Effective Date 01/January/2018 01/January/2018 (ii) Amendments to standards Amendments to IAS 40 Transfers of Investment Property 01/January/2018 The adoption of the above did not result in any changes to previously reported net profit or equity of the Group. (iii) Standards issued but not yet effective The below mentioned standards are not yet effective. The Group is currently evaluating the impact of these new standards. The Group will adopt these new standards on the respective effective dates. IFRS 16: Leases Effective Date 01/January/2019 2.1 Adoption of IFRS 9 - Financial Instruments The Group has adopted IFRS 9 as issued by the IASB in July 2014 with a date of transition of 1 January 2018, which resulted in changes in accounting policies and adjustments to the amounts previously recognised in the consolidated financial statements as of and for the year ended 31 December 2017. As permitted by the transitional provisions of IFRS 9 and QCB regulations, the Group elected not to restate comparative figures. Any adjustments to the carrying amounts of financial assets and liabilities at the date of transition were recognised in the opening retained earnings and the opening balance of fair value reserve of the current period. The adoption of IFRS 9 has resulted in changes in the accounting policies for recognition, classification and measurement of financial assets and financial liabilities and impairment of financial assets. IFRS 9 also significantly amends other standards dealing with financial instruments such as IFRS 7 Financial Instruments: Disclosures. Set out below are the IFRS 9 transition impact disclosures for the Group. Further details of the specific IFRS 9 accounting policies applied in the current period are described in more detail in note 2.1 (e). 7
2.1 ADOPTION OF IFRS 9 - FINANCIAL INSTRUMENTS (CONTINUED) (2.1.a) Impact of adopting IFRS 9 The impact from the adoption of IFRS 9 as at 1 January 2018 has been to decrease retained earnings by QAR 166.02 million and decrease the fair value reserve by QAR 68.17 million. Retained earnings QAR 000 Fair value reserves QAR 000 Closing balance under IAS 39 (31 December 2017) 1,057,036 12,530 Impact on reclassification and remeasurements: Investment securities (equity) from available-for-sale to those measured at fair value through other comprehensive income 57,191 (57,191) Investment securities (equity) from available-for-sale to those measured at fair value through profit or loss 3,845 (3,845) Investment securities (mutual funds) from available-for-sale to those measured at fair value through profit or loss 125 (125) Investment securities (debt) from available-for-sale to those measured at fair value through other comprehensive income 7,982 (7,982) Investment securities (debt) from loans and advances to customers to those measured at amortized cost - 975 69,143 (68,168) Impact on recognition of Expected Credit Losses Due from banks (89) - Investment securities (debt) at fair value through other comprehensive income (1,500) - Investment securities (debt) at amortised cost (758) - Loans and advances to customers (191,644) - Loan commitments and financial guarantees (41,169) - Net impairment losses on due from banks, Central Bank and other financial assets (235,160) - (166,017) (68,168) Transfer from risk reserve - - Opening balance under IFRS 9 on date of initial application of 1 January 2018 891,019 (55,638) 8
2.1 ADOPTION OF IFRS 9 - FINANCIAL INSTRUMENTS (CONTINUED) (2.1.b) Classification and Measurement of Financial Instruments The Group performed a detailed analysis of its business models for managing financial assets as well as analysing their cash flow characteristics. The below table reconciles the original measurement categories and carrying amounts of financial assets in accordance with IAS 39 and the new measurement categories under IFRS 9 as at 31 December 2017. Financial assets Cash and balances with central banks Original classification under IAS 39 New classification under IFRS 9 Original carrying amount QAR 000 Remeasurement Impact of IFRS 9 Reclassification New carrying amount QAR 000 QAR 000 QAR 000 Loans and receivables Amortised cost 1,979,872 - - 1,979,872 Due from banks Loans and receivables Amortised cost 2,202,199 (89) - 2,202,110 Loans and advances to Loans and receivables Amortised cost customers 28,915,434 (310,230) - 