Good afternoon, everyone. This is Elena Sanchez-Cabezudo from EFG Hermes, and I would like to welcome you all to Doha Bank's Third Quarter 2025 Earnings Call. We have with us from Doha Bank, Dimitrios Kokosioulis, Deputy Chief Executive Officer, Aman Ullah Khan, Chief Financial Officer, Salman Mustafa Siddiqui, Chief Risk Officer, and Hesham Kalla, Head of Investor Relations. I would like to hand over the call now to Dimitrios. Please go ahead.
Thank you, Elena, and good afternoon to all. On behalf of our Group CEO, Sheikh Abdulrahman, who is actually away at the IMF annual meeting, we would like to thank you for your time in joining us on the Q3 investor call. As I have done in the past, I will share some highlights for the quarter that has ended and then hand over to Aman, our CFO, to cover the financial highlights. Let me start off by stating that the bank's initiatives in Q3, spanning technology, funding, and business diversification, are delivering tangible results as this is shown on the results. We remain committed to capitalizing on these advances to sustain profitability, elevate client experiences, and contribute to Qatar's economic vision. Beyond the financials, Q3 was marked by important milestones across digital transformation, global partnerships, and community engagement.
We were able to kick off and we are almost done with the migration of all of our credit cards to Mastercard, bringing cardholders world-class experience with global benefits and enhanced digital payment security. We launched a pioneering API banking platform, among the first in Qatar, enabling corporate clients to integrate seamlessly with our systems for real-time transaction reconciliations. We expand our Tadbeer payroll solution for government entities, enhancing efficiency and transparency while supporting Qatar's shift towards digital and paperless operations. Our mobile app also is increasing in penetration, and we've had more subscriptions and more active users. Also we have seen that from the current sub-accounts, more than 30% were opened through mobile banking through our digital channels rather than going to the branches. So we are very satisfied with this transformation and the transition from branches to digital channels.
Market confidence continues on the funding front as the bank successfully priced our second debt issuance this year of $500 million. This time attracting nearly four times oversubscription from a highly diversified global investor base. This outcome reinforces investor confidence in Doha Bank, Qatar's financial system, and of course, the long-term resilience of our economy. In Q3, we also saw the bank's partnerships and global engagement being enhanced as we signed a strategic MoU with Seviora Holdings, opening new opportunities for cross-border investments and collaboration between Qatar and Asia. Some of the executive management participated in some very important global conferences and forums, like in Cyprus 2025 and currently at the IMF World Bank annual meeting, demonstrating Doha Bank's active role in shaping global financial dialogue. Our community engagement remained strong during the quarter as well.
We concluded a youth summer camp in partnership with the Qatar Equestrian Federation, continued our sponsorship of the Global Champions Arabians Tour in London, and announced our official sponsorship of the Doha Marathon by Ooredoo 2026. These initiatives reflect our commitment to promoting health, cultural heritage, and social wellbeing in line with the pillars of Qatar National Vision 2030. To meet evolving retail needs, we launched a new personal loan campaign offering competitive rates and lifestyle rewards, further strengthening our value proposition for individuals and families. In a nutshell, in summary, Q3 has been a quarter of resilience, innovation, progress for Doha Bank. We continue to advance digital transformation, strengthen our funding base, deepen global partnerships, and engage meaningfully with our community. Looking ahead, our focus will remain on optimizing efficiency, expanding our product offerings, and supporting Qatar's long-term vision for economic diversification and sustainable growth.
Thank you again for the participation, and now we'll hand it over to our CFO, Aman, to give you some more highlights of our financial growth.
Thank you, Dimitrios, and hello, everyone. This is Aman, the CFO of the bank. I will just take a couple of minutes to take you through the financial highlights. First, the balance sheet. The total assets grew by around 8.6% year-on-year and 8.3% year-to-date. The bank witnessed a loan growth versus Q2 of 5.4% quarter-on-quarter, as well as 3.7% year-to-date. The investment portfolio remains robust, having grown by around 8.5% year-to-date. The guidance for the loan growth is around 5% before the end of the year. The customer deposits grew by around 4.9% year-to-date and 2.8% year-on-year. Our LDR remains strong at 93.35%, which is well within the regulatory maximum. The LCR, which is a measure of short-term liquidity, also remains very strong at around 299%. On the capital side, the capital ratios remain healthy.
