Hello, and welcome to the Qatar Islamic Bank conference call. I would like to advise all participants that this call is being recorded. I'd now like to welcome Jahan Keshtkarian to begin today's call. Thank you, Gavin. Hello, everyone, and welcome to QIB's third quarter 2020 results conference call. On this call we have QIB CFO, Gourang Hemani. As usual, we'll conduct this conference with first management to bring the company's results, followed by a Q&A session. I will now turn the call over to Gourang. Please go ahead. Good day to everybody. Welcome to the Q3 2022 results call for Qatar Islamic Bank. We'll start first with a quick macroeconomic standpoint, and then we'll move to the QIB results. As we are all aware, on the macroeconomic front there is a lot of developments and the market movements driven by the sharp rise in the global inflation and how the central banks have continually changed its assessment and measures to tackle the same, along with the geopolitical situations emerging from Russia-Ukraine conflict. However, during the same time, the economic conditions in GCC and Qatar have remained conducive and improved thanks to the improvement in the hydrocarbon prices and the role Qatar is expected to play as Europe tries to wean away from its current dependencies on the primary gas supplies. At the same point of time, the peg to US dollars have also helped these economies as US dollar strengthened against other major and other emerging currencies. High gas prices boosted the fiscal position of the Qatar government, enabling it to lower its debt both externally and domestically. Improvement in systemic liquidity have had both positive and negative impact on the banking sector balance sheets in Qatar. With that have kind of offset each other in terms of net impact they have on the banking sector profitability. As we enter Q4, we on behalf of QIB welcome everybody to come and enjoy what shall be one of the largest sporting event in the region. Country is all geared to make it a very successful World Cup ever and have everybody come and enjoy. Moving to QIB performance, we have announced a net profit attributable to the shareholders amounting to QAR 2.85 billion for the nine months ended 13 September 2022, representing a growth of 12.9% compared to same period last year. Total assets of the bank now stand at about QAR 184 billion, with total financing at QAR 121 billion and customer deposits at QAR 123 billion, both having dropped by 5%-5.7% and 6.3% compared to December 2021, driven by the sharp reduction in the public sector lending in the overall banking sector. However, given the low profit rates on these facilities in a sharp rising interest rate environment, these balance sheet reduction have had little or no impact on the bank's profitability. The bank continued to maintain a healthy capital adequacy ratio of 18.5%, computed under the Basel guidelines as implemented by Qatar Central Bank. QIB was also able to maintain its ratio of non-performing financing assets to the total financing assets at 1.5%. That is around the same level as September 2021, one of the lowest in the industry. The bank continues to pursue conservative impairment policy, building precautionary impairment charge for financing assets for QAR 1.1 billion for the first nine months of 2022. The bank continued to maintain a healthy coverage ratio of non-performing financing assets at 95.2%. Moving on to the profitability. The bank's net operating income for first nine months was QAR 4.8 billion, up 5.5% compared to last year, with total expenses reaching QAR 826 million. That is up 3.7% compared to last year, enabling bank to further improve its efficiency and bring down the cost to income ratio to 17.2% compared to 17.5% in 2021, which is the lowest in the Qatari banking sector. Barring the drop in the balance sheet size, in effect, the bank continued to improve its performance on all key metrics, including net profit, efficiency, asset quality, return on assets, return on equity. I think I have done with presenting the performance of QIB for the nine months commentary. I think we are happy to go on to take any questions, if any. Back to you, Jehan. Gavin, we can start Q&A now, please. If you would like to ask a question, please press star followed by one on your telephone keypad. That is star one to ask a question. Your first question comes from the line of Edmond Christou from Bloomberg Intelligence. Please ask your question. Hello, good afternoon. Thanks for the presentation. The first question on the credit growth into Q4, and if you can give some color on next year credit growth. As you explained a few times that there are you know repayments from the government, higher oil prices or gas prices has impacted the credit growth on the public sector. It will be useful to know how much you still have on the overdraft facilities. I think the central bank data shows around QAR 60 billion total overdraft facility in the system, how much your market share in that? Do you expect this to remain a drag into next year, maybe Q1-ish next year? The second question on margin. You defended the margin very well, but clearly there is pressure domestically on the margin, especially the rate differential between deposit and lending. Do you see a risk of contraction next year? The last one on the Stage 1 falling and Stage 2 up. However, your cost of risk remain low. Do you see any outcome from the central bank review and more provisioning into next year? Thank you. Okay. In fact, Edmond you've covered kind of all the questions on behalf of all the other investors. However, we'll