28,605,204 Investment securities debt Available-for-sale Amortised cost 1,964,087 - - 1,964,087 Investment securities debt Held to Maturity Amortised cost 3,190,528 (758) - 3,189,770 Investment securities debt Available-for-sale FVOCI 856,638 (1,500) - 855,138 Investment securities debt Available-for-sale FVTPL - - - - Investment securities Loans & receivables Loans and advances Amortised cost 20,865 (786) 20,079 Investment securities equity Available-for-sale FVOCI 44,494 - - 44,494 Investment securities equity Available-for-sale FVTPL 42,889 - - 42,889 Investment securities funds Available-for-sale FVTPL 1,233 - - 1,233 Other assets: Accrued interest receivable Loans and receivables Amortised cost 196,587 - - 196,587 Derivatives with positive fair value FVTPL FVTPL 4,578 - - 4,578 Others Loans and receivables Amortised cost 205,388 - - 205,388 39,624,792 (313,363) - 39,311,429 Financial liabilities Due to banks Amortised cost Amortised cost 3,982,103 - - 3,982,103 Certificate of deposits and commercial papers Amortised cost Amortised cost 418,534 - - 418,534 Customer deposits Amortised cost Amortised cost 23,568,578 - - 23,568,578 Other borrowings Amortised cost Amortised cost 2,192,233 - - 2,192,233 Debt securities issued Amortised cost Amortised cost 3,624,368 - - 3,624,368 Subordinated debt Amortised cost Amortised cost Other liabilities: Accounts payable Amortised cost Amortised cost 76,299 - - 76,299 Derivatives with negative fair value FVTPL FVTPL 11,458 - - 11,458 Accrued interest payable Amortised cost Amortised cost 152,358 - - 152,358 Acceptances Amortised cost Amortised cost 287,817 - - 287,817 Others Amortised cost Amortised cost 275,808 - - 275,808 ECL for financial guarantees and undrawn commitments - Amortised cost - 41,169-41,169 34,589,556 41,169-34,630,725 Financial Liabilities There were no changes to the classification and measurement of financial liabilities. 9
2.1 ADOPTION OF IFRS 9 - FINANCIAL INSTRUMENTS (CONTINUED) (2.1.c) Expected credit loss / Impairment allowance The following table reconciles the closing impairment allowance for financial assets in accordance with IAS 39 as at 31 December 2017 to the opening ECL allowance determined in accordance with IFRS 9 as at 1 January 2018: 31 December Re- 1 January 2017 measurement 2018 QAR 000 QAR 000 QAR 000 Due from banks - 89 89 Loans and advances to customers 119,372 190,858 310,230 Reclassified debt securities under IAS 39 reclassified as amortised cost in IFRS 9-786 786 Available-for-sale debt investment securities under IAS 39 reclassified to amortised cost under IFRS 9-758 758 Available-for-sale debt investment securities under IAS 39/debt financial assets at FVOCI under IFRS 9-1,500 1,500 Loan commitments and financial guarantees - 41,169 41,169 119,372 235,160 354,532 10
2.1 ADOPTION OF IFRS 9 - FINANCIAL INSTRUMENTS (CONTINUED) (2.1.d) Movement in ECL Stage 1 Stage 2 Stage 3 Total QR000 QR000 QR000 QR000 Exposure subject to ECL - Loans and advances to customers 29,580,583 1,071,068 296,225 30,947,876 - Investment securities (Debt) 5,894,902 17,988 5,912,890 - Loan commitments and financial guarantees 4,613,168 10,440 4,623,608 - Due from banks, central banks and other financial assets 1,194,000 22,058 1,216,058 Opening balance (Day 1 impact) - as at 1 January 2018 - Loans and advances to customers 247,242 63,774 296,896 607,912 - Net impairment losses on investment securities (Debt) 1,097 1,161 2,258 - Loan commitments and financial guarantees 37,211 3,958 41,169 - Net impairment losses on due from banks, central banks and other financial assets 88 1 89 285,638 68,894 296,896 651,428 Net transfer between stages - Loans and advances to customers (23,605) 40,123 16,518 - Net impairment losses on investment securities (Debt) 342 345 687 - Loan commitments and financial guarantees (13,296) (3,902) (17,198) - Net impairment losses on due from banks, central banks and other financial assets (25) 18 (7) (36,584) 36,584 - Charge for the Period (net) - Loans and advances to customers (including interest in suspense for Stage 3) 2,500-8,122 10,622 - Net impairment losses on investment securities (Debt) - - - - Loan commitments and financial guarantees - - - - Net impairment losses on due from banks, central banks and other financial assets - - - 2,500-8,122 10,622 Closing balance - as at 2018 - Loans and advances to customers 226,137 103,897 305,018 635,052 - Net impairment losses on investment securities (Debt) (2.1.d) 1,439 1,506 2,945 - Loan commitments and financial guarantees 23,915 56 23,971 - Net impairment losses on due from banks, central banks and other financial assets 63 19 82 251,554 105,478 305,018 662,050 The above assessment is preliminary and management will finalize within 2018. 11