The bank CET1 sat at around 13.57% and the total capital adequacy ratio at around 19.46%. Given the expected asset growth and assuming the current equity structure remains at the Q3 levels, the guidance or CAR for the end of the year is around 18.5%-19%. Moving on to the income statement. The bank achieved the total profitability of around QAR 745 million, which is an increase of 7.9% year-on-year. The net interest income remains flat compared to last year. NIMs stood at around 1.76%, having fractionally improved from the last quarter. The guidance for NIM is to be around 1.85% ± 10 basis points for the year. The bank is forecasting a couple of rate cuts, one by the end of this month and one in December, which will affect the NIM by 5 basis points over the full year 2026.
The bank's total cost has increased by around 5.6% year-on-year, and the cost-to-income ratio stands at around 39.2%. The bank's guidance for the cost-to-income ratio is to be around 38% by the end of the year. The net impairment on loans for the first nine months stand at around QAR 453 million versus QAR 590 million for the same period last year, indicating a decrease of around 23.1%. The cost of risk for the first nine months stood at around 120 basis points versus 131 basis points for the same period last year. The guidance for cost of risk for the year-end 2025 is to be around 120-130 basis points. One of the major improvements for the quarter was in the NPL ratio, where the ratio decreased to 6.75% on the back of loan growth and some write-offs.
The bank maintains a guidance of around 7% NPL ratio for the year-end, as earlier stated in the previous calls. The specific provision coverage stood at around 78.4% as compared to 74.8% last year, in 2024. The guidance for specific provision coverage is to be around 80% by the end of the year. The bank now opens the floor to the questions and answers. I will hand it over back to you, Elena.
Thank you very much for the presentation. We will move to the Q&A. If you have a question, you can write it in the chat and I will read it to management, or you can also click on the raise hand button. Before we start, perhaps a couple of questions from my side. There was a very strong increase in deposits, or a strong increase in deposits in Q3, and that helped in reducing your due to banks this quarter. Is that something sustainable, that reduction in reliance from interbank, or is that something temporary for Q3?
Elena? Yeah, okay. This is question number one. Okay?
Yeah.
Do you have another question?
Yeah. The other question is on Islamic banking. We have heard rumors and talks about Doha Bank potentially asking the central bank for a conversion to Islamic. I just wanted to ask you if there are any updates on that front. Thank you.
All right. Elena, for question number one, you asked about the sustainability for the deposit. This is exactly what we have been referring to in earlier calls. We have been building a very healthy pipeline on both the deposits as well as the loans end. This is just a result of the efforts that Dimitrios has earlier explained. We have grown our proposition both in the retail space as well as the wholesale banking space, on the back of strategic partnerships at both ends. This has resulted in not just increase in CASA, but as well as other deposits. This momentum is going to continue. That is one. For question number two, again, this Islamic banking question has been asked on various forums and our complete answer has always been, if there is any update, we will come and inform the market.
The process itself takes two to three years and we have no update to share with any of the market participants. Whenever there is an update, we will. Until we have to, you have to rely on rumors, probably.
All right. Thank you. We will take a question from Chiro Ghosh. Please go ahead.
Hi. This is Chiro Ghosh from SICO Bank. So three questions. The first one is on the asset quality. The asset quality seems to have improved quite a bit. If you can give some color and what kind of trend can we expect for the rest of the year and 2026? If you can give some kind of color, because the stage 2 is still high, so can we expect some movement to stage 3? Because otherwise things look good. That is my first one. Second is the margin side. I would just again ask you to repeat. The 5 basis points you said is for every 25 basis points or for the 50 basis points rate cut, which you expect. Plus, if you can give some sensitivity for every 25 basis points, how do you see the bank's margin moving in which direction?
Last is, again, the loan growth was again quite solid in the third quarter. Was it because of the pent-up demand from slightly weaker performance in the second quarter, or this is the trend we can expect going forward?
Hi, this is Salman Siddiqui. I will take the first and the third question, while the margins question I will leave for my colleague, Aman. On the asset quality, yes, for sure, the asset quality has improved at the back of the very strong loan growth. We did touch upon that in our last investor call, where we said that there is a strong pipeline which is going to yield in stronger loan growth in the third and the fourth quarter. The results are speaking for themselves on that count.
