Good afternoon, everyone. Thank you for joining us today. This is Janany Vamadeva from Arqaam Capital, and I am pleased to welcome you to Doha Bank's Semi-Annual 2025 Earnings Webcast. Without further ado, I will now turn the call over to the Group Deputy CEO. Over to you.
Hello, good afternoon to everyone. On behalf of Sheikh Abdulrahman, our Group CEO, I would like to thank you for joining Doha Bank Q2 results investor call. Doha Bank's performance for the second quarter of 2025 is a period marked by continued progress across the bank's operations. Since the launch of the strategic Himma Transformation, we have been relentlessly focused on building a stronger, more agile, and digitally enabled Doha Bank. Our brand strength is growing, and our reputation with clients, partners, and investors continue to strengthen. Let me begin with a few strategic highlights from this quarter. The transformation, actually, our digital transformation is accelerating. In Q2, we delivered over 20 new features across our retail and corporate platforms. Our Tadbeer corporate mobile app continues to gain traction in the market. We even gained the best corporate app award in the market.
For retail customers, adoption continues to climb, with four major releases improving functionality, security, and convenience. We have more than a 44% increase in subscriptions, more than 21% increase in active users in our mobile banking application, which still continues to be ranked as number one in Apple Store and Google Play. We signed the landmark MoU with Blackstone during the Qatar Economic Forum, a pivotal collaboration giving Qatar investors access to world-class private market strategies. Our credit ratings were reaffirmed by both Fitch and Moody's, reflecting our current fundamentals and improving risk management. In a strong show of investor confidence, a leading private sector investor joined our shareholder base in Q2. We also continue to strengthen our funding profile, successfully closing a EUR 500 million three-year syndicated loan, marking our entry into the euro-denominated market.
In terms of business group progress update, in retail, we saw a strong momentum in product campaigns, in digital engagement, as I have described before, and operational efficiency, including a big, robust growth of 33.6% year-on-year growth in housing loans. We are continuing to focusing on expense through the management on fee income, on working on more innovative features and to put more features on our mobile banking application, and making sure that we also bring [CASA] . We have had more than QAR 100 million in [CASA], working with the wholesale banking and increasing synergies. In wholesale banking, we continue to enhancing our global transaction banking proposition, driving cross-sell under the One Bank strategy. In international banking, we deliver strong growth in the FI's indications while continue to expand with new relationships. In treasury investments, we manage market conditions effectively, growing the fixed income portfolio, enhancing solutions for clients.
While external factors such as geopolitics impacted the loan book drawdowns, we remain focused on our portfolio optimization. Our deliberate exit from low yield exposures strengthens the path to sustainable profitability. In closing, and on behalf of Sheikh Abdulrahman, our Group CEO, I would like to thank our clients, our employees, partners, and shareholders for their continued trust. Our journey under Himma is still unfolding. Quarter by quarter, we are proving that Doha Bank is transforming with discipline, with ambition, and with purpose. We remain committed to building long-term value, reinforcing stability, and contributing to Qatar's economic diversification goals. Thank you all for joining, and with no further ado, I would like to hand it over to Mr. Aman, our Group CFO, to share the financial highlights.
Thank you, Dimitrios. This is Aman, and I will take you through the financial highlight for the H1 of 2025. Starting with the balance sheet. The total assets grew by 16.2% year-on-year and 11.6% year-to-date. The growth coming mainly from the investment book of around 10.3%. Loan book was mainly muted on account of geopolitical situation towards the end of Q2, for which we had some healthy pipeline that could not be drawn down due to the ongoing situation. We expect this pipeline to be drawn down towards the second half of the year 2025. Having said that, there was still year-on-year growth in the loan book of around 1.7%, and we still maintain the guidance for our loan growth target to be in the range of 3%-5% for the year. The customer deposits were flattish, around 0.2% increase year-to-date.
Our liquidity remains strong with the LDR around 91% and LCR close to 350%. The capital continues to remain healthy, with the bank CET1 close to 13.13% and total capital ratio at around 19.19%. Given the expected growth and given the results on the share buyback, if it happens, the guidance for CAR is to be around 18.25%-18.75%. Income statement, the bank achieved a profit for the first six months of around QAR 467 million , a growth of 8.1% year-on-year. The net interest income increased by 1.5% year-on-year. The net interest margin stood at 1.74%, which is down 18 basis points as compared to the year-end. We maintain our NIM guidance to be in the range of 1.85%, plus or minus 10 basis points. As we move towards the end of the year, the last bit of the liabilities, we expect them to be repriced down.
This is a guidance which we have been giving since the start of the year, that the first six months we will see partial NIM contraction, after which we will see increase in NIM towards the end of the year. The bank's total operating cost increased by 8% year-on-year and the cost income ratio stood at around 39.1%. The guidance for the cost income ratio for the whole year continues to be around 37%-38%. The net impairment on loans for the first six months stands at around QAR 322 million as compared to QAR 417 million last year for the same period. Cost of risk expanded around 141 basis points as compared to 139 basis points for the same period of last year. The guidance for cost of risk still remains the same, between 120- 130 basis points.
The NPLs slightly increased to 7.66% as the loan book has slightly contracted, but there has been no new addition in the numerator for the NPL. The guidance for the NPL, we continue to keep the guidance at around 7%, or bring the ratio down to 7% towards the end of the year. The specific provision coverage at around 78.8%, compared to 74.8% as of the end of the year last year. The guidance for specific provision coverage is to be around 80% by the end of this year. We now open the floor for question and answers. I will hand it over back to you, Janany.