2.1 ADOPTION OF IFRS 9 - FINANCIAL INSTRUMENTS (CONTINUED) (2.1.e) Changes in Accounting Policies and Significant Estimates and Judgements Key changes to the Group s accounting policies The key changes to the Group s accounting policies resulting from the adoption of IFRS 9 are summarised below. Since the comparative financial information has not been restated, the accounting policies in respect of the financial instruments for comparative periods are based on IAS 39 and applicable QCB regulations as disclosed in the audited consolidated financial statements as of and for the year ended 31 December 2017. Classification of financial assets and financial liabilities IFRS 9 contains three principal classification categories for financial assets: measured at amortised cost (AC), fair value through other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). IFRS 9 classification is generally based on the business model in which a financial asset is managed and its contractual cash flows. The standard eliminates the existing IAS 39 categories of held-to-maturity, loans and receivables and available-for-sale. IFRS 9 removes the requirement contained in IAS 39 relating to bifurcation of an embedded derivative from an asset host contract. However, entities are still required to separate derivatives embedded in financial liabilities where they are not closely related to the host contract. IFRS 9 largely retains the existing requirements in IAS 39 for the classification of financial liabilities with the exception of the treatment of the bank s own credit gains and losses, which arise where a bank has chosen to measure a liability at fair value through profit or loss, these gains and losses are recognised in other comprehensive income. There continue to be two measurement categories for financial liabilities: fair value and amortised cost. Impairment of financial assets IFRS 9 replaces the incurred loss model in IAS 39 with an expected credit loss model. The new impairment model also applies to certain loan commitments and financial guarantee contracts but not to equity investments. Under IFRS 9, credit losses are recognised earlier than under IAS 39. Key changes in the Group's accounting policy for impairment of financial assets are listed below: The Group applies a three-stage approach to measuring expected credit losses (ECL) on financial assets carried at amortised cost and debt instruments classified as FVOCI. Assets migrate through the following three stages based on the change in credit quality since initial recognition. Stage 1: 12 months ECL Stage 1 includes financial assets on initial recognition and that do not have a significant increase in credit risk since initial recognition or that have low credit risk (i. Local sovereign that carry credit rating of (Aaa) or (Aa) and carry (zero) credit weight in accordance with capital adequacy instructions of the QCB ii. Externally rated debt instruments of rating Aaa or Aa. iii. Other financial assets which the group may classify as such after obtaining QCB's no objection) at the reporting date. For these assets, 12-month ECL are recognised and interest is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance). 12-month ECL is the expected credit losses that result from default events that are possible within 12 months after the reporting date. It is not the expected cash shortfalls over the 12-month period but the entire credit loss on an asset weighted by the probability that the loss will occur in the next 12-months. 12