We also expect this trend to continue in the fourth quarter as well and beyond. The bank has taken a very conscious note of its strategic alignment with the growth trajectories. A detailed study has been done as to where does the bank want to grow and how. More so on the NPL reduction, that is again at the back of the loan growth, some resolution of accounts and calculated write-offs that we touched upon over the last two quarters that we had investor calls for, that we were taking some very calculated write-offs subject to the regulatory approvals where we have touched the necessary regulatory provisioning requirements. Moreover, when it comes down to stage 2, the bank has already deployed a multi-pronged strategy. The bank is engaged formally now with subject matter experts. They are on the ground working with the bank.
We are going to come up with out-of-the-box solutions. We are very actively engaged with the regulatory authorities and have got their concurrence in terms of the project being conducted at this point in time, which will help yield very strong resolution in terms of the stage 2 book. We only see resolutions coming through, not migrations to stage 3 from the stage 2. Whatever migration would happen from stage 2 to stage 3 would be a logical migration, not a no options migration kind of thing. We see more resolution coming and more curing from stage 2 to stage 1.
Okay.
Okay. On the margin front, Chiro, the 5 basis points as I earlier explained, the impact on NIM is on the basis of 50 basis points rate cut. This 5 basis points is for 50 base rate cut overall impact on NIM. Secondly, you asked about the sensitivity. The sensitivity for 5 basis points annually would be around QAR 50 million on the static portfolio.
Okay. Sorry, again, just to understand it well. So every 5 basis points NIM improvement for every 25 basis points rate cut?
No, these are two. Roughly you can say, but you cannot actually equate because what we are assuming is one rate cut in October and one in December. The liabilities repricing might have some impact here and there. Roughly, you can say that, 5 basis points, but it is not technical. It will be a little bit off. For example, the first 25 basis points rate cut would have an impact of close to QAR 30 million. The next one will have impact of around QAR 20 million. So in total it will be QAR 50 million impact on the profitability. But roughly you can say that, yes.
Got it. Very clear. Thank you very much.
We will take the next question from Waruna Kumarage. Please go ahead.
Hello. Hi, good afternoon, gentlemen. Am I audible?
Yes, we are. Good afternoon.
Yeah. Hi. This is Waruna Kumarage from SICO Bank, Bahrain. I have a few questions. Starting off with the NIM subject. Just want to get an idea, what's your expectation in the next quarter? In the near term, do you expect Because I see that from your presentation that NIMs are weak compared to first quarter. Second and third quarter is a bit weak, so just want to get an idea of what's going to happen in fourth quarter. Secondly, on the long run, in the same table you're saying the NIM, it gives indication that you expect the NIMs to expand in the medium term from 2025 to 2027. So, given that interest rates are most likely to decline further, how do you expect to create this NIM expansion? That's my first question. Second question on the stage 3, I see that there were some write-offs.
I think that's the reason why NPAs have fallen. So, if you can give some clarity on the write-offs, that will be helpful. Lastly on cost of risk, you have given guidance for this year. So what can we expect in the next two years? Will it be elevated same level, or can we expect some normalization? Thank you very much.
Waruna, I will start with the NIMs part. The guidance for NIM, as I earlier explained in the call, is for it to be around 1.85% ± 10 basis points. If you see our NIM trajectory for the year, you would have noticed a decline in the first two quarters, followed by an increase in Q3. As per our earlier calls, we did explain this phenomenon based on the balance sheet structure. We mentioned that pretty much most of the assets get repriced the day the rates are cut whereas the liabilities show a lag effect. The NIMs improved based on that logic. Second thing you mentioned about the guidance for the next two to three years. The bank is better off when the rate cuts in the long run.
In the short run, there is a NIM attrition based on the balance sheet structure, as I earlier explained. In the long run, the asset repricing, given that most of the loans have floors as well, whereas the liabilities get repriced based on the prevailing market rates. Generally, the margins expand in the long run.
The next two questions, I will ask my colleague, Salman.
On the reduction in the NPLs, as I just said earlier, it is a mix of multiple things. The first one being, or the primary driver being our strong growth in the loan book, which will continue given the pipeline that we have. The second one, yes, we did take calculated write-offs, which we had hinted in the last two investor calls about. Those are the write-offs where we have achieved the regulatory provisioning requirements, and those write-offs have also been taken to enable the bank to aggressively take the recovery efforts against those defaulted accounts in terms of now all-out recoveries. As I mentioned, the bank has actively engaged with subject matter experts, which is a third party known for providing solutions for distressed assets, recoveries, off-balance sheet or written-off portfolios.