Thank you. We are ready to take questions now. If you wish to ask a question, please type it into the Arqaam Capital chat box. We will pause for a few minutes to just collect the questions. As we wait for the questions to arrive, I have a question on the tax exemption. From what I understand, Doha Bank is exempt from paying the Pillar Two tax for five years. Just wondering what will happen after the five-year period. Will it still be exempted or do we have to carry out another exercise to see whether you qualify for that?
Okay, I will answer this. See, the guidance in the executive regulation is for the exemption for the first five years, and this is how we foresee it. It gives us, as a bank, time to reevaluate our strategy for the international locations. Having said that, after five years, based on the current guidance, we would foresee a tax liability.
Thank you for that. My next question is on loan growth. You did mention that you expect the pipeline to be drawn down, but what sort of a growth are you expecting for H2 or full year?
Okay, so it's 3%-5%, but I'll let Salman maybe shed some light on it.
Hi, good afternoon. This is Salman Siddiqui. I'm the Chief Risk Officer for the bank. As my colleague Aman mentioned and the Deputy CEO mentioned earlier as well, the growth target that we're pursuing is around 3%-5%, which is backed up by quite a strong pipeline. Some of the deals that were in the pipeline, which got slightly delayed during the quarter that we're reporting because of the recent regional conflict that the world witnessed. Certain elements came into play which actually restricted the disbursement of those loans, I would say. You will see that Q3 will witness that growth and the pipeline would transpire into actual disbursements. We'd expect the 3%-5% to consistently be achieved during the remaining two quarters.
Thank you for that. Just a reminder, if you have any questions, please send it directly to Arqaam Capital chat box. We have our first question. I think NPL ratio is up to 7.8% now, but guidance remains at 7%. Can you please explain what you expect to see in H2 that gives you this confidence? Is it loan growth or some asset quality resolution?
I think I'll take that question. The NPL ratio is actually at 7.65%. That is again, led by the disbursements that did not take place during the close of the second quarter, I would say, rather than addition of any new NPLs into the book. If we look at essentially our Stage 3 portfolio, it has remained the same. There's no addition to the portfolio in Stage 3, which essentially means the bank has not moved any new names into the NPAs. Which, again, points towards the quality of the new assets that have been booked, which are of high quality and better ratings. Second part is that, yes, we anticipate that the resolution of NPAs or the lowering of the NPA ratio will be driven by multiple factors.
The first one being the loan growth, which we do definitely expect to take place during the Q3 and Q4 period. Second, the resolution of certain remedial names or NPA names that is at the verge of finalizing. We are at very advanced level of certain resolution of accounts, which our remedial team are working upon. We are in advanced stages of discussions with the Central Bank as well, and subject to the Central Bank's approval, we see that those names getting resolved will bring in the much anticipated resolution to the NPA ratio or lowering of the NPA ratio. The bank is also pursuing out-of-the-box solutions in terms of getting the subject matter experts on board in terms of NPA resolution and getting the best practices in place to ensure that the bank remains at par with the best market practices as regards the remedial portfolio.
Thank you for that. Our next question is: What will drive the improvement in NIMs in H2 2025?
Okay. I would just reiterate what I mentioned earlier. Our initial guidance for NIM was that during the first six months of this year, there will be contraction based on the liabilities that we have that as they start getting repriced after the last rate cut that happened towards the end of last year. The growth in NIM would come from reduction in cost of funding, that has already started. We have already started seeing movements in starting of Q3, in reduction of cost and funding and the improvement in NIM. The answer would be the reduction in cost of funding.
Thank you for that. Just a reminder, if you have any questions, please send it to your Arqaam Capital chat box. We have another question from Andy Brudenell, Ashmore. Fees and other non-funded income is picking up. Do you give guidance on growth here? Could you talk a bit more about where the opportunities are? If the group becomes-
Sorry.
If the group becomes one of the main players in the market as hoped, what contribution could NFI, non-funded income, be to total income in, say, three years?
Okay, I'll start with the fee and commission part of it. We have seen a growth of around 10% year-on-year. As we have given guidance in the Q1 call, the plan is to keep the fee and commission income to be around 15% of the total operating income, for this year. Growing by 1.5% towards the next two to three years as a percentage of total operating income.
Thank you for that. It looks like we don't have any more questions, Hesham. I would like to just ask one last question. Would you have any update on the share buyback program?
It's still under regulatory approval process, so we await their decision as we speak.
We have one question. The cost base is growing as part of the transformation. When does this slow? What is OpEx growth for the next three years?
The cost continues to increase as you rightly mentioned, because of the transformation and this would be the case till the end of next year. Our guidance on cost-to-income ratio after three years is to be around 30%-31%.
The next question is, does guidance on cost of risk remain at 120- 130 basis points?
Yes, it will remain around the same region of 120-130 basis points, barring any extraordinary resolutions that we see, and we do anticipate the resolutions that I earlier mentioned in one of my responses. If that be the case, we're not factoring them in for now. If that be the case, you will see a substantial drop in that. But for now, we would rather remain a bit conservative and remain at the 120-130 basis points guidance.
Thank you for that. It looks like we do not have any more questions, so I will hand it back over to you, Hesham.
Thanks, Janany. For everyone that dialed in and participated on our call, I appreciate it. You know where to find me. I will be in the office for a couple of weeks before my annual leave. If you need any follow-ups, I will be happy to organize a call with the chiefs that are sitting here with me for you. Other than that, I wish everyone a safe and happy summer. Thank you. Bye.
Thank you, everyone.