2.1 ADOPTION OF IFRS 9 - FINANCIAL INSTRUMENTS (CONTINUED) (2.1.e) Changes in Accounting Policies and Significant Estimates and Judgements (continued) Stage 2: Lifetime ECL - not credit impaired Stage 2 includes financial assets that have had a significant increase in credit risk since initial recognition but that do not have objective evidence of impairment. For these assets, lifetime ECL are recognised, but interest is still calculated on the gross carrying amount of the asset. Lifetime ECL are the expected credit losses that result from all possible default events over the expected life of the financial instrument. Expected credit losses are the weighted average credit losses with the life-time probability of default ( PD ) as the weight. Stage 3: Lifetime ECL - credit impaired Stage 3 includes financial assets that have objective evidence of impairment at the reporting date in accordance with the indicators specified in the QCB s instructions. For these assets, lifetime ECL is recognised and treated with the interests calculated on them, according to QCB s instructions. When transitioning financial assets from stage 2 to stage 3, the percentage of provision made for such assets should not be less than the percentage of provision made before transition. Hedge accounting The Group has elected to continue to apply the hedge accounting requirements of IAS 39, hence no impacts on adoption of IFRS 9. Key changes to the Significant Estimates and Judgements Financial asset and liability classification Assessment of the business model within which the assets are held and assessment of whether the contractual terms of the financial asset are solely payments of principal and interest on the principal amount outstanding. Impairment of financial instruments Assessment of whether credit risk on the financial asset has increased significantly since initial recognition and incorporation of forward-looking information in the measurement of ECL. Inputs, assumptions and techniques used for estimating impairment Significant increase in credit risk When determining whether the risk of default on a financial instrument has increased significantly since initial recognition, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group s historical experience and expert credit assessment and including forward-looking information. 13
2.1 ADOPTION OF IFRS 9 - FINANCIAL INSTRUMENTS (CONTINUED) (2.1.e) Changes in Accounting Policies and Significant Estimates and Judgements (continued) In determining whether credit risk has increased significantly since initial recognition following criteria's are considered: I. Rating downgrade as per table below Credit quality grade according to Moody s rating scale at initial recognition A Aa Aaa B Ba Baa Caa Significant change in credit quality grade Two notch downgrade One notch downgrade II. III. Facilities restructured during previous twelve months Facilities overdue by 30 days as at the reporting date Credit risk grades Credit risk grades are defined using qualitative and quantitative factors that are indicative of risk of default. These factors vary depending on the nature of the exposure and the type of borrower. Exposures are subject to ongoing monitoring, which may result in an exposure being moved to a moved to a different credit risk grade. Generating the term structure of Probability of Default (PD) The Group employs statistical models to analyse the data collected and generate estimates of PD of exposures and how these are expected to change as a result of the passage of time. This analysis includes the identification and calibration of relationships between changes in default rates and changes in key macro-economic factors, across various geographies in which the Bank has taken exposures. (2.1.f) Changes to Groups financial risk management objectives and policies i) Credit Risk Measurement The estimation of credit exposure for risk management purposes is complex and requires the use of models, as the exposure varies with changes in market conditions, expected cash flows and the passage of time. The assessment of credit risk of a portfolio of assets entails further estimations as to the likelihood of defaults occurring, of the associated loss ratios and of default correlations between counterparties. The Group measures credit risk using Probability of Default (PD), Exposure at Default (EAD) and Loss Given Default (LGD). This is similar to the approach used for the purposes of measuring Expected Credit Loss (ECL) under IFRS 9 as detailed in note 2.1.e. ii) Credit risk grading The Group uses internal credit risk gradings that reflect its assessment of the probability of default of individual counterparties. The Group uses internal rating models tailored to the various categories of counterparty. The credit grades are calibrated such that the risk of default increases exponentially at each higher risk grade. iii) Credit quality assessments Pursuant to the adoption of IFRS 9, the Bank has mapped its internal credit rating scale to Moody s rating scale, the table below provides an analysis of counterparties by rating grades and credit quality of the Bank s credit risk, based on Moody s ratings (or their equivalent) as at 2018. 14
