Good afternoon, everyone. This is Elena Sanchez, and on behalf of EFG Hermes, I would like to welcome you all to Doha Bank's first quarter 2025 earnings call. We have with us on the call from Doha Bank, Mr. Dimitrios Kokosioulis, Deputy Chief Executive Officer, Mr. Aman Ullah Khan, Chief Financial Officer, Mr. Salman Mustafa Siddiqui, Chief Risk Officer, Mr. Fawad Ishaq, Chief Treasury and Investment Officer, and Mr. Hesham Kalla, Head of Investor Relations. The call will begin with a presentation from management on the key highlights of the first quarter, and then we will open the floor for Q&A. I would like to hand over the call now to Mr. Dimitrios. Please go ahead.
Hello. Good afternoon to everyone, and thank you for joining us today. On behalf of our Group CEO, Sheikh Abdulrahman, it's my pleasure to welcome you to our Q1 2025 investor call. Actually, I'm pleased to share that Doha Bank has had a very good 2025, with strong momentum and significant progress that has been achieved across all key financial metrics and strategic areas. In the first quarter of 2025, and thanks to the significant advancements in our Himma Transformation program, we have achieved income growth and enhanced our operational efficiencies.
Total assets have increased, reflecting our prudent balance sheet expansion strategy. These results highlight our resilience and discipline execution as we align with Qatar's financial development goals. We have made substantial strides in strengthening our capital and liquidity positions. Our capital and liquidity continue to remain strong, demonstrating our prudent risk management and proactive funding strategy. Strategically, Q1 was marked by several key milestones. We successfully returned to the international debt capital market with benchmark issuance of $500 million at an additional top of $275 million, with investors reinforcing their confidence in our long-term vision.
We also introduced several new innovative digital solutions, including the launch of a state-of-the-art corporate mobile app, which has been ranked also as the number one corporate app in the country, and the enablement of new features on our retail mobile app, including digital account opening, which further solidifies our leadership in this digital banking space. Additionally, we announced our intention to a share buyback, reflecting our belief that our stock is undervalued, and over the medium to long term, this initiative will reward both us and our shareholders.
Looking ahead, we remain focused on executing our transformation strategy, expanding low-cost liabilities, enhancing cost efficiencies, and advancing our digital ecosystem. These are critical levers in delivering long-term sustainable value to our stakeholders while contributing meaningfully to Qatar National Vision 2030. Now, with that, I would like to hand it over to our CFO, Mr. Aman, who will provide a more detailed overview of our financial performance over this past quarter.
Thank you, Dimitrios. My name is Aman, and I am CFO of the bank. I will quickly take you through the financial performance review for the first quarter of 2025. We will start with the balance sheet first. Overall, a very positive quarter as Dimitrios earlier explained. Our overall assets grew by around 4.6% year- to- date and 12.7% year- on- year. The result coming from both the investment and the loan growth. Our year-to-date loan growth was around 1.4% and 6.3% year- on- year, coming evenly from both the private and the public sector.
Our guidance for the current year for the loan growth is around 5%. Year- to- date, the investments grew by around 7% as well as 21.6% year- on- year, primarily coming from high-quality liquid assets. The customer deposits declined by around 1.6% marginally, but year- on- year, they were up by around 3.8%. The long-term overall funding remained intact. The LDR, the liquidity, the loan-to-deposit ratio is good, strong, around 96.26% within the regulatory requirement. Our capital base and the capital ratios remain healthy and strong. Our overall capital adequacy ratio was around 19.27%, with CET1 ratio being 19.27%.
Our guidance for the current year for CAR is between 18.25%-18.75% on the backdrop of the share buyback, as Dimitrios was earlier explaining. Moving on to the income statement. We achieved a profit of around QAR 252 million for the first quarter of 2025, a growth of around 8.8% year- on- year. Net interest income also increased by around 6.4%. The NIM stood at around 1.91%, which was in line with what we had last year, Q1 2024, of around 1.92%. The guidance for NIM for the current year is around 1.85%+ or - 5 basis points, depending on the rate cuts. Our net fees and commission increased 12% year- on- year.
The total operating cost for the bank increased by around 10.5%, and the cost to income ratio stood close to 37.9%. The guidance for the current year for cost to income ratio is for it to be around 37%-38%. The net impairments for loans and advances for the first quarter stood at around QAR 229 million versus QAR 179 million last year. The cost of risk for Q1 2025 was around 149 basis points versus 123 basis points for the same period last year.
