Through awareness of Qatar, in the Middle East and, you know, on a worldwide basis, which will be positive for Qatar in the long run. The real benefit will come from, of course, the North Field Expansion. Everything remains in place in terms of the positivity. I think the one thing which I would say is that, since our last call, the volatility in the international markets has probably increased. You know, the pace of Fed interest rate increases is obviously higher than a lot of people expected. That and inflation has remained strong. That component, I think, will have some impacts in the long term on the economy and the bank in terms of, you know, cost of funding, etc. If you move to the next slide 7 on guidance.
Sorry, slide five on guidance. Again, our guidance remains the same for 2022, and we remain committed to our 2026 five-year plan targets. The one area that I would probably look at is two factors. One is the cost of funding is likely to go up if the Fed increases rates by another 150 basis points over the next two cycles. Increasingly, I'd say, while normally interest rate rises have been very good for banks, and we've also seen the benefit in our interest income. I think we are reaching that point where borrowers are starting to find it difficult to continue servicing these high interest rates. I believe our ability to pass on all of this interest rate increases will be less than it was before, when we were early in the cycle.
Therefore, not being able to pass on fully into our entire borrower base and the full extent would obviously have an effect on your net interest margin. You know, while at the same time having to absorb the cost of increased funding costs. I think that's where I would say, particularly for 2023, you might see some pressure on net interest margins. I would say 2.8%, where we are right now, is probably the top of the net interest margin. There's more downside risks than upside risk on further interest rate rises. The second piece is, again, relating to, you know, the cost of loans and, you know, the high interest rates. I think that's going to also have some effects on, let's say, creditworthiness.
Therefore, I believe we should be conservative. If you add in also that the COVID support measures have been withdrawn, or phased out completely, that will mean that we should be conservative in our outlook for risk. Therefore, I would say that while our guidance has been 100-110, I think there's a potential for higher cost of risk. Again, being conservative, being prudent, we believe that there might be another 25 basis points above that. Again, we also need to be conservative in our approach. Therefore, I think there are the two sort of changes to our outlook and guidance.
We remain committed to the 2026 targets, as I said before, but given this situation of the much higher interest rates than I think anyone anticipated, that's why I say, I would say these are the two effects on net interest margin, potentially, and on cost of risk also, for this year. Apart from that, look, our core business remains strong. I'm actually excited about the potential of our retail business in Qatar. We've made some new team members coming on board, and we are seeing some good upward momentum in our retail business. I actually see this as a good opportunity potential for the next few years. There's a lot of opportunity there, given our name and our presence in Qatar.
Again, our international, of course, Turkey, Kaan Gür will speak to it, but that remains, I'd say a challenging outlook for this year, next year. We continue to manage very conservatively for risk. Our other associate banks, both NBO and UAB, continue to perform well, and I see an improving trends. Similarly, we have a new management team in UAB, who we feel very confident about will help to bring a real turnaround in that business. The international outlook of our associates is positive. I'll hand over now to Rehan, and then, of course, we're happy to take any questions. Thank you.
Yeah. Thanks, Joseph, and good afternoon, everyone. I'll focus on slide eight, which shows both the quarter-by-quarter analysis as well as the year-to-date as well. As we can see, we have achieved QAR 2.2 billion for the first nine months of the year. It's 3.3% up year-on-year and 5.3% up quarter-on-quarter. What are the main things that are driving this improvement? Firstly, you can see operating income is up 9.5%, mainly driven by net interest income, but also non-funds income as well. Even though we saw some reduction in Q3, and that is mainly as a result of investment income and the market volatility that we've all seen.
Despite that, year-to-date we're up 9.5%. Costs are fairly flat year-on-year 0.4% up and slightly down quarter-on-quarter. The main driver of operating profit being up 12.8% is the income. That's something that has been a very important part of our strategy, that it should be income now that drives the growth in our profitability. The reduction in our cost to income ratio. That's down from 24.8% a year ago to 22.6% for the first nine months now of this year. Just a little bit on the balance sheet before we carry on. You can see that the lending volume has decreased by 2.6% from QAR 101 billion to QAR 98.4 billion.