try to address them one at a time. In Q4, as we know that, I think as of now, I think the Q4 growth story would be we continue to work towards it. However, given the fact that there are a lot of activities that will be surrounding the World Cup, very difficult to predict where or how much the balance sheet growth would come out to be. We expect to be benign, not very strong. Yeah, we continue to work. There are a lot of things that continue to happen in the pipeline. We'll see how much of that culminates in Q4 or spills over to next year. Coming on to the next year, I think we continue to assess. I think we have already said that we have already mentioned that 2023 would be the period when I think the LNG gas expansion activities really start taking the forefront, with the World Cup activities being over. I think we'll see more and more contracts to be awarded to the various participants in the LNG expansion plan. I think that should continue to be the positive boost to the overall credit sector growth, especially in the private sector. In terms of public sector, as I said, we've said that we have about our share in government lending has dropped to 11%. There is still some overdraft facilities. However, they are not very extremely material. These were the ones which have always been carried or maintained by the Ministry of Finance even over a quite recent past, if not looking into just the current position. We don't expect any sharp reductions going forward. However, we'll have to continue to wait and assess as to how well does the government see its overall asset liability management going forward. In terms of NIM pressures, I think we have always mentioned that we expect our NIMs to improve if every Fed hike was followed by a corresponding hike by QCB. If that doesn't happen, then we should be fairly be in a decent position to be able to maintain. Going forward, we could even see a slight improvement going forward, as we have also highlighted the fact that in Islamic banks, there is usually a lag effect of around six months, whereby we expect the asset repricing to really kick in. Going forward, we do not expect any major contraction in the NIM. We've been able to improve the NIM marginally on the contrary compared to previous quarters. I think we see ourselves in a position whereby we should be able to defend and if not improve our NIMs, taking advantage of the higher hikes in interest rates. If we have seen in the latest one, I think QCB have matched all the rate benchmarks. I think that's a positive note for the banks in general for everybody. I think on your thing on the front going forward in terms of the provisioning, as I said, most of the provisions that we have built this year have been allocated towards Stage 1. Our asset quality remains very strong. Marginal change in the percentage if you go and look into the Stage 2, but that's more driven by the fact of the balance sheet size change rather than any significant absolute changes in the Stage 2 financing in general. Overall, we are very happy with our asset quality, the way we have been able to defend in terms of what is going to entail out of the central bank restructuring. We've already submitted the proposals and the only way we will be able to throw a light on it is once we come to the year-end financials. However, having said that, I think, the way we have built our Stage 1 ECL, I think we will have to look into how we are going to rationalize it. There are a number of ways we'll do it. I think as we have always mentioned in the past, in order to defend the provisions that we have built, if we are required to downgrade some customers to Stage 2 or Stage 3, we will not hesitate. We do not have a policy of trying to boost the profitability by reversing the provisions that we have built. We continue to maintain our approach or our guidance that we provide that if we have strong operating performance. We will continue to build provisions because effectively it helps us in maintaining a very stable and a robust growth scenario for us. I hope I have answered all the questions and. Much appreciated, and apologies for asking them as zero. Thank you. Okay. Thank you. Your next question comes from the line of Aybek Islamov from HSBC. Please ask your question. Yes, thank you for the conference call. I wanted to ask you about your funding cost and the funding position. So there's quite a bit of a pickup in the cost of funding in the third quarter on a sequential basis. Can you elaborate what are the drivers behind that? And can you elaborate on the central bank guidelines in terms of rebalancing the funding mix towards domestic funding away from non-resident funding? You know, where do you stand on that? If you can sort of give some color on the ratios. Unfortunately, banks in Qatar don't publish Q3 reports. I mean, that would be a very big help for us if we had them. Yeah, if you can provide more color, that would be great. Yeah. Thank you. I'll answer one by one. What's driving the cost of funds? Well, US inflation, Fed hikes, QCB rate hikes, and overall changes in the interest rate environment. I think, if the rates are going to move as sharply as the way they have, I think it is but natural that the cost of funds will increase as the liabilities reprice. We've always mentioned that the liability repricing cycle tends to be much more quicker compared to the asset repricing. I think that's what it is. However, having said that, we've still been able to defend our NIMs. We really see no difficulty so far in passing on the improved cost of funds to our asset book. Coming to