2.1 ADOPTION OF IFRS 9 - FINANCIAL INSTRUMENTS (CONTINUED) (2.1.f) Changes to Groups financial risk management objectives and policies (continued) iii) Credit quality assessments (continued) Rating grade Loans and advances to customers Investment securities (Debt) Loan commitments and financial guarantees Due from banks and other financial assets* AAA to AA- 4,159,482 4,846,777 175,423 272,161 A+ to A- 2,574,078 684,505 166,291 830,494 BBB to BBB- 16,466,058 326,230 3,668,945 91,345 BB+ to B- 7,359,860 55,378 612,949 218 CCC to C 92,173 - - - Unrated - - - 21,840 Total 30,651,651 5,912,890 4,623,608 1,216,058 * Other financial assets include balances with other central banks and other assets which are subject to credit risk. 3 FINANCIAL RISK MANAGEMENT The Group s financial risk management objectives and policies are consistent with those disclosed in the consolidated financial statements as at and for the year ended 31 December 2017, except for the effects of adoption of IFRS 9 as described in Note 2.1 to this interim condensed consolidated financial statements.. 4 SHARE CAPITAL AND DIVIDENDS PAID 4 a) Share capital 31 December 2018 2017 2017 QR 000 QR 000 QR 000 (Reviewed) (Reviewed) (Audited) Authorised Ordinary shares of QR 10 each 2,103,604 2,003,433 2,003,433 Issued and fully paid as of 2018 Number of shares in thousands QR 000 At 31 December 2017 (Audited) 200,343 2,003,433 Issue of bonus shares on 20 February 2018 10,017 100,171 At 2018 (Reviewed) 210,360 2,103,604 On 20 February 2018, the Bank issued bonus shares (ordinary shares) at the rate of one share for every twenty shares held by the ordinary shareholders upon obtaining approval from the shareholders in the Annual General Meeting held on 20 February 2018. Qatar Investment Authority and Qatar Holding hold 47.71% of the ordinary shares of the Bank with the remaining shares held by members of the public and institutions (52.29%). 4 b) Dividends Paid During the period, the Bank paid a cash dividend of QR 1 per share totaling to QR 200,343 thousands (2017 QR 1 per share totaling to QR 190,803 thousands). 15
5 FAIR VALUE RESERVE 2018 QR 000 2017 QR 000 31 December 2017 QR 000 (Reviewed) (Reviewed) (Audited) At the beginning of the period/year 12,530 11,801 11,801 Adoption of IFRS 9- Restated Balance as at 1 st January 2018 (55,638) - - Realised during the period/year - 138 504 Fair value losses during the period/year (4,427) (1,456) (23,160) Net amount of impairment transferred to profit or loss - 3,088 23,317 Amortised during the period/year on reclassification to loans and advances to customers - 17 68 At the end of the period/year (60,065) 13,312 12,530 6 LOANS AND ADVANCES TO CUSTOMERS Loans and advances to customers comprise: 2018 2017 31 December 2017 QR 000 QR 000 QR 000 (Reviewed) (Reviewed) (Audited) Loans and advances to customers 30,947,876 26,999,808 29,357,271 Less: Deferred profit (4,528) (8,149) (4,704) Gross loans and advances to customers 30,943,348 26,991,659 29,352,567 Net Impairment of loans and advances to customers (Note 2.1.d) * (635,052) (344,998) (416,268) Net loans and advances to customers 30,308,296 26,646,661 28,936,299 The total non-performing loans and advances to customers (excluding performing loans under watch list) at 2018 amounted to QR 296.22 million, representing 0.96 % of the total loans and advances (31 December 2017: QR 292.04 million representing 0.99 % of the total loans and advances). Interest in suspense of QR 55.19 million as of 2018 (31 December 2017: QR 62.96 million) is, for the purpose of the Qatar Central Bank regulatory requirements included in the above impairment allowance amount. * For stage wise exposure and allowance for impairment refer to note 2.1.d. 16