We are approaching with a multi-pronged approach, which would comprise of restructurings on the distressed assets, but economically viable restructurings. Very strong recovery drive, backed by very well-thought-out recovery strategies, account-by-account level recovery strategies. We are also exploring some out-of-the-box solutions, which I cannot make public at this point in time because they are at very nascent stages at this point in time. However, these have been shared with the regulatory authorities, and we are detailing our approach. Once that is done, we will be sharing the results once those approaches are put to work and the results will be reflective of those approaches.
Cost of risk guidance.
As far as the cost of risk is concerned, I think our guidance has remained around the 120-130 basis points.
For the current year.
Yeah, for the current year mark. I would let it remain like that for now. However, for the coming year, I would say that it would—
100 and—
Yeah.
100 and—
It would hover somewhere around the 110 to 115 basis points mark, given the trajectory that we are witnessing and given the curing or remediation measures that we've applied. Yes, that's the mark we are looking at.
Okay. Thank you. If I can squeeze a couple more questions. They were related to recovery. Do you expect, are there any recoveries in the pipeline that we can expect in the near term which can benefit you? That is one question. Secondly, on the deposit side, I can see encouraging trends in demand and core deposits actually managed to gather more deposits than time deposits this year. Is there any specific strategy that you are adopting in deposit mobilization?
For recoveries.
Yeah. On the recoveries, yes, we are looking at recoveries that we have projected at the start of the year. The bank continues to pursue those recoveries aggressively. However, what I referred to earlier, the engagement of the subject matter experts is only going to facilitate that recovery effort further. Because being the subject matter experts, they will provide us with very specific solutions, looking at what we can recover from those accounts that the bank has already taken the hit for on the P&L. I am now referring to the NPL accounts. On top of that, the stage 3 recoveries we are looking at, and the written-off book as well, what we can recover from that.
As I said, we are looking at some out-of-the-box solutions, but I cannot be publicizing or syndicating those solutions for now until the time we have not presented them formally to the regulatory authorities and even got their nod of concurrence. Once that is done, which will be very soon, we will be sharing those in the future investor calls.
On the deposit, Waruna, as I earlier explained, we have had some strategic partnerships with the public sector, wholesale banking, as well as retail level that has helped us. On the back of the services, the improved services that we offer, both from the new corporate app, new retail app, and our ancillary services has really helped us in elevating our CASA base. As you rightly explained, the proportion of CASA over overall deposits has increased as compared to the time deposits.
Okay. Thank you very much, gentlemen. That is it from my side.
We will take the next question from Andy Brudenell from Ashmore. Please go ahead.
Andy, you are on mute.
Hello?
Yes, there you are. How are you, sir?
Wow. Okay. This happens a lot on this call and I am not sure why. Okay. Yeah. Good now. Thank you. Okay, most things have been answered, I think, but just on a non-funded income side, as the balance sheet growth accelerates, I believe guidance, particularly fee income, was to see an acceleration as well, but that doesn't seem to be happening. Is that just coming with a lag or I believe the guidance initially was for 10%, and I think it's tracking around 5%. So I would be intrigued to understand a little bit more about that, please. Then a question on, you cite cost-to-income ratio, which looks a little bit lower than I would have expected, which is being delivered. So this seems to mostly be that OpEx growth is not coming through as high as initially I was anticipating.
Is that what's going to drive, one, that lower cost-to-income ratio this year, but also quite a punchy target of back to kind of 30%-odd in the medium, in the next three years, I think by 2027. Can you just give me a sense of how much of that is just a reduction in OpEx versus just the ratio changing because income accelerates? What should we think about in terms of OpEx growth and where is that spending going? Because it has been quite high because there's been so much going on with the various transformations that the new management's brought into place. So is that now mostly done and therefore there's going to be a significant deceleration there? Just a bit of color around that would be really useful, please. Thanks.
All right. Thank you, Andrew. I am going to answer the non-funded income first. As you are right, the growth in the fee income is around 5%. We were expecting a bit higher, but the reason for it was the delayed or the lag drawdowns. As drawdowns happen in the latter part of the year, you will see an uptake in Q4 and the coming quarters. So the fee income is going to improve. The reason being, as we explained in the investor call in Q2, due to the ongoing geopolitical scenario, some of the drawdowns did not materialize back then, which happened in the latter part of Q3, hence delayed fee income. Yeah, but you are right, it will increase in the coming quarters based on the pipeline that we have and the materialization timelines that we have for that pipeline.