on the funding mix bit of it, I think overall, if you have seen that during the first eight months, I think that's where the regulators have published the last numbers as of August. Overall, we see that the sharp increase in the liquidity, in the domestic liquidity has allowed the banking sector in general and QIB as well to be able to reduce its reliance on foreign funding. I think overall there has been the drop of 4% in the mix between the domestic and the international funding mix for the sector as a whole, and we too have been able to bring down. In fact, almost all of our reduction in the deposits that you've seen for the year have come through repayment of non-resident deposits. Having said that, QIB sits at a far more comfortable position in terms of the non-resident funding, which would include non-resident deposits, non-resident bilateral or syndicated borrowings or Sukuk borrowings, is at 25% of the overall funding needs, well below roughly 40%, industry average. We tend to, I think, continue to depict the strong liquidity positions we have, whether it be in terms of the overall credit ratios or the loan to deposit ratio compared to the market as well as in terms of the reliance to the non-resident funding. Hope that answers the question. Can you just elaborate to what extent you rebalancing the funding mix away from non-residents in the first half? As I told you, the rebalancing is happening more in terms of the overall, let's say, product mix rather than geographic mix. I think with QCB publishing the new guidelines in terms of the credit ratio, whereby they have also included the long-term bank borrowings and Sukuk as a part of the regulatory ratios, has allowed us to really let go of certain expensive deposits. The focus had been more on the non-resident deposits. I think the driver has been the product mix. The geographical mix came automatically, given the fact that with all the things happening, I think the cross-border country premiums, which everybody was asking, continues to go higher across all markets. That made much more sense for us to repay the international deposits compared to the domestic deposits. Understood. Thank you. Thank you. Once again, if you would like to ask a question, please press star followed by one on your telephone keypad. That is star one if you do wish to ask a question. Currently, there are no further questions, so I'd like to hand back to our speakers. Apologies. We have a question from the line of Chirag Ghosh from SICO. Please ask your question. Hi, this is Chirag Ghosh from SICO. First, thanks for great call and, I think most questions have been answered. Just one quick one in case I missed it. About operating expense, it went up a bit. Of course, it says QIB might be still the lowest cost-to-income ratio in this region for sure, if not in the world. Just want to get a sense of what's your outlook on the operating expense going forward? As I said, you know, we'd always mentioned that if you remember back to our call in Q1, Q2, that we expected the expenses to go up in Q3 and Q4 marginally as the bank continues to show its commitment towards making FIFA a very successful event. A lot of it is the marketing spend and the other activities that are around FIFA. I think that's what has driven the increase. Plus, as I said, we do not look at it purely from the absolute level perspective. If you look at it, eventually we have said that as long as our cost to income ratio remains about 17.5%-18%, we would be fairly happy where we are. If you look at Q3, Q4, you will find a lot of one-time impact coming from FIFA-related activities. You need to on the long run. Mm-hmm We continue to remain confident in our ability to remain one of the most efficient organizations in the region. No, undoubtedly. One more thing on, just if you can throw some light on the overall liquidity situation in Qatar. I mean, you expect it to remain like this, so then what will be the strategy at least over the next two quarters? If you can throw some light with that. As I said, the liquidity we continue to expect to remain strong. I think the government is committed to be able to help the banking sector reduce its reliance on foreign funding. From that perspective, that's a very positive note on the overall health of the banking sector. It would have its negative impact in general. As I mentioned to start with, it would have a negative impact in terms of the top line, the balance sheet growth especially- Mm-hmm Coming from the public sector side would remain stunted. We've always been a bottom line-driven bank, right? We have never focused much on, let's say, purely to say that we need to have certain targets in terms of top line, in terms of the balance sheet. We always said that we will be able to commit and comment on where the private sector credit would grow because the public sector credit is purely driven by the government strategies. So far they continue to remain liquid. We will continue to work on rebalancing the product mix, whereby we would try to continue to focus on low-cost funding, challenging in this interest rate environment, given the fact that most customers would demand better returns on the deposits they place with us. We continue to focus on improving the current accounts, operating accounts, savings accounts, and try to have a better mix of the funding rather than purely focusing on the, let's say, the level of assets or level of deposits. Most of these overdraft facilities, like the ones which Edmond was asking question on, they were really not. If I compare it with the cost of funds that are there