Hello, everyone, welcome to Dukhan Bank. Please note that this call is being recorded. You will have the opportunity to ask questions to our speakers later on during the Q&A session. If you would like to ask a question by that time, please press star followed by the number one on your telephone keypad. I'd like to hand the call over now to Shahan. Please go ahead.
Thank you, Gail, hello, everyone. I want to welcome you to Dukhan Bank's first quarter 2026 financial results conference call. On this call from management, we have the bank's Acting CEO, Ahmed Hashem, Group CFO, Osama Abu Baker, and Riaz Khan, Head of Reporting and Budgeting and IRO. As usual, we will conduct this call with first management reviewing the company's results, followed by a Q&A session. I will now turn the call over to Ahmed. Please go ahead.
Thank you, Shahan. [Non-English content], everyone. A warm welcome to all of you joining us today. Before turning to our financial results, I'd like to briefly frame our performance within the broader economic and sectoral developments in Qatar during the first quarter of 2026. The recent geopolitical developments introduced a degree of uncertainty across the GCC, with potential implications for energy markets, trade flows, and regional economic activity.
Within this context, the group has, [Non-English content] , maintained stable operations supported by a well-established operating framework and prudent risk management. These factors have enabled the bank to provide consistent, secure, and reliable services to its customers. The bank's business continuity and crisis management frameworks remained integral to its operational resilience through disciplined execution, robust infrastructure, and ongoing coordination with regulators and relevant stakeholders. The bank has ensured continuity of operations while maintaining a strong control environment.
The Qatari banking sector continues to demonstrate sound fundamentals characterized by strong capitalization and liquidity. In response to recent developments, the QCB has introduced a range of precautionary measures aimed at supporting liquidity conditions and preserving financial stability. These measures provide an additional layer of assurance for the continued smooth functioning of the financial system. During the quarter, we also progressed on our strategy focusing on enhancing liquidity measures, risk management protocols, and selective growth.
Additionally, we continued to deepen our engagement within the broader financial ecosystem through targeted partnerships and collaborations, supporting innovation across key areas of the sector while contributing to the development of Qatar's digital economy. Looking ahead, we will continue, [Non-English content], to build on this momentum with a clear focus on disciplined execution, innovation, and long-term value creation while supporting Qatar's National Vision 2030. With that, I will now hand over to Osama and Riaz, who will take you through the financial results. Over to you, Osama. Thank you.
Thank you, Ahmed. Good afternoon, everyone. Our results reflected a disciplined approach to growth underpinned by well-managed balance sheet, a diversified financing portfolio, and a stable funding base. Continued customer confidence and a clear focus on operational efficiency and asset quality remain central to sustaining this performance. At the end of this quarter, liquidity remains strong with all key ratios above regulatory thresholds. Total deposit base remained at historic level, underscoring customers' confidence and the strength of the Bank's value chain. Our group total assets reached the highest level at QAR 126 billion, underscoring balanced growth across our portfolios. However, our profitability margin dropped by 1.7% to reach QAR 430 million. Our capital adequacy ratio stood at 19.1%.
Outlook. Our focus for the rest of the financial year 2026 will remain firmly aligned to our strategy. Building a leading digital-enabled bank centered on exceptional customer experience, delivering sustainable, well-balanced growth with continued discipline on capital, liquidity, and risk. Strengthening our people, culture, and capabilities, ensuring Dukhan Bank remains a place where talent thrives. Creating a long-term value for shareholders while contributing meaningfully to Qatar's economic and social development.
Looking ahead, we expect a low single-digit balance sheet growth led by wholesale and private banking. Profitability growth is expected to mirror this trend, supported by stable NIMS. We will maintain our conservative provisioning approach, continuing to build buffers. I will now turn it over to Riaz for a detailed overview of our quarter and financials.
Thank you, Osama. Let me begin with a brief overview of Group's balance sheet performance as at March 2026. Our total assets reached all-time high at QAR 126.5 billion, underpinned primarily by financing assets of QAR 91 billion, which represents 72% of the total asset base. Investment securities contributed 21% to the total assets, amounting to QAR 25.9 billion. On the funding side, we continued our efforts to diversify while leveraging long-standing relationships with clients and maintaining a balanced maturity profile.
