Good day, and welcome to the Qatar Islamic Bank Q4 2021 results conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Gourang Hemani, CEO. Please go ahead, sir. Thank you. Unfortunately, I'm still, and happily still the CFO of the bank, I'm happy to say that. Thanks again to QNBFS for hosting the conference. We'll just quickly start with a quick update on what's happening in Qatar, then we'll move on to QIB results, then we'll follow it up with the question and answers. In terms of Qatar overall economy, I think we've been seeing a good growth starting from July of last year. The country continues to benefit from very high hydrocarbon prices and has been very wisely spending it for the capital expenditure expansion. In terms of 2022 World Cup, we are in the landmark year, one of the largest event to be hosted in the country and in the region. In terms of the high hydrocarbon prices and in terms of the overall spending pattern that has been executed by the country, we are expecting that in the coming one or two years, the GDP growth for the country would be above 4%. The Omicron wave of COVID has impacted in Qatar like rest of the world. However, I think the very prudent and well-executed vaccination policy has allowed to contain the economic impact of this to be very limited. Based on what we are hearing worldwide, I think it is going to have a more temporary impact rather than any longer-term impact in the current variant. I think as we go into 2022, we'll be seeing high expenditures in the country, both for the short-term purposes to make this mega event a very successful event as we can see from all the plans that have been made. At the same point of time, continue towards the medium-term 2030 expansion growth plan, whereby they plan to increase the LNG expansion capacities, plan to institute very many structural reforms that include foreign direct investment, residency program, labor reform, et cetera. All these put together puts Qatar in a very positive growth path and very positive atmosphere for the banking sector. In terms of the year-to-date growth in the Qatari banking sector, up to November, we've seen a year-to-date growth in assets of 6.7%, reaching overall QAR 1.8 trillion. The loans have grown year-to-date in the system by about 7.5%, and deposit growth has been 6.4%. Very strong, very healthy, consistent with what we had been projecting at the beginning of the year for the system. In terms of QIB, I think we are very pleased to announce that we have achieved net profit attributable to shareholders reaching QR 3,555,000 million which is up 16% compared to last year. Hello. Speaking. Yeah, they will join now. Tracy, can we go to Q&A, please? Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star one to ask a question. We will now take our first question from Edmond Christou from Bloomberg Intelligence Research. Please go ahead. Hello. Hi. Thanks for the call today. Can we I can't hear you. It's all good. Can you hear me clearly? Yeah. Yeah. Okay. Should I go ahead with the question? Can you hear me clearly? Just checking. Okay. Can I ask a question now? Hello, can you hear me? How are things with you? Family, everything okay, Sean? Hello. Hi. Yes. Great. Okay. I think Edmond wanted to ask a question. Okay. Should I go ahead now? Yeah. Go ahead. Okay. Excellent. On the margin, just try to understand the trend of the margin into the first half of this year. We understand that probably margin will widen from a rate hike into the second half of the year. It's a bit difficult for me to understand the trajectory of the first half of the year. On the asset yield, we've seen a decline in the asset yield in Q4. Different parts of the world have different rules as we speak. I think there is a problem with the connection. I can hear you clearly. Probably you cannot hear me. Yeah, I think. Yeah. Can do, Madan. I think Gourang needs to join. Gourang needs to reconnect, I think. Yes, I just reconnected. Can you hear me now? Your parents are in Quebec? Which part? Hello. Okay. Okay, Mohit. Can you, Gourang? Can you connect please? Yeah, I can hear many people on the call. It's very simple questions on the margin. Asset yield, what the trajectory of asset yield for the first half of the year, given the competition we see from banks on private sector and the cost of funding, especially on the dollar, if you see a pickup in the cost of funding? Thank you. Vinay? Yeah. Vinay, can you ask the speaker to put me on call so that I can complete my presentation and then they can continue with the conference call? Yeah, I can do that. Okay. I'll ask them. I think they're not able to hear me also. All lines are open. Can you hear me? Hi, can you hear me? The operator, can you hear me? Yes, I can hear you, sir. Can you reconnect Gourang, please? I think I'm already connected. He's already connected, sir. Yeah, okay. He's not able to hear the questions. He needs to finish his presentation before taking the calls. Okay. If you want to go ahead with the presentation. Yes, I will go ahead please. Sorry, everybody. I just got dropped out from the line, and I'll just quickly finish my presentation on the QIB results. I will start it by saying that we are very proud to achieve net results for the year for 2021 for QAR 3,555,000, which is about 16% higher for last year, translating into