7 INVESTMENT SECURITIES 2018 2017 31 December 2017 QR 000 QR 000 QR 000 (Reviewed) (Reviewed) (Audited) Available for sale - 4,332,910 3,020,093 Held to maturity - 2,848,723 3,190,527 Investment securities measured at FVOCI 895,379 - - Investment securities measured at FVTPL 42,731 - - Investment securities measured at amortised cost 5,062,171 - - Gross financial investments 6,000,281 7,181,633 6,210,620 Less: net impairment losses on investment securities (Note 2.1.d) * (2,945) (110,751) (110,751) 5,997,336 6,099,869 6,099,869 * For stage write exposure and allowance for impairment refer to note 2.1.d. 8 EARNING PER SHARE Basic earnings per share are calculated by dividing the profit for the period by the weighted average number of shares in issue during the period. Three Months Ended 2018 2017 (Reviewed) (Reviewed) Profit for the period QR 000 176,085 170,021 Weighted average number of shares 210,360,434 210,360,434 Earnings per share (QR) (2017 adjusted) 0.84 0.81 The weighted average number of shares (2017 adjusted) is as follows: Three Months Ended 2018 2017 (Reviewed) (Reviewed) Qualifying shares at the beginning of the period 200,343,271 200,343,271 Bonus shares issued on 20 February 2018 10,017,163 10,017,163 Qualifying weighted average shares at the end of the period/adjusted for 2017 210,360,434 210,360,434 There were no potentially dilutive shares outstanding at any time during the period, therefore, the diluted earnings per share is equal to the basic earnings per share. 17
9 FINANCIAL INSTRUMENTS- CARRYING AMOUNT, FAIR VALUES AND FAIR VALUE HIERARCHY The Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements. Level 1: Quoted market price (unadjusted) in an active market for an identical instrument. Level 2: Other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that are based on unobservable market data. 9 a) Financial instruments measured at fair value Fair value hierarchy The table below analyses financial instruments measured at fair value at the end of the reporting period, by the level in the fair value hierarchy into which the fair value measurement is categorised: QR 000s Level 1 Level 2 Level 3 Total 2018 (Reviewed) Derivative assets held for risk management - 7,370-7,370 Investment securities 850,720 - - 850,720 850,720 7,370-858,090 Derivative liabilities held for risk management - 2,076-2,076-2,076-2,076 2017 (Reviewed) Derivative assets held for risk management - 16,553-16,553 Investment securities 2,812,589 1,383,030-4,195,619 2,812,589 1,399,583-4,212,172 Derivative liabilities held for risk management - 28,989-28,989-28,989-28,989 31 December 2017 (Audited) Derivative assets held for risk management - 4,578-4,578 Investment securities 1,481,817 1,427,524-2,909,341 1,481,817 1,432,102-2,913,919 Derivative liabilities held for risk management - 11,458-11,458-11,458-11,458 18
10 CONTINGENT LIABILITIES, GUARANTEES AND OTHER COMMITMENTS 31 December 2018 2017 2017 QR'000 QR'000 QR'000 (Reviewed) (Reviewed) (Audited) Contingent liabilities: Unused credit facilities (cancellable and noncancellable) 9,526,046 10,223,608 9,408,427 Guarantees 8,164,128 7,163,035 8,238,506 Letters of credit 709,175 1,036,787 777,902 18,399,349 18,423,430 18,424,835 Other Commitments: Interest rate swaps 899,640 1,013,320 1,066,379 Forward foreign exchange contracts 1,276,018 4,159,344 918,960 Total 2,175,658 5,172,664 1,985,339 Unused credit facilities Commitments to extend credit represent contractual commitments to fund loans and revolving credits. Commitments generally have fixed expiry dates or other termination clauses. Since commitments may expire without being drawn upon, the total contract amounts do not necessarily represent future cash requirements. Guarantees and letters of credit Letters of credit and guarantees commit the Group to make payments on behalf of customers contingent upon their failure to perform under the terms of contracts with third parties. Guarantees and standby letters of credit carry the same risk as loans. Credit guarantees can be in the form of irrevocable letters of credits, advance payment guarantees and endorsements liabilities from bills rediscounted. 11 SEGMENT INFORMATION For management reporting purposes, the Group is organised into two major operating segments: Retail banking, private banking and wealth management Corporate banking, treasury, investments and brokerage subsidiary Principally handling individual customers deposit and current accounts, providing consumer loans, residential mortgages, overdrafts, credit cards and fund transfer facilities. Private banking and wealth management represents servicing high net worth individuals through a range of investment products, funds, credit facilities, trusts and alternative investments. Principally handling loans and other credit facilities, and deposit and current accounts for corporate and institutional customers and providing money market, trading and treasury services, as well as management of the Group s funding. This includes the brokerage activities of the wholly owned subsidiary, Ahli Brokerage Company L.L.C. 19