As a result, we maintained a regulatory loans to deposit ratio of 95.4%, with both the LCR and NSFR comfortably above the regulatory thresholds, demonstrating Bank's sound liquidity management. Also, non-resident deposits remained minimal at 8% of the total deposit. This is in line with our strategy to focus on stable domestic funding sources. Now turning to profitability. For the first three months of 2026, the Bank reported a net profit of QAR 429.5 million, a 1.7% decline compared to the same period of last year. This was mainly due to a decline noted in the net banking income, which actually declined by 0.2% versus the same period of last year.
Despite challenging macroeconomic dynamics, the group continued to focus on revenue diversification and strengthening of non-finance related income streams, along with prudent management of funding costs. Operational efficiency also remained a key strategic focus, with continued optimization efforts enhancing overall profitability. We remain committed to protecting our margins and managing the cost of funds efficiently. Our current NIMs are stabilized at 2.1%.
Operational efficiency also remained a key strategic focus with continued optimization efforts enhancing the overall profitability. These results highlight the group's resilience and its ability to sustain in an evolving operating environment. On the credit quality front, NPL ratio was maintained at 4.2%. Stage three coverage ratio continued at the same levels of financial year 2025 at 75.7%. The coverage ratio is over 95% when including the effects of eligible collaterals. Stage two loans represented 8.9% of the gross loans, with a solid coverage of 9.5%.
Our financing book remained well diversified, covering all sectors including government 21%, real estate 23%, commercial lending 14%, consumer financing 9%, contracting 4%, industry and manufacturing 3%, and services in other sectors about 26%. Exposures to GREs accounted for 17% of the total financing book at the end of March 2026. GRE exposures are currently reported within their respective sector classes.
Our capital adequacy ratio stood at 19.1%, well above the regulatory minimum of 14.63%. On the tax front, based on the assessments performed for the period 2026, it is concluded that the parent company and its subsidiaries are tax residents in the state of Qatar and are not subject to Pillar Two requirements. Accordingly, there is no impact on the group's condensed consolidated interim financial statements. In summary, our financial performance reflects the strength of our fundamentals, strategic clarity, and prudent financial management. We remain focused on sustainable growth, margin preservation, and long-term value creation for our stakeholders. With that, we now open the floor for your questions. Thank you.
At this time, I would like to remind everyone that in order to ask a question, you may press star followed by the number one on your telephone keypad. Once again, if you would like to ask a question, you may press star followed by the number one on a telephone keypad. Your first question comes from the line of Abhinav Sinha with Lesha Bank. Your line is open. Please go ahead.
Yeah. Hi. Thanks for taking my question. Just a couple of questions from my end. One is on the loan growth. Do you still see mid-single-digit growth for the full year? On the NIM, given that there was slight pressure on the banking income in Q1, do you expect to keep the stability for the remaining of the year? Thank you.
Yes, we still see a low-single-digit growth in the loan book. We have a good pipeline. We have been always selective, and now we are more selective. A low-single-digit is achievable, and we can fund that from our deposit base. Regarding the NIM, right now, there is no pressure on the cost of funds. We don't see that in the near future. Definitely all depends on how the situation will unfold. At the right time, we might update our guidance, but currently our NIM, we expect it to stabilize at the current levels.
Understood. Thank you very much.
Your next question comes from the line of Lee with Orion Investment. Please go ahead.
Hi. Thank you for your presentation. If I could just ask for a little bit more color on NPLs, if you see any additional pressure. From your results, it looks like it's okay, but going ahead from here, are you seeing any other stresses from it? Maybe we could talk a little bit about going forward, how have you seen the income in terms of loans growth, in terms of deposit growth, in terms of your clientele from first quarter onwards. You probably have a month or so of that now. Do you see any recovery in the area? The third question would be, you mentioned GRE, 17% of your finances. Is there a target what that would be for the year? Thank you.
Okay. Regarding the NPLs, I don't see any move from last year or Q1 numbers. There are no significant movement either in or out of the NPLs. As Riaz mentioned, we have a good coverage so far, and we continue monitoring the coverage. In the first quarter, due to the current circumstances, the bank decided to take around QAR 63 million to be on the safe side for stage one and stage two, and that gives you an indication that we are comfortable with our NPL coverage.