basic earnings per share of QAR 1.42. QIB board of directors have proposed a dividend distribution of 0.575 per share. That is 57.5% of nominal share value, subject to approval by the Central Bank and QIB General Assembly. This translates to a very improved payout of 40% for 2021. The total assets of the bank have reached QAR 194 billion, translating to 11.2% growth in 2021, of which 4.2% came in last quarter of 2021. The financing activities have registered an annual growth of 7.8%, of which 1% came in Q4, resulting in the total balance sheet total financing assets of QAR 128 billion. Investing activities have grown sharply by 33.5% in 2021 to reach QAR 44 billion, with majority of the new investments in State of Qatar Sukuks. The bank has shown a very strong deposit generation ability, having grown their deposits by 11% in 2021 to reach QAR 131 billion. The bank's strong asset liability management capabilities can be seen from the fact the bank has improved its financing to deposit ratio from 101% in 2020 to 98%, reflecting the bank's strong liquidity position, if you take into consideration the strong LCR, NSFR, and other regulatory liquidity ratios in place. In terms of profitability, the bank's total income reached QAR 8.1 billion, registering a growth of 2.2%. The bank's income from financing activities, despite low interest rate environments, have grown by 1%, and the bank's fee income has grown by 10%. The big benefit the bank received was on the low interest rate environment was on the funding costs, whereby the total fundings paid on the Ijarah and Sukuk dropped by 15% to reach QAR 2.114 billion. In terms of the overall net operating income, the bank registered marginally shy of QAR 6 billion at QAR 5,990 million, up 10% compared to last year. The bank was also able to contain its total general and administrative expenses 1% below last year and now stand at QAR 1.1 billion. The bank's drive to improve the efficiency, supported by strict cost control measures, enabling to bring down the cost to income ratio from 20.1% to 18%, one of the lowest in the banking sector, especially the lowest in the Qatari banking sector. The bank was also able to manage its non-performing financial assets to total financing assets at about 1.4% level, one of the lowest in the industry. Moreover, the bank's Stage 2 financing ratios were also stable around 15.75%. The bank continued to take precautionary impairment charges for financing assets at QAR 1.3 billion, which is up 5% compared to last year. This translated to an annual cost of risk of about 1% and helped in improving the coverage ratio for Stage 3 financing to 95% compared to 92.5%. In terms of the overall coverage, by taking into the total provision versus the total impaired financing, the coverage is almost 270% compared to 227% last year. The bank's total shareholders' equity reached QAR 20.7 billion, reflecting a growth of 13.3%. The bank's capital adequacy ratio stands at about 18.92%, well above the Basel and Qatar Central Bank minimum requirement of 14%. Having taken through the summary of the results, happy to take any questions. As a reminder, to ask a telephone question, please signal by pressing star one on your telephone keypad. We will so take the first question from Edmond Christou from Bloomberg Intelligence Research. Please go ahead. Thanks for the call today. Just want to understand the margin into the first half of this year. How do you see the competitive pressure? I think, looking at Q4, clearly the asset yield has dropped notably. How do you see the competitive pressure into next year? Also on the cost of funding, I think there's a slight increase in the cost of funding, but you still prioritize healthy and low LDR in the industry. How do you see this evolving into at least the first half of the year? For the second half of the year, what is the sensitivity of interest rate hike in term of positive or negative impact on margin, if possible? The second one is on the fee and Forex generation. It was slightly weak in Q4, expected to be better on what we hear on improving business activity in Qatar. Do you have any view on how this should evolve into next year? What's the expectation on this? Thank you. In terms of the net profit margin on the financing portfolio, I think we have been fairly stable for the year at about 3.3%-3.4% across the year, and I think it's almost in line with last year as well. What we have been seeing is the fact that the low interest rate impact on the asset book has been more than compensated or kind of almost compensated by what we have been seeing on the reduction that we've been able to get on the cost of funding, especially on the Urrea book. Our forecast, at least for the first half of the next year, is we believe the margins to continue to remain stable. What we have projected as we go for our planning purposes is we expect the first half, we did not anticipate any major increase in the Fed rates or the corresponding Qatar Central Bank lending rates for the first half of the year, and we expect it to grow by about 50-75 basis points in the second half of the year. First half, we expect the NIMs to be around the same level that what we have seen for the year 2021. As we go into second half, we will see the impact slowly percolating into the P&L. However, given the fact that most