Within this, as we've talked about in the past, the government has been paying down their overdraft. About QAR 6 billion is the movement downwards from that. That's the main impact. Underlying, we are seeing growth. It is conservative, and will continue to be conservative on our lending growth. But the overall reduction is mainly as a consequence of the overdraft reduction from the government. If we look at deposits, you can see deposits are up almost QAR 6 billion year-on-year, which is 6.9%. Within that, the low-cost deposits, and again, a very important part of our strategy, is up 11% year-on-year.
That is helping us maintain our net interest margins, which you can see are constant at 2.8% quarter-on-quarter, but up from a year ago from 2.6% to 2.8%. That has been helping drive net interest income further upwards quarter-on-quarter as well as year-on-year. If we look at provisions, you can see that we are increasing provisions. Provisions are higher year-on-year by approximately 27%. We will take a conservative view on provisions. As we know, Q4 is the quarter in which we make our final decisions, both with the auditors and with the central bank. We do expect provisioning to be higher in Q4 than it has been in the previous three quarters.
You can see the cost of risk right now on a net basis is 95 basis points. We had guided 110 as the 100-110 as the range for the cost of risk for the full year. It potentially is around that area with a slight upside risk I would say, depending on where we finally end up and the view we take in this rising interest rate environment that we're currently in. On the associates, you can see that it's 72% higher year-on-year. This is driven by both NBO and UAB. As Joseph earlier said as well, these entities we're working very closely with.
We're very much involved in their strategy, and obviously passing on some of our experiences, some of our learnings over the last few years. We're pleased to see that that's now beginning to translate into a better performance from both of those entities. We expect that to continue further next year and beyond also. As we've seen, Turkey is in a hyperinflation situation right now. We took an adjustment in Q2 of QAR 69 million just on the non-cash net monetary loss basis, a further QAR 29 million in Q3. Of course, Q2 was from first of January, so it did equate to two quarters worth being taken in Q2. Now we've taken one quarter's worth in Q3.
That's how we expect that to continue for as long as Turkey remains in a hyperinflation situation. Then just a bit more on the ratios. Down below, you can see NPL ratio is at 4.5%, consistent with previous couple of quarters really. Then on the coverage ratio. On the coverage ratio, you can see that we continue to build that up during the year. It was 97.4% at the end of last year, and we've been building that up to 107.6% now. On the capital adequacy ratios, you can see that there is a reduction.
This is as a result of the fair value reserve, negative fair value reserve on our bond holdings. That, again, is something we've seen as a result of the market volatility. That's something that has impacted our capital. Although we remain very well above any of the regulatory ratios that are required and our own internal benchmarks as well. We remain very well capitalized both from a Qatar and a international point of view. Overall, I think in summary, what I would say is that income continues to be the driver for the improvement in our profitability. Costs are fairly flat. Provisioning is higher than this time last year, and we expect that to continue in Q4 as well.
We're pleased with how the associates are doing, and that's helping us on the overall profitability side. We will be conservative on balance sheet. We do expect a bit of NIM pressure in 2023 as a result of these interest rate rises. That's the overall summary. Before we go to Q&A, I will hand over to Kaan Gür in Turkey to just take us through the results of Alternatif Bank, and then we can go to Q&A session.
Thank you, Mr. Rao. Good afternoon, everyone, dear all. Let's look at together with the Turkish macroeconomic situation for a second. I'm going to summarize the existing situation, and then we will go to Turkish banking sector overall, the performances. Finally, I am going to speak on Alternatif Bank's third quarter financial performances. On the Turkey side, I would like to say that especially the growth is important. As you know, Turkey was one of the very fastest growing country in 2021, which is 11%. Actually, we are seeing a kind of downtrend. In the first half, we have seen 7.6% as a growth performance.
It is obvious that the growth expectation is, you know, decreasing, and we are expecting 3% growth in third quarter. Most probably last quarter is going to be 0% growth in Turkey. When you look into that aspect, actually, the most important thing is your current account deficit performances. Actually, last year it was very, you know, well performed, but now we can see, you know, important rise there. So 3.9% current account deficit as of first half of this year. Unfortunately, elevated energy costs, you know, increasing current account deficit to GDP level, you know, from 4%-5% by year end of this year.
Inflation, again, especially CPI, increased to 83.5% in September, and we'll see again some rise till October. You know, before starting November, we're gonna see some base effects, which is going to a kind of decline trend, and we're going to see some you know below 70% on the CPI side. As you very well know that central bank you know start to cut the policy rates. It is now 12%. You know that in the same time, macroprudential measures are the main tools of the monetary policy. Market expects CBRT to cut the policy rate to single digit levels as of this year end.