Regarding the loan growth, actually, I didn't understand the question, but if you are talking about the growth, yes, we see that a low single digit is achievable and it always comes from the wholesale banking. Mainly, the growth will come from that area. Regarding the GREs, it has been always the case, the same percentage or the same composition for the last three, four years, and we expect it to continue the same.
Thank you. Thank you for the answer. I suppose what I was going to ask about the growth for once you is, Ever since February, things were probably looking a bit difficult. That was a new situation for everybody. I'm just asking from April onwards, indications, is everything coming back to normal? Are you seeing things still under a little bit of pressure? Maybe some color in the business environment. Thank you.
Things are not normal, definitely. Things are slowly getting back to normal. Definitely today is not exactly the same situation in February 27th, that's for sure. We have been selective, as I mentioned, and that helped us during this time. We have a healthy pipeline. As I mentioned in the wholesale banking area, we continue to support our client base. Again, we are cautious. We are very selective, and we don't see any pressure from that perspective.
Great. Thank you. Thank you for the answers.
Your next question comes from the line of Andy Brudenell with Ashmore Group. Please go ahead.
Great. Thank you very much. It was good to see that you added the sort of extra buffer, as you mentioned on cost of risk. I think you said coverage is now 75%, excluding collateral, and you wanted to build buffer. Is there a target coverage from that 75% that you hope to get to either the end of 2026 or just within the medium term, please? That would be useful.
If the situation is a normal situation, definitely we would love to increase it to the 80% level in the medium term. Due to the current circumstances, the bank opted or the management opted to take the buffers on stage one and stage two because stage three, with the securities that we have, is well covered. Now our attention is towards stage one and stage two, to be honest. Right now we have to build the buffers in these two stages.
Thank you. Sorry, I missed. What is the stage two level of NPLs now and the coverage level there, please?
Stage two makes 8.9% of the total loan book, the coverage is close to 10%. 9.9% precisely.
Right. Great. Thank you. Sorry, just one more that I missed. Apologies. The percentage of exposure of the loan book to the real estate sector, please, what was that figure?
This was 23% of the total loan book. Here you have to take care that out of the total real estate exposures, close to 37% and 40%, that is the GREs basically, which we classify as part of the real estate.
Right. Got it. Okay. Sorry, maybe just one final one. You said the NIM you hope can be stable. You're not seeing any pressure on cost of funds now. You're not seeing any liquidity issues. Is that just the liquidity being provided, or it's just that it's simply not by the authorities, or it's just simply not needed right now, so there's no liquidity needs or is it a combination of the two? Just to get a little bit of color on that, please.
Yeah. Actually, it is attributed to many factors. Number one, the QCB has given the relief on the minimum required reserves. That helped the system to get more liquid. The government definitely didn't withdraw any of its deposits. To the contrary, we have seen some increase from the GREs in their deposits. The most important factor, in Qatar, we didn't see a run on deposits. When the state escalated, our deposits, neither from individuals or corporates, there was no run on the bank in order to transfer the funds outside or to move the funds. All these factors helped to reduce the pressure on the NIM.
As I mentioned earlier, our growth in our assets is very moderate this year, low single digits. We don't anticipate any pressure on liquidity. As Riaz mentioned, that the non-resident deposits composition in the bank balance sheet is very minimal compared to the market. Always we have a buffer, and we have very good relations with international customers. We can tap into that area where we can get three to five years deposits at a very attractive rate.
Great. Yeah, that's very useful color. Thank you. Thank you for that. Sorry, I've just sort of another final question. OpEx growth, please. Last few years, it's been reasonably high. You've been making some investments. There's been some digital costs. Is that all done now? What would sort of be your estimate of just the absolute growth in the OpEx line, please? Thank you.
I don't see any absolute increase compared to last year. The cost-to-income ratio might go up or down based on the growth or shrink in income, but the absolute growth, the number, is not going to change from last year.
Okay, great. All right. Thank you very much. Thanks for this.
Thank you.
Thank you. Thank you, everyone. That concludes our Q&A session for today. I will now turn the call back over to Shahan for the closing remarks. Thank you.
Thank you, everyone, for joining the call. I'd like to thank management for giving us an update. We will pick this up again in the second quarter. Thank you.
Thank you very much, everyone. See you next quarter.
Thank you.
Thanks all for joining. Thank you. Thank you. You may now all disconnect. Have a nice day ahead.