of the impact does come in on the rollover dates of the financing, so we should start seeing more benefit coming in from the Q3 and the latter half of the Q4. We believe that however, this could also result in depositors demanding for a higher cost of funding. I think we still believe our overall projection for 2022 is that we should be able to maintain our overall NIMs with full benefits accruing from 2023 onwards. Having said that, if the Fed hikes and the QCB interest rate hikes are earlier in the year, then we could see more impact happening from the second half of the year. If what the markets are saying, that there could be a potential Fed hike in March, and if QCB follows it, then we should see the benefits starting to come from end of second quarter and beginning of third quarter of next year, third quarter of 2022. How many hikes are you pricing for the budget? What was the second question? How many hikes are you pricing for the budget? 2 to 3 hikes. You can say third hike, but the third hike coming more at the end of the year, so not having any impact on the profitability of the bank. Okay. Thank you. The second one on the fee and Forex. I was expecting it to improve sequentially given the improving business environment, but it has been volatile previously. I just want to make sure. I think in a sense, if you have noticed that our Q3 has always been very strong from the fee income side of view. I think that's the point of time you have a lot more holidays and a lot more customer spending, especially on the card-related activities, et cetera. I think Q4 has again got slightly dampened by the fact that Omicron-related impact and all people starting to really slow down the travel and slow down the spending as such. However, we keep advocating the fact that it's never a point to look at it just on a quarter by quarter. Fee income needs to be observed and monitored over a medium term, at least on a half-year basis or a three quarters, because there are elements of fee income that can be very transactionally driven or could be seasonally driven. I would not really make a comment to say that whether it was a weak quarter or a not weak quarter. I would say please look at the overall growth has been 10% growth in the fee income, which I believe is very healthy given the current market environment that we are in. Okay. Thank you. Appreciate it. We will now take our next question from Lynette Elitch from Bloomberg Intelligence Research. Please go ahead. Hello. Thank you so much for the call. My first question is related to cost of risk. I've noticed that the cost of risk has improved significantly sequentially as it has benefited from provision releases on stage 1. Also at the same time, there was a downgrade from stage 1 to stage 2 and provisions moved with them. Is this related to the end of the support program, or do you have any update concerning corporate data that resulted in such a downgrade? Also going forward, do you expect more releases from stage 1 to keep the cost of risk at low levels? And what is a comfortable level for coverage ratio for stage 1, given that at the beginning of 2020, the coverage ratio for stage 1 was at 0.6%? I have a second question concerning would you expect the repayment to dampen public sector growth, government repayment, I mean, to dampen public sector growth? What is your expectation in terms of loan growth for your bank and for the sector as a whole as well? Would your priority be to gain market share for 2022 or like rather than gaining on margin for this year? Thank you so much. Coming to the first question on the impairment. Again, as I said, we as a bank have always been very conservative and we tend to take more impairment charges at the beginning of the year so that we try to kind of, if you keep noticing it, that normally you would see that the Q1 and Q2 tend to have higher provision charges because we prefer to build up the provisions in order to cater to any uncertainties. When those provisions, as we keep heading during the year, we get more clarity on how the asset quality tends to move. In the first quarter, second quarters, you will see more allocations towards stage 1 and stage 2, which slowly get let's say, translated to stage 2 and stage 3 as we get more clarity in terms of the NPL generation and the asset quality formation. I would not call it as a release from stage 1 in the last quarter, but I would say it's more about allocation of the provisions that you would have built in the first half of the year as we keep moving closer to the end of the year and we get more clarity in terms of where the asset quality stands at. The way we look at it is in terms of the overall impairment charges that we have built in. I think as I was mentioning, that we have increased, in fact compared to last year, our total impairment charges for financing have grown by almost 5% to reach QAR 1.3 billion. I think if you look at the quality of our portfolio and if you compare it with the cost of risk that we take, that clearly translates that despite having a very good quality of portfolio compared to the peers, I think we continue to build provisions. I think that's the conservative approach we take. We strongly believe the fact that if you are able to generate strong operating revenues, it makes sense to allocate more towards provisioning