Another important thing is, maybe last sentence for the Turkish macroeconomics, I can say that especially macroprudential measures may be effective with the cost of weaker growth momentum. Rising geopolitical risks and weaker economic expectations may affect the dynamics of the Turkish economy, but it's a global issue, as we all well know. On the Turkish banking side, next page, I can say that especially Turkish banking performance on the profitability side supported by the improving Turkish risk spreads and CPI linkers. Banking sector will see, as of third quarter, a kind of improvement on the bottom line performances. Asset size also increased, but the growth mainly coming from the higher dollar Turkish lira parity.
Loan increase, especially on the corporate and commercial loan utilization, was the essential factor. Now the whole environment is changing rapidly, not in favor of the growth, of course. Maybe last thing I could emphasize that the balance sheet composition, you know, Liraization is the main issue. You can see, you know, very strong Liraization on both asset side and the, you know, liability side of the banking sector. The other important thing is I would like to mention that our, you know, performance, especially on the NPL side and the cost of risk, Alternatif Bank again continues its, you know, outperforming performance as a result of our consistent focus over the past year.
This is the overall Turkish banking sector, let's say, summary. When you look into our performances, I would like to start with our balance sheet performance. We can see that total asset size grow by 31%. Year-to-date performance is, you know, strong. Of course, the performance is coming from the Turkish lira side. You know that we have been optimizing our loan book in favor of Turkish lira. I can say that especially now total Turkish lira loan book is 58% of the total loan. Again, it's continuing performance for Alternatif Bank. Of course, as a result of our actions starting from last two and a half years, now we are fully hedged.
Our focus still remains on decreasing Turkish lira funding costs, because this is the main issue. We're trying to optimize our funding mix.
We are trying to increase our share of low cost deposit. Of course, we are very active on FX Turkish lira components in funding. I can say that, especially FX-protected Turkish lira time deposits, there's a threshold there, 20%. Alternatif Bank, you know, has been, you know, over those thresholds in both a FX-protected deposit and Turkish lira deposits. We well positioned, I can say. On the profitability side, our net profits increased by 7% quarter-on-quarter to TRY 232 million. Mainly, positive effect comes from net interest income, thanks to increasing Turkish risk spread, especially, and very strong net fee and commission income.
Our net interest income in this period increased by 15% and reached TRY 426 million quarterly. We continued especially focus on expense base. We have very tight management on that. As you can see here, significantly below yearly inflation levels. Our total gross operating income as of September reached TRY 1.3 billion. At the end, actually, our overall profitability performance is very good. Then I can say that, you know, after the IAS 29, we are still carrying positive bottom line. Third quarter was again, you know, better performance for Alternatif Bank, and we are trying to increase our contribution to our, you know, overall group, you know, performances.
This is all I would like to share with you, but of course, I am ready to answer your questions during the Q&A session. Thank you.
Thank you, Kaan. We now move to Q&A. If you wish to ask the question, please use the raise hand features on your device. If your name is announced, please unmute and ask your question. Do mute once your question is answered to let others ask their questions. We have our first question from Waleed Mohsin. Please go ahead and ask your question.
Yes. Good afternoon. Thanks very much for the presentation. I have three questions. First one, domestic loan growth. Shall we be concerned that, going forward, the government, by putting an equity into projects, given the high liquidity environment at the state level, that private sector banks and domestic banks will actually be crowded out both by the government as well as international banks looking to participate in these projects. As a result, the medium-term outlook for loan growth could be materially downgraded. That's the first question. Secondly, if you could provide an update on local liquidity and funding. The reason why I ask this question is that, you know, there has been a change in how the regulator looks at non-resident deposits.
I was wondering if you could provide an update both on the liquidity, but as well as the kind of the funding situation in the market. My third and final question is on cost of risk. I mean, we completely hear your comments around being conservative, but in a period where the macro has done well, and by and large, the banking system has delevered, be it that most of the deleveraging is coming on the public sector, but still the system hasn't grown that aggressively. The higher cost of risk guidance seems to be a bit surprising. Is this driven by regulatory instructions from the central bank? Thank you.