11 SEGMENT INFORMATION (CONTINUED) Management monitors the operating results of the operating segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss. Segment information for the period is as follows: 2018 (Reviewed) Retail & private banking and wealth management Corporate banking, treasury, investments and brokerage subsidiary Total QR 000 QR 000 QR 000 Net interest income 50,660 155,309 205,969 Net fee and commission income 11,885 29,923 41,808 Foreign exchange gain 4,048 1,025 5,073 Income from investment securities - 1,108 1,108 Other operating income - 6,894 6,894 Total segment operating income 66,593 194,259 260,852 Other material non-cash items: Net provisions (4,085) (2,508) (6,593) Reportable segment profit 28,724 147,361 176,085 Reportable segment assets 6,314,816 33,329,640 39,644,456 Reportable segment liabilities 11,633,222 22,980,260 34,613,482 2017 (Reviewed) Retail & private banking and wealth management Corporate banking, treasury, investments and brokerage subsidiary Total QR 000 QR 000 QR 000 Net interest income 53,930 148,407 202,337 Net fee and commission income 11,555 31,579 43,134 Foreign exchange gain 2,888 1,140 4,028 Income from investment securities - 2,653 2,653 Other operating income - 1,519 1,519 Total segment operating income 68,373 185,298 253,671 Other material non-cash items: Net provisions (4,236) (3,088) (7,324) Reportable segment profit 30,688 139,333 170,021 Reportable segment assets 6,041,515 31,824,048 37,865,563 Reportable segment liabilities 9,144,542 23,880,093 33,024,635 20
12. RELATED PARTIES The balances of related parties included in the consolidated financial statements are as follows: Assets: 2018 31 December 2017 Board of Board of directors QR 000 Shareholders QR 000 directors QR 000 Shareholders QR 000 (Reviewed) (Audited) Loans and advances to customers 715,762-776,274 - Liabilities: Customer deposits 638,847 3,688,371 540,477 3,760,193 Unfunded items: Letters of guarantee, letters of credit, commitments and indirect credit facilities 11,798-12,022 - For the three months period ended For the three months period ended 2018 2017 Board of Board of directors Shareholders directors Shareholders QR 000 QR 000 QR 000 QR 000 (Reviewed) (Reviewed) Income statement items: Interest and fee and commission income 9,327-8,047 - Interest and fee and commission expense 3,542 12,070 2,080 9,731 Board of Directors remuneration 3,030-3,030 - a) Transactions with key management personnel Key management personnel (other than Board of Directors) and their immediate relatives have transacted with the Group during the period/year as follows: 2018 31 December 2017 QR 000 QR 000 (Reviewed) (Audited) Other loans 4,608 4,709 Key management personnel compensation comprised: For the three month period ended 2018 2017 QR 000 QR 000 (Reviewed) (Reviewed) Salaries and short term employee benefits 8,679 9,449 Post employment benefits 7,651 8,637 16,330 18,086 21
13 CAPITAL ADEQUACY RATIO As per Qatar Central Bank regulations, the Group has calculated the above ratios in accordance with Basel III guidelines. The Group s minimum QCB regulatory limit, including the Capital Conservation Buffer (2.5%) and the applicable Domestically Systemically Important Bank ( DSIB ) Buffer, is 12.50% for 2018. The table below summarises the composition of prevailing regulatory capital and the ratios of the Group. The Group and the individual entities within it complied with the externally imposed capital requirements to which they are subject to: 2018 2017 31 December 2017 QR 000 QR 000 QR 000 (Reviewed) (Reviewed) (Audited) Common Equity Tier 1 (CET) Capital 4,854,889 4,670,907 4,845,285 Additional Tier 1 Capital - - - Additional Tier 2 Capital 357,032 48,800 354,532 Total Eligible Capital 5,211,921 4,719,707 5,199,817 Risk Weighted Assets 31,264,172 29,185,983 30,691,827 Total Capital Adequacy Ratio 16.67 16.17 16.94 22