and impairment to build balance sheet strength. I think this is not something new which we have been following across quite very many years. The second question, can you remind me what was it? The question you had. The second question I had is, do you expect government repayments to dampen public sector growth? What is your expectation in terms of loan growth for your bank for 2022? Okay. I really don't see that we should be witnessing significant public sector repayments. I think what you could see is there are different ways to look at it, right? The public sector fund that comes into the system can either come through more deposits into the system or it could come in form of repayment of shorter term facilities. The way we look at it is in terms of QIB, our government-related exposure, in fact, has significantly increased in 2021 compared to 2020. The reason I put it is to say is that we don't look at government exposure or purely from the perspective of the financing. Even if we speak from that, I think our lending to government and government-related entities have increased by almost 33%. The financing to government and government-related entities is about almost QAR 23 billion compared to QAR 17 billion last year. If you add on top of it that we have increased our investments by almost 33%-34%, almost entirely coming from investment in State of Qatar Sukuk. In fact, our overall exposure to the government on the assets exposure has increased from 26%-32%. We expect in 2022 that I think there will be a lot more spending happening by the government, especially on the, let's say, operating expenditure bit of it for the 2022 World Cup. I think that they also are cognizant of the fact that they want to maintain a good liquidity. I see more inflows happening from the government on the deposit side of the balance sheets, rather than on the repayment side of the assets. In terms of the industry outlook, we believe that, I think as I was mentioning at the beginning of the call, we've seen a total loan growth of about 7.5% in November, which is almost in midway between our forecast for the year, which is about 6.5%-9%. I believe, therefore, for next year, we also expect the balance sheet and the financing book to grow around 7%-9%, around that range. I think this is a healthy growth levels to be maintained over a medium-term level. I think this would be boosted by the fact that as the government prepares for the planned expansion on the LNG and the other expansion projects that they have in place, especially in terms of the infrastructure. I think while hydrocarbon expansion, the LNG expansion may not have a direct impact on the banking sector because you will hardly have very many local banks participating, given the fact that majority of the requirements are in foreign currency, and especially they are very tight in pricing. I think QP has already shown the way they want to do it. I think they tap the capital markets in 2021 for a very significant size transaction. We expect other partners to bring in their capital and to go for wholesale funding. There will be no direct impact of that, but what we expect and as in line with what we have seen in the past is that there's going to be more of an indirect benefit, especially in the areas of manufacturing and services sector, where as the subcontracts will get awarded to the private sector, you will see more participation happening from them, which is kind of an indirect benefit coming from the entire, let's say, both the capital expenditure spending that we expect on the hydrocarbon side, as well as on the other domestic sector capital spending in the areas of predominantly infrastructure. Thank you so much. That was very helpful. Thank you. We're going to take our next question from Chiradeep Ghosh from SICO. Please go ahead. Your line is open. Hi, this is Chiradeep Ghosh from SICO. Thanks, Gourang, for the call. I have a couple of very quick questions. First is about the margin side. I remember in the previous calls you had said that a lot of your loans have a floor which has helped you protect your margin. I just want to know how does it pan out in the current scenario, and does it also have a cap, in the sense if the interest rate goes up very fast, would your NIM also get restricted? The yields would get restricted? That's my first question. Second one is, your operating expense slightly went up faster than the revenue, but it's still one of the lowest in the industry. If you can give us some color, how do you expect it to pan out for 2022? Because it's really low. I mean, how competitive or how sustainable it is? Yeah. Okay. On the first question, as I said, is, yes, we have benefited in many cases from the floor. As the interest rates start picking up, we start to expect seeing the benefit. We do expect our asset yields to go up. As I said, it's more about the timing because we believe there is going to be, as I explained earlier as well, there's a lag effect between the pricing between the Fed hikes and the QCB hikes and that translating into our P&L. However, rarely do we have any caps inbuilt into any of our assets. We do not seem to be any negative impact coming even if the rates do get increased quickly in 2022. In terms of the second question on the operating expenses, yes, there was a slight increase in fourth