I think, let me handle the first part about the outlook for loan growth. If you remember at the last investor call, I'd said that our outlook for the next years is approximately at GDP, which we see at 3%-5%. We remain with that. In terms of the international, you know, let's say the expansion projects of the government. If they are funded by project finance and the local banks tend not to take part, because frankly, we don't have the ability to do such long tenor, you know, project finance sort of transactions, except for QNB. We would be sort of taking part in the loans at the contracting side, so the subcontractors and the onshore component.
That will continue, you know, because any project will have an onshore component and, you know, we will provide some element of financing and the bonding, et cetera. That I don't see any change in that. I do believe that we will grow at 3%-5%, so there's no change in our approach on that. That's a, I would say, a conservative way we want to grow our balance sheet, so that we ensure that we maintain necessary credit quality, et cetera. Because at these higher rates, I'm always concerned about, you know, people's ability to pay. In terms of the second question about liquidity, yes, I think there have been some changes to the way particularly non-resident deposits are classified.
There's for some of the ratio calculations, there's an element of a haircut which is implemented on that. I think the logic for that is basically because there's this perception, especially from some of the rating agency work that has been done, that Qatar's external liabilities of the banking sector are very high compared to its some other countries in the region. As a result of that, there's a little bit of, let's say.
Haircut being put on the benefit of foreign currency deposits in the ratio calculation. That automatically leads to a little bit more, I'd say, demand for local currency deposits, because they're worth that much more in terms of the ratio calculation. That has plus along with the increase in interest rates, that's led to, I'd say, increase in interest rates in the domestic market. It feeds back to what I said about cost of funding and net interest margins likely to be more challenging, I think, in 2023. Yeah. Walid, your third question was on cost of risk. I think there's a couple of things to consider here.
Firstly, the COVID schemes are finished, so that means that we are, you know, we need to monitor very carefully how our customers behave post that. We're still in the early stages of that. That's why we're highlighting the need to be conservative on a cost of risk basis. Secondly, coupled with that, interest rates are rising right now and forecast to rise further. We do think that may lead to a little bit of stress on certain customers as well. Therefore, the cost of risk, we don't see going down this year or next year. Although our five-year guidance remains intact of cost of risk coming down, but that'll be more in years three to five rather than years one to two.
Got it. Thank you, Mike. That's very helpful. Thank you.
Okay. Thank you, Waleed.
Our next question from Edmond Christou. Edmond, please go ahead and ask your question.
Hello, good afternoon. Thanks for the presentation. The first question on the overdraft facility. Is it possible to tell us what is the market share on the overall overdraft facility of the government for the bank? Just to anticipate if this overdraft will continue into next year. The second question is, if possible, on the IAS 29. I think the impact on the third quarter was QAR 29 million. Is there any reversal or provision that has been set aside? And what is the gross impact, if possible to provide? And just follow up on the same question, I think last quarter, we discussed that 26% of the Turkish lira portfolio is CPI linker. Doesn't
You are talking that next year, the CPI is likely to fall from the 70%. Does it make sense to grow this portfolio or not to grow it at all? Because it will have a normalization impact on your margin. Just want to understand the strategy to hedge against the IAS 29. What is the thing behind it? The last question, if possible, it's on the. I noticed that the deposit for the international, it's still stable. You have a decline in the deposit on the wholesales. It's probably shedding expensive deposit. But probably this doesn't give indication what is resident or non-resident deposit. Is it possible to split what is the resident, non-resident deposit from Q4 until September? Thank you.
Okay, thank you for those questions. Let me answer those in turn. Firstly, in terms of the government overdraft, it is nearly zero now for us. Very, very close to zero. We don't think that will now be a driver for variance in our loan book going forward. I think that is now pretty much fully settled from our own bank's point of view. There may be some still outstanding with other banks, but from The Commercial Bank's point of view, this is now virtually zero. That's, I think, not gonna be a factor anymore going forward.
In terms of IAS 29 and the impact to the books, yes, as you said, QAR 29 million is the overall impact on the net monetary loss. There is some further movements within income and costs as well, but they're not material overall to the numbers. In terms of CPI linkers, I think that was your third question, maybe Kaan Gur, you can answer that question.
Yeah. Yeah, Mr. Rehan. Thanks for the question. First of all, I can say that, you know, till our last meeting, actually, we add up some, you know, 6% on our existing CPI linker portfolio. It means that now we are around, you know, 34%-36%, around there. We are already well-positioned there. You know, we're not going to see upcoming the increase there. I think we're going to keep this, you know, as it is.