The guidance for the current year for cost of risk is for it to be around 120basis points-130 basis points. The NPLs remain flat from 7.41%, marginally declined from last year, same quarter, from the level of 7.46%. The guidance for NPL for the current year is for it to be around 7%. The specific provision coverage is around 77.5% as compared to 74.8% at the year end 2024. The guidance for the coverage is for it to be around 80%, subject to if there are any write-offs, then the guidance will adjust accordingly. Now we are open to the Q&A. 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 Q&A designated area, or you can also click on the raise hand button and I will unmute your microphone. We have a first question from Nikhil. Please go ahead. Nikhil, your mic is on. Please go ahead. All right, I think Nikhil may have some issues with the mic. We will move on to the next question from Shiro Ghosh. Please go ahead.
Hi. I am seeing a couple of developments across the line items. Just two questions. First is, if you can give some update on what is the Zakat? What is the latest on the corporate tax? What you have been guided on that? I did not very clearly understand. That is the first one. Also, I want to get a better sense of the borrowing demand. I mean, how is the borrowing demand? Where do you see the borrowing demand panning out over the next one year? Especially if we see more rate cuts than what we have initially perceived, like maybe three cuts or more. Yeah, these are my two questions.
Okay, Shiro, I will go with the first question about the corporate tax. During March of 2025, there was a change in the draft executive regulations wherein it was mentioned that if we are an entity operating in six jurisdictions or less, and another condition was that the net book value of our tangible assets is outside the main jurisdiction.
So if Qatar is less than EUR 50 million, then that particular entity will not be subject to pay any tax liability for the next five years, and naturally, we are falling under that. We also foresee based on, again, based on the draft executive regulations, as per the change in those draft regulations, we are not foreseeing any tax liability in the next five years, and we have disclosed it in our financial statements as well.
Perfect.
Any second questions?
Sure. This is Dr. Fawad Ishaq. I am the Chief Treasury and Investment Officer. On the funding side, we are very cognizant in terms of the borrowing cost and in terms of managing our liquidity. We, from a liability perspective, are weighted mostly in the three, six month bucket. For us, every potential rate cut is benefiting in terms of the rollover of these liabilities to lower rates. Along with that, we have been expanding our long-term liabilities through syndications, bilaterals, and EMTN. We did a very successful EMTN this year, as a consistent sort of issuing in the EMTN market because we did our first one last year in March, and we said every year we will come with an EMTN issuance to make sure we have a complete yield curve.
What we have done on the long end is that we have done two syndications. One end of last year, one beginning of this year, and we are using now the swaps which have gone down. Two-year, three year swaps, when they hit 3.4%, 3.5%, 100 basis points or 110 basis points of long-term cost, then we fix it around 360 basis points, 365 basis points, which is closer to the short end of the deposit curve.
Our cost of funds have gone down this quarter, about 35 basis points from the rollover, and we expect that to go another 15 basis points-20 basis points, factor in two rate cuts. If there are four rate cuts, then actually that will have more of an advantageous impact in terms of lowering our cost of funding further. We manage the asset liability gap very closely, and we manage it dynamically using swap market as a hedging instrument for that.
Just a follow-up. If I look at your interbank borrowing, the liability side of it, over last one year, roughly around QAR 12 billion has been added to that. Would it have any potential negative impact, or?
On the interbank side, it is partly because in the Qatari riyal market, that is a major component from the systematic perspective. Every bank has a large amount of interbank, and that is basically large banks are given the mandate to sort of facilitate the liquidity. There is no EMTN or loan syndication market in Qatari riyal currently, so most of the reliance is on corporate deposits and interbank. For us to manage the growth and manage the asset liability gap, sometimes we look at the cheaper interbank deposits to bridge that gap. As you have seen, we have been paying off high-cost deposits.
We are probably the only bank which has been shifting, so the deposit makes a cross-border. That is why you are seeing the interbank sometimes or due from banks go up, but this is not purely money market. This due from banks going up is funding our investment book through repos. Actually, if you look at how much the investment book has grown, it is proportionate to how much we have grown in terms of the due from banks.
Okay. Very clear. That is all from my side. Thanks.
Great.