Number two, for the cost-to-income ratio, I think you have a very good observation that it should have shown a higher growth in terms of maybe expenses as well as ratio. The reason being, we have been discussing about this in earlier calls as well that while the bank is working and going through a significant transformation, which entails significant CapEx and OpEx, at the same time, we have a very tight strategy when it comes to the rationalization of cost. We have, as well as identifying the revenue weaknesses. We are working very hard on that, and up to now, we have identified, by Q3 already, close to QAR 50 million in savings for the current year, annualized realized savings. Hence, while we spend for the transformation, we also are tightening, so to say, the avenues for the recurring cost.
The cost guidance for the coming three years, of course, transformation is somewhat 70% already done. We expect the elevated ratio cost and commission next year. But after that, based on the one-off costs, again, I cannot go about the details of those one-off costs, as they stop incurring from 2026 onwards, you will see a major drop in cost-to-income ratio from 2027 year onwards, hence the guidance of 30%-31% in the next two to three years.
Okay, great. Thank you very much.
Welcome.
All right, thank you. We will take some questions from the chat now. There is one question on the share buyback. Please remind us where you stand on the share buyback.
We are still under the regulatory approval process. As and when there is approval, we will apprise the market of any update at that point in time.
All right, thank you. Just finally, one follow-up question on NPLs. I know you talked a lot about NPLs already, but there is a question on whether this quarter there was any downgrade from stage 2 to a stage 3.
No. There were no downgrades from stage 2 to stage 3. As I said, there are certain accounts in stage 2, which are awaiting curing. They may transit to stage 1 after completing their regulatory curing period. Other than that, there were no downgrades. However, if the bank does take any downgrades, it will be at the back of a conscious decision to do so and in compliance with the IFRS 9 requirements after considering the necessary flags that are there for SICR requirements.
All right, thank you. We will take a question now from [Ranjan Ranatunga]. Please go ahead.
Hello. Can you hear me?
Yes, we can.
Yes, we can.
Yeah, good afternoon, and thank you for the call and taking our questions. I just have one query with regards to your NIM, the medium-term guidance, which is an improvement to 2.25%. Just wanted to know how many rate cuts have you factored into this particular guidance?
Okay. Ranjan, right?
Yeah. Yes.
We are factoring, from now till the end of next year, around four rate cuts.
Okay. That will be around 100 basis points.
100 basis points, yeah.
Based on your guidance of 5 basis points per every 50 basis points, that is around 10 basis points of improvement coming from rate cuts, if I understood what you said earlier correctly, then from where would you get the rest of the improvement?
No. That 5 basis points is actually decrease. It is not increase. Again, this is based on a static portfolio.
Okay.
When we are providing the NIM guidance, that takes into consideration a certain trajectory for growth in portfolio as well, as well as initiatives that we are now working on. So it is a multi-pronged effort to bring the NIM upwards, including changing the funding structure on the balance sheet.
Okay. This improvement NIM would be a function of four rate cuts and perhaps also improvement in your CASA.
Yes, exactly. Absolutely.
Okay. On the loan book side, can we expect perhaps maybe an improvement in your credit spreads or even a change in mix, which could be favorable towards your NIMs and thus NIIs?
Okay. For the loan side as well, Ranjan, we have floors. The floors are more or less about to get activated.
Okay.
You will sort of fix your yields on the loan side, whereas your cost will continue to go down.
Okay. Thank you very much. That's clear.
Yeah.
All right. We have no further questions, and therefore we can conclude today's call.
Elena, if you allow me, there was one here. I just want to see if the chief would give guidance. The provision coverage you said for Q4 you were targeting 80%?
70%-80%, yeah.
Do you want to give any kind of coverage outlook for next year? What you'd be comfortable with? We'll do it on the Q4 call?
Yeah, I will do it on the Q4 call. We are working as we speak.
Okay. I guess that's it, Elena.
That's it. Yes, I don't see any other questions. We can conclude today's call. Thank you everyone for joining today's call, and thank you as well to Doha Bank's management team for the presentation and the Q&A session. Thank you.
Thank you, Elena. Thank you, EFG. Anybody that has further questions, please reach out to me.
Thank you.
Thank you.
Thank you.