We are not going to, you know, strong intention to grow our CPI linkers because we know that there are you know different you know tools that we can you know offset that net interest margin, especially on the Turkish lira balances side. We are keeping our existing you know situation as it is. Thank you.
Yeah. Thank you, Kaan. I think your fourth question was around deposit and the mix. We can see that in slide 16, where non-resident deposits are now 15% of the makeup for The Commercial Bank. That's versus 20% in the market. We don't have September numbers here just yet, so it's August.
In terms of market in September, in terms of The Commercial Bank. Then you can see the makeup is 28% for individuals, 29 corporate and 28% government, and other agencies of the government. I hope that answers your question.
Very useful. Can I follow up on the first question, if possible?
Sure, sure.
Just on the capital generation. I mean, it used to be straightforward to think about capital generation with capital saving from expanding into government lending. Now government is repaying, and it's unlikely to see uptick in the government lending demand into next year or the next two years, depending on the oil prices. How should we think, personally, how should I think myself about cash generation here, since margin could contract a few basis points, cost of risk could pick up and, you're gonna grow 3%-5%? This is 3%-5%. What, which sector you think you're gonna grow, where you are able to maintain, capital generation and improve the CET1? Thank you.
As I mentioned earlier about we see opportunity in the retail banking sector, where we have, I'd say there's still opportunity. There are opportunities in the consumer lending side, opportunities in the individual consumer mortgage. The Qatar government has come out with, you know, residency programs and everyone's familiar with the Golden Visa in Dubai. But Qatar actually has a five-year visa and a lifetime visa, depending on the amount you invest. We see opportunities in this space both for residents and non-residents. Then we continue, as you said, with the 3%-5% coming from a mix of private sector and there will be some government also, because I think the government is investing in downstream industry, as part of Qatar National Vision 2030, plus.
We believe that this will constitute the growth path for the bank in terms of its assets.
Thank you.
Our next question is from Rahul Bajaj. Rahul, please go ahead and ask your question.
Thanks. Thanks, Joseph. Thanks, Rehan. Two quick ones from my side. First one is on Turkey. So I understand you are kind of taking a more conservative view for your cost of risk, mainly because interest rates are now much higher and that kind of changes how kind of borrowers would repay. Just kind of if I focus on Turkey, how is your thinking about cost of risk and NPLs in Turkey? Because that has remained pretty low and at least the headline interest rates remain low in Turkey relatively. So how should I think about the asset quality cycle and cost of risk there? Do you think that 2023 would be more challenging than, I mean, the recent past? That's my first question.
The second one is on the tax rate. I could be repeating this question. I can't remember if I asked this in the second quarter results as well, but I see elevated tax payment in this quarter as well. Is this the kind of new norm, new effective tax rate that we should consider that we've seen the last two quarters for the near future? Those are my two questions. Thank you.
I will just briefly talk about Turkey at a macro level, and then Kaan can speak in more detail. Basically, we have been running our Turkey business in a very conservative basis, and on a risk basis over the last four years since the new management team came in. I think that has paid dividends in the sense that our NPL ratio is one of the lowest in the market. We continue to see that positive trend in terms of, you know, a low NPL ratio. You know, we're not trying to grow very fast or do anything very dramatic, and therefore we anticipate that low NPL ratio will continue in Turkey. Kaan , you have anything to add to that?
Thank you, Mr. Joseph. Exactly. Actually, I totally agree with your comments on that. You know, this is exactly we are going to sustain our conservative approach. It paid out so far, and we are going to keep that approach. I don't, you know, anticipate, you know, any, let's say, divergence from our existing levels in terms of cost of risk, in terms of NPL. At the same time, I can say that especially in Turkey, even though there is a, you know, risk on the high interest rates overall the world. You know, in Turkey especially, you know, the SMEs, the large corporates, they have chance to tap lower interest, you know, in the market.
Actually, we are well-positioned in all terms, and we don't expect any, you know, divergence on our existing cost of risk and NPL levels. Actually, I can say that. Thank you.
Rahul, your second question was around tax, which is also, I mean, completely Turkey. Kaan , would you want to add anything on the tax? Obviously, it is a function of us doing better in terms of income and pre-provision costs.