We will take the next question from Andy Brennen. Please go ahead. Andy, please go ahead. Your mic is on. All right. I think he may have also some issues with the mic. We will move on and go through some of the questions that we have received. A question from Nikhil. Your cost of risk for year 2025 is around 1.25%, suggesting that the next few quarters could see a good decrease in the overall provisions. Can we assume that it could be led by recoveries and also more lump sum in nature, as seen in the past?
Okay. I will take this question. Thanks for this question. My name is Salman Siddiqui, I am the Chief Risk Officer. Yes, we do expect some recoveries that are in the pipeline to materialize. We are awaiting certain regulatory approvals in terms of expecting certain resolutions as well in the book. More so, this would be also coupled with the planned write-offs that the bank has forecasted in terms of where we have met the requisite requirements from a regulatory perspective to take the write-off. They would also play into this entire equation. We do expect that the number would be around the region of 120 basis points- 130 basis points.
A follow-up question from Nikhil. Can we know the reason behind the higher ECL charges for stage two rather than stage one, as it deviates from the past pattern, as the coverage for stage 1 has fallen while stage two increased if compared on a quarter-on-quarter basis?
Okay. The primary reason is that there is a certain exposure where the bank is actively, where we see a SICR flag, and we are building against that particular exposure as part of our farsighted view on that particular exposure. Therefore, you see that migration in the coverage between stage two and stage one. However, in the coming quarters, you would see that as the book continues to grow, the stage one coverage would immediately catch up on the older numbers. We do not have any imminent concerns around the coverage as such, and we are very confident of meeting our expectations.
All right. Thank you. Another question from Nikhil. Looks like the cost to income ratio has been a bit higher than the past quarterly run rate, with the full year guidance remaining at 37%-38%, while your target remains over the next three years at 30%-31%. Can we know the steps likely to be taken by management to achieve the target?
I will take the question. This is Aman. For cost income ratio, as we have explained in previous quarter as well, since the bank is going through a significant transformation, for the next couple of years, the ratio is going to remain elevated. There are steps taken, and we have explained in previous calls as well, we have initiatives basically to reduce operational costs, and we have identified around QAR 100 million cost saving that will be allocated towards more, I would say, profit-bearing or income-bearing initiatives. Having said that, this ratio will remain elevated for a couple of years in the next year based on the backdrop of transformation that we are having.
Also, I wanted to just add that we are rationalizing all our expense line items. We are closing down branches, both domestically and overseas. We are going to rationalize our overseas network. Given the new technologies, the new automation that we introduced at Doha Bank, including AI, machine learning, RPA, this gives us opportunities to look at our operational cost as well and restructure and reduce headcount, which would, we believe, give us some breathing room and reduce and improve the cost-income ratio.
There are many such initiatives that we are taking and taking place. With more digital penetration, we have launched a corporate mobile app, we have launched a retail app. We see growth in subscriptions and active users. We are going to look into more branch closures and reduction of cost. As Aman has said, investments that we are making actually in our core systems, these saves are going to be redistributed towards savings that we are doing in our infrastructure, in our systems, which is a critical next step for setting up and putting together the bank of the future.
We will try to take questions now, again, from Andy Brennen. Please go ahead.
Hi. Can you hear me?
Very well.
Yes, we can.
Okay, great. I got disconnected from audio entirely last time. Thanks. Loan growth, the guidance is for 5%, which is lower than last year. GDP growth is accelerating in the country. Could you just talk a little bit about why you do not see that being as strong? Are there write-offs or repayments expected somewhere, or is it just being conservative? Then also, which particular sectors are either delivering on this front or being a bit soft still? Thank you.
Okay. Thank you, Andy. Regarding your question about the loan growth, we have a couple of things that we want to mention here. Number one is that we do have a healthy pipeline of good high quality asset that we are targeting. Ever since the t ransformation started, a lot of focus has been on addressing the asset quality issue. Naturally speaking, we have upgraded our credit underwriting standards.
The quality of asset that we are targeting is different than what the bank used to have. There is a healthy pipeline for it, but as you mentioned, there are expected repayments. There will be partly some write-offs. We don't want to inflate our book with a bad credit, so we are chasing good credit in the market. As you would know that based on the current rate environment, it's a bit competitive as well. We don't want to compromise on our margins at the same time. That's, I would say, and I would ask Salman Siddiqui, if he wants to add.