quarter of the year. I think that was a combination of certain non-recurring spend that we had on certain legal cases, also on some consultancy-driven activities, and also driven by the fact that we had increased marketing spend to support launch of certain products and services. In general, as I've been saying, I think 18% level is a fantastic level if we are able to maintain it. I think we do expect the absolute level of cost to go up in 2022 and as we move forward, as we continue to invest in digital space, as we continue to improve on, let's say, marketing and other expenses. As I had mentioned in the last call, I think 2022, almost every organization is going to have a one-time impact of their participation in the 2022 World Cup event, either through marketing and other activities. The absolute levels of cost would go up. We hope that our revenues are able to show that and show a similar level of growth in terms of it. While there could be marginal increase in the cost-to-income ratio in 2022, we do not see it as something that is going to have a major impact. I think as long as we are able to operate anywhere 19% and below, I think we should be fairly happy in terms of how we are approaching the overall efficiency-related initiatives and measures that we want to take. Thank you. Just one very quick one is the 7%-9% loan growth which you're expecting. Do you expect most of it to come from public sector lending, or you'll be lending to other sectors also? No, I think if you look at it, I think the trend of 2021 is expected to continue. I think the overall system loan growth was about 7.5%. If you look at it, I think the growth was evenly distributed between public sector and private sector. I think the public sector growth, the systemic growth for the first 11 months, because that's the last statistics available as of now, was about 7.7%, and domestic private sector was 9%. If you take out the reduction in the international, which I consider more as a private sector. I think it's been a balanced growth, and I think the same trend is expected to continue in 2022. Okay. That's all from my side. Thank you very much. As helpful as ever. We will now take our next question from Ebrahim Al-Shamsi from GIB Capital. Please go ahead. Yes, hello, everyone. Thank you for the call. I have a couple of questions on my side. One is regarding your loan growth and the sector loan growth. What is your expectation for 2022 and 2023 loan growth, as well as if you look at NSFR, there is an imminent rate hikes for 2022. If we assume that rate hikes to be around 100 basis points, how would that translate to your NIMs as well? That's it. I'm not sure if you were able to join the call from the beginning because I answered both the questions. I will answer it very quickly again to say that we said that we expect the loan growth to be about 6%-9% for 2022, almost in line with our projections that we had put in for 2021. We believe it's a very healthy, sustainable levels. The growth will come evenly from public sector as well as from private sector. In terms of the impact of interest rate hikes on the NIM, I think I already mentioned about it to say that we are putting in about three hikes, more in the second half of the year. We expect the NIMs to remain stable. Our financing margins that is the financing yield minus the Cost of Deposits or UDIA is about 3.3%-3.4%, we expect it to continue for the next year. At least for the first eight to nine months, we don't expect any major benefits to come from the interest rate hikes. Ladies and gentlemen, please stand by as we're experiencing a momentary interruption in today's conference. Please go ahead, sir. Your line is now open. Okay. Sorry, guys. I seem to be having a connection problem. I got dropped again, so happy to take the question again, unless Vinay has already answered it. No, Gourang. Okay. Can anybody repeat the question if there's any question that is pending to be answered? We will now take the next question from Maha Madani from Avia. Please go ahead. Hi. I have a question, please, on the FOL and all the related approvals. Can you please give us some update on the approvals, whether in the EGM or the Qatar Central Bank, please? Yeah. As you know, while the law has been passed, we are going through the various regulatory approvals, including the approval from Qatar Central Bank, which needs to be followed by the approval by the shareholders in the extraordinary general meeting. We are following up with the regulators to see when the necessary formalities can be completed. Honestly, I don't have much of clarity at this point of time, which I could be able to share with you, but we believe things are moving, and we should expect it, if all things go right, I think within the first half of this year. Okay. Thank you. There appears to be no further questions at this time. Okay. If there are no more questions, we can wrap up this call. Thank you, Gourang, for the update, we can pick this up next quarter. Yeah. Thank you very much. Again, sorry, everybody, that I unfortunately got dropped a couple of times. Thank you for attending, and thank you for waiting. Stay safe, and have a very happy and successful 2022. Thank you very much. This concludes today's call. Thank you for your participation, ladies and gentlemen. You may now disconnect.