Yes, we can say. Again, yes, this is as a result of our growing, you know, core operating income. I think this is the factor of this. If there is any additional, you know, question on this, please, again, Rahul, could you if you need anything else.
Yeah, sure. Basically, should I expect the current kind of tax rate to continue in the near future?
Yes. Actually, on the corporate tax side, there are some rumors, but it's not going to make any considerable change because you know we know that especially when you look into Turkish fiscal discipline actually corporate taxes coming from the banking sector is essential. Of course, yeah, we don't expect any you know very considerable increase there. This is, so far, actually this is our knowledge, but of course we're gonna monitor especially the government's action regarding that. We don't expect any unexpected you know considerable increase there.
Rahul, just to add, of course, that in Turkey, the hyperinflation adjustments and accounting has not been adopted, so we're adopting that at the group level only. Obviously the profitability of the banks is still very good in Turkey, and therefore they are paying higher taxes as a result as well.
Understood. Thank you.
Our next question is from Raghed Srouji . Can you please go ahead and ask your question?
Yes. Hello. Thanks for taking my questions and for the presentation. Had a few questions that I wanted to ask, and they relate to some of the previous points raised in the presentation. The first one, I'm curious to know and to have more color from you, if possible, on the impact of higher rates on the loan quality. Do you expect to see any drastic deterioration because of the increase in rates and how do you assess how are borrowers prepared to pay those higher rates? The second question, also discussed previously. We do see that across the Qatari banking segment, a lot of banks are, you know, trying to be conservative and adding more provisions at this stage.
Is it kind of internal intention of each single bank which is driving this? Or is it some kind of a regulatory initiative and regulatory kind of effort to prompt banks to be more, you know, conservatively provisioned? And the last question, if you could please repeat your outlook for cost of risk or for credit costs for this year and for the next year as well. Thanks a lot.
Yeah. Thank you for those questions. Firstly, in terms of net interest margins, yeah, look, that's exactly what we've said in the presentation, that we do expect a little bit of pressure. We're guiding ten basis points, possibly for next year as the downside risk. From 2.8%, where we are right now, to potentially 2.7% next year. That's totally because of our view that we may not be able to pass all of the next couple of cycles of interest rate hikes onto our customers. The provisioning that you mentioned, yes, that is linked partly to that and partly to the fact that we are out of COVID.
Certainly as The Commercial Bank, I cannot speak on behalf of all the other banks, but certainly for The Commercial Bank, that's why we believe a conservative approach is required right now. The third question's in terms of guidance for cost of risk. We said 100-110 basis points for this year and next year, is the guidance we'd given at the beginning of this year. We think there's a potential slightly higher upside risk to that for this year, maybe 10-20 basis points. 20 basis points, I think is possible once we conclude on all of the provisioning requirements for the year.
Understood. Thanks a lot. Just coming back to the first question. I was curious about how higher interest rates locally affects the loan quality, the performance of the borrowers from the bank. Do you expect any, you know, drastic deterioration over the near to medium term in the loan quality specifically, in response to higher rates?
Yeah. I think, you know, your questions number one and number two are linked. As in we're saying there may be some NIM compression because of the interest rate rises, and there may be some quality concerns as well as a result of those rate rises. That's why we're saying potentially a NIM compression of 10 basis points and the cost of risk to stay at the guidance level that we gave for this year, stays for next year also.
Got it. Thanks a lot. Yeah.
Just to summarize, I think, particularly the smaller borrowers, we think are more vulnerable to these, you know, quite significant interest rate rises. That's why we are being conservative, particularly in the post-COVID when the support schemes are being withdrawn. I think that's just a double effect coming through.
Understood. Thanks a lot. Thank you.
Our next question is from Aybek Islamov. Aybek, please go ahead and ask your question.
Yeah, thank you for the conference call. I think two questions from me. The first one is just want to check on your subsidiary performance, associates performance, which looks quite stable. Would you be able to guide us on potential impairments related to your subsidiaries in Oman, UAE in the fourth quarter? Right. So what to expect there, if you can give us some color. I think secondly, you mentioned about loans which were impacted by COVID, but can you please remind me what were your deferred loan ratios like at the end of 2020 and at the end of 2021? Yeah, that's it. Thank you.