Yeah, sure. Thank you, Aman, for that. Andy , I'll just pick up from where my colleague just left. It's at the back of this very point that we are taking a bit of a conservative view on the loan growth in terms of we do not only want to focus on the book building part of it, but the remuneration part of the book as well. Our focus is to build a book which has a sustained yielding tendency rather than a short-term view on the book. Moreover, we are also building a book which is diversified in terms of its concentrations.
As I'm sure you're aware that the road to the World Cup, banks did end up with a certain concentration in their books. We are also trying to diversify sectoral concentration and be selective on where we build the book, what kind of tenant do we get exposed to, and the returns that we anticipate from those kind of exposures. We did take a bit of a conservative view.
Yeah. Great. Got it. Okay. That all sounds pretty good. Just on the cost growth, I know you talk about the cost-income ratio, but obviously there is various aspects to that. Just in terms of OpEx growth, the transformation process is ongoing. Obviously, that costs a bit of money. There is a lot of consultants involved. 10% growth, is that the case for the next couple of years? And then when does it normalize, and what is normal? Thanks.
Okay. Andy, so 10% this year, the growth will be in that range. Next year, the growth will be similar in 8%-10% range then it will start subsiding. As I explained earlier, this and the next year are a bit heavy in terms of operational and as well as capital expenditures. After the year 2026, I would say the cost overall OpEx will start subsiding.
Okay. All righty. I will let someone go then. Thanks so much.
Welcome.
Okay, we will take the next question from Lee Beswick. The balance sheet is still geared with very expensive additional tier one capital of QAR 4 billion . Why didn't you choose to buy back the AT1 capital, which would have been more beneficial to common equity holders, rather than buying back common equity, which will gear the balance sheet even more?
Sure. Happy to take that question. As you know, it's a strategic tier one that we have placed. It's not something that we went out and did it in a public market perspective. There is a call date that we are closely monitoring, so we have the option of calling it back if we feel that the cost of that tier one sort of is not in line with our overall weighted average cost. But this is more strategic, and we have that ability to call it back if we feel that from a perspective of how our funding mix looks like and what we are targeting in terms of overall cost, we have the ability to do that.
Even if we need to increase that, on the flip side of it, we have that ability to call it and reissue and increase the capital if we are looking at expansion and more so if we are looking at putting more capital in some of our branches, as that's part of our international growth strategy as well. All options are on the table for us, and you can understand that it's still, from a perspective of a cost perspective, sort of is in line with what we're projecting, if we do the comp analysis to where the tier one trade in the market.
All right. Thank you. Another question from Lee Beswick. Is there a price at which you will stop buying back stock, or will you buy at any price?
So, see, now the idea is that we still, we are under the execution. The execution's still not started as per our press release last time. It is subject to regulatory approvals. Once it happens, then we will see engage the market, and we still haven't decided any particular target or a price in mind. But as the market situation is, when the execution starts, we'll decide accordingly.
All right. Next question from Vinod Surendran. Asset quality trends in 2025 target NPLs and the stage two loans in the medium term. Is there any update on the resolution of large ticket real estate exposure?
Yes. Thank you for that question. Yes, there is a view on certain exposures in the real estate sector where we see resolutions that are currently in the pipeline. There are regulatory discussions going on on the same between the bank and the regulator on the proposed resolutions. The proposals of certain resolutions have been submitted to the regulatory authorities. We have received a certain approval on an exposure which will come into effect probably in Q2. There are further resolutions, proposed rather, and the proposals are with the regulator for seeking necessary approvals.
Once approved by the regulators, you will see those resolutions getting affected in the books. Moreover, the bank is also actively considering engaging with third-party consultants in terms of bringing in the necessary expertise to help the bank in offloading or otherwise looking at alternate solutions for certain exposures where we see there is still viability, where we see there is still a secondary market for those exposures. That is also an active thought under consideration.
A few questions from Danul. Could you share any color on problem loans relating to real estate?
I think I would just repeat the response that I gave. It's precisely the same response that, yes, Doha Bank is actively pursuing the resolutions on certain real estate exposures that bring in a bit of a higher percentage in terms of their concentration or contribution towards the overall portfolio. Doha bank has had some success in resolving certain exposures where we did get the regulatory required or the required regulatory approvals. Those resolutions you would see getting affected in the book during the second quarter.
At the same time, Doha Bank is also conscious of the growth in the book so that every resolution that we see is backed up by a healthy growth in the book as well. We do not only see exits or resolutions, but we also see a tangible growth in the book as well. Moreover, there are certain other resolutions or proposed resolutions rather, which are in the process of being reviewed by our regulatory authorities. Once those proposals are concurred upon by the regulators, would those be executed accordingly.
Another question from Danul. Has GRE lending and deposits picked up?
Of course. One of our good areas of focus has been in terms of diversity and book growth, the GRE sector or public sector, where we have seen a very healthy pipeline. We have certain very strong deals in the pipeline which are undergoing the gestation period in terms of their approvals, the regulatory approvals. Once we get those approvals, you will see those deals getting executed and showing the numbers in the books. Yes, we are very optimistic. You can see that the composition of the book has slightly moved towards the GRE, which currently stands around 5%.
Right.
This percentage, you will see gradually picking up.
Okay, and the last question from Danul. Any plans to issue new debt to support the share buyback?
Definitely we do not need to issue new debt to do the share buyback. But there is a clear funding plan for 2025, and we have sort of very clear idea in terms of what do we need to raise across multiple sort of instruments that are available to us to support the asset growth overall. We have already done our first EMTN, as I said, first indication was already done. There is a pipeline in terms of us looking at multi-currency issuance, private placement, potential syndication and EMTN in the second half.
We will try to keep to the plan that we had already put in place, which matches exactly the funding that we require, both from a regulatory ratio perspective, which is most of the deposit and longer term for LCR and NSFR, and also making sure that it aligns with the timetable for our pipeline for drawdown and supporting the asset growth. To answer, there is an aggressive funding plan that we have in place to support asset growth. But for the buyback, we do not need to issue anything.
All right, thank you. A question related to funding from Vinod Surendran. He is asking specifically about USD, bonds, senior notes, tier two or AT1 capital instruments.
As I said, we have a very clear sort of program put in place, which is our EMTN program. We have issued last year. Exactly the same sort of plan was followed this year. We will build a curve around, so every year there is one issuance. We have a 2026 maturity as well coming in in March. Then we have the call date for AT1. So we will decide on the AT1 in terms of whether we want to call it or we want to renew it or we want to call it an issue. But no plans for tier two. I think as you can see, a very strong capital base for us to keep on growing. But on the EMTN side, there will be regular issuance, both on public market and also private placement.
All right, thank you. A question from Lee Beswick. You stated a target for capital adequacy ratio. Do you also have a target for CET1 ratio?
In line with the capital adequacy ratio, currently we stand at around 13.12% for CET1. So we are saying based on the amount of share buyback, the capital adequacy ratio will fall between 18.25%-18.75%, which is approximately 50 basis points-80 basis points drop. Similar for, CET1 as well.
All right, thanks. Any thoughts on when the group could transform to Islamic status? Would there be a decision this year, next year, and how long will it take?
Okay. For that, as we have explained on our earlier investor call as well, I will be very specific. Last Q2 [inaudible] 2024, our investor call, our Group CEO did hint on conversion to Islamic. But as we speak, the talks are very premature. There is nothing concrete out there for us to comment on. There is nothing that we can enlighten you with. There is nothing solid or concrete at all. Very premature.
If there are any developments on that front, we will keep you posted for sure.
What is your medium-term target for return on equity?
The guidance for this year is between 6.5%- 6.7%. In the next three years time, we are targeting double digits.
All right. Another question: do you expect transfers from stage two to stage one assets, and what is the timeline for this?
Okay. We do anticipate certain transfers of certain exposures, which are awaiting completion of the curing period. Once that happens, you will see certain transitions happening from stage two to stage one. And upon resolution and completion of the curing period, this transition would continue.
Any guidance that you can give on other non-funded income after a drop in full year 2024, but strong in Q1 2025?
I can say that the trend would continue. The trend that we picked up in Q1 of this year, similar growth trend will continue.
There are no additional questions in the queue, therefore we can conclude today's call. I would like to thank the management team of Doha Bank for the presentation and all the answers they have provided today in the call. I will just hand it over to management for any closing remarks. Thank you.
I think that I would like to thank you again on behalf of our Group CEO for your attendance. I think it is very clear that there is a strong momentum as a result of the Himma Transformation. I think that we are very excited. By executing and continue to execute our transformation strategy, expanding low-cost liabilities, as I said before, and enhancing cost efficiencies and advancing also our digital penetration, we are going to bring the results that we have actually outlined before in other investor calls. We are confident about that. We would like to thank you and to look forward to see you again in the next investor call. Thank you.