Aybek, thank you for your questions. Firstly, in terms of impairments, as you know, that's a Q4 exercise that we do. Certainly, we can see with our initial discussions with the auditors, and of course, they're not concluded at this stage. The performance of both of the associates has been very positive this year. That gives us a much better level of comfort than in previous years. As you know, we've taken considerable impairments on UAB already. As of now, I would say that if there is to be any impairment, it is likely to be minor. I would think that at this stage we can say that it's likely to be zero. Of course, as I said, the work is not concluded.
As of now, we don't think that an impairment will be required. If it is, it should be a fairly minor number. That's on the impairments. On the COVID schemes, I'll have to get back to you in terms of what the percentages were in terms of end of 2020 and 2021. We'll come back to you. I think it was about 2.5% as at the end of 2021.
Yeah. I believe that's what you mentioned on your previous conference calls. Yeah.
Yeah.
Exactly. Can I just add one more question on your liquidity position. In your slide deck, you show that the non-resident deposits right now are 13%, I believe, of your total deposits, right? 13 or 15, I don't have it in front of me.
15. 15%.
15%. Yeah, 15%. I think in 2020 or 2021, they were much higher, around 20-21%. So in that regard, can you give some color, what was your net stable funding ratio like two years ago when your non-res deposits were higher, and what your NSFR is like now?
Yeah. Actually, NSFR has also been subject to change, so it's not a like for like.
Yeah.
There are new regulations in place. So that's now becoming effective. Certainly, you're right that banks have been bringing down the amount of foreign currency deposits as a percentage of overall deposits. We are, you know, the NSFR needs to be 100% or greater. That is the requirement per the new regulations from the central bank. We are pretty much there as of now. We track it on a weekly basis. Currently, we're compliant with the NSFR requirements. It is quite a tough ratio to manage, so it needs a very close watch.
Yeah, I would just say it fluctuates, you know.
Yeah, it fluctuates.
You know, around 100 plus or minus 2 or 3%.
Exactly.
Would be the best way. Because, you know, when we have such a high low-cost balance and also deposits, you know, movement can easily swing it, and that's why we tend to be within that ratio.
Yeah.
Within that sort of range.
What would be your comfortable non-resident deposit ratio within your deposit base so that, you know, you're absolutely comfortable and then about NSFR that it doesn't worry you on a day-to-day basis?
I don't think it's as much about the non-resident versus resident.
Mm-hmm.
which is, you know, the issue on the NSFR. It's really just making sure that we have enough long-dated,
Yeah.
deposits. 'Cause there's a bit of a haircut applied on non-resident deposits for the NSFR.
Okay. It's about the 10, yeah? Yeah.
Yeah, it's about 10. 10, yeah.
10, yeah. Thank you very much. That's all from me. Thanks.
Okay. Thank you.
Our next question is from Vijay Singh. Vijay, please go ahead and ask your question.
Thank you for the opportunity. I have two questions. The first question relates to the investment book, and what is the interest rate sensitivity there and potential for further mark-to-market losses, if any, if there was another 100 basis points movement? The second question relates to the total exposure that you have to Turkish sovereign bonds, and how you're looking to manage that exposure.
Yeah. On the investment book, if we have another 100 basis point movement, we could look at around QAR 30 million-QAR 50 million further losses. The number is relatively smaller as compared to the investment book because most of our investments are HTM and therefore will not be subject to mark to market losses. On your second question, the Turkish sovereign bonds are basically held by Alternatif Bank as part of their requirements for meeting their ratios in Turkey. A commercial bank in Qatar has probably zero holding of Turkish sovereign bonds.
Yeah. My question is that, you know, if at some stage we have some sort of a domestic restructuring in Turkey, what is the total size of exposure that we're looking at? Because ultimately that will come to your balance sheet as well.
The overall balance sheet size of Alternatif Bank to the group is about 7.5%. It's relatively small, and the impact is becoming smaller as we grow the bank in Qatar.
Okay. Thank you. That's all for me.
Thank you. We have no further questions. Joseph, over to you for closing comments, please.
Thank you very much, Zubair. Thank you everyone for your questions. Very interesting as always, and we are very happy to answer any other questions which may come up and come back to you with any other clarifications. Please do reach out to Zubair and Rehan. Thank you again, and we look forward to talking to you again after the end of this year. Thank you.
Thank you.