in the market today, they were hardly paying us anything in terms of the net contribution when it comes to the spreads or the margins, et cetera. In general, they never really hurt us in terms of the profitability. Yes, optically, it really doesn't appear. Mm-hmm to be very appealing to say that the balance sheet size has gone down or the financing book has gone down. At the end of the day, it's all about trying to give a shareholder return which is more measured through various number of performance measures rather than purely the balance sheet size or the top line. Okay. Just one quick question. It's like a technical question. I understand that you are taking a very conservative stance on your asset quality. You're moving something from one loan from Stage 1 to Stage 2, conservatively so that you can book higher provision, that's clear. You also said that you don't have any intention to, you know, to reverse it in the subsequent quarter to boost your earnings, which is also fine. If this customer continues to pay the loan, can you continue to keep it in Stage 2 or regulation will force you to move it back to Stage 1? Look, any backward transition from Stage 2 to Stage 1 has to be justified not only through the repayment capabilities but overall the health of the borrower and needs to get approved by the regulator as well. All backward transitions, whether from Stage 3 to Stage 2 or Stage 2 to Stage 1, require clear approvals from the regulator. The question is, technically can I do that if the health of the borrower has improved? Yes, I can do that if I'm able to show that the conditions that required us to move or what we chose to consider while moving them from one stage to another have improved. It improves our case to be able to bring it back. There is no automatic backward transition, if I can answer your question. Okay. No, it's quite clear. I understood. Exactly what I wanted to know. That's all from my side. Thank you very much as always. Thank you. Your next question comes from the line of Varun Kumar from SICO. Please ask your question. Hi. Thank you. I have a question, I mean, following up on an earlier question regarding the coverage. My question is on Stage 1. Now, the past few years, you have substantial increases in coverage, especially in, you know, 2020, 2021, even 2022. Now your coverage is, I mean, quite high compared to, you know, any peers in the region. I want to understand, I mean, what were the, you know, variables which were driving this, and, in terms of mechanism, how to do it. Do you have to justify this to the, you know, central bank in terms of your model? If at all, I mean, in the future, is there a possibility for you to kind of reduce this based on, you know, how you see the macroeconomic outlook? If you can, you know, shed some color on that. Thank you. Varun, this is a very technical question. I really don't want to go into this one. I'm happy to take this on one-on-one. You're asking more about the modeling, the accounting implications, et cetera. I think let's spare all the other investors. You please reach out to us one-on-one, and we'll be happy to take it forward to you. In general, I can summarize that they have been driven by various assumptions and modeling and have been justified through various acceptable justifications. Does it mean that I need to stick to those? No. It depends upon how the economic environment changes, how my portfolio evolves. There are multiple variables which is very difficult to elaborate on such a call. Happy to take it to you one-on-one, but in, I briefly explained to you that the various variables and parameters that are there that drive the numbers. Very difficult to cover it here. Yeah. It's at, I mean, reversal is at your discretion if necessary. I mean, if you see your variables changing, it is possible. As I said, it is not at my discretion. It is at how the various parameters and the variables that. Parameters. Yes. Okay. How they move. Yes. in the market and in our portfolio. Okay. Got it. Thank you. Thank you very much. Your next question comes from the line of Mahia Al-Mahmassani of Abu Dhabi Investment Authority. Please ask your question. Hi. Yes. If you already touched base on the loan growth discussion. Basically in Q3 and in the sharp fall and the contraction in the loan book looks a bit higher than expected. Previously, like in previous calls, we were assuming that for the full year we may reach 2%-3% growth, but now we are at a -6% year to date. What is your view on Q4? Yeah, I understand that the liquidity situation not helping. I mean, it's the excess liquidity in the system and the repayments. I mean, looking at your portfolio, especially that you were mentioning your share of public sector is around 11%. One would expect that you should be less, I mean, or more immune, I mean, compared to more, to banks that are more exposed to the government sector. Can you please elaborate on that segment and when we will see the inflection point, especially that now with it being like the fifth consecutive quarter of really slow growth? As I mentioned, to say that we continue to have a decent growth on the private sector side of it, maybe not to the extent that we would have liked. If you look at the overall industry, the private sector growth had been only muted about 3%, and the public sector had reduced by more than 4.5%. What you are seeing for QIB is just that the market dynamics being reflected into our balance sheet as well, given the fact that as of now, we are the number two bank in the country. What you see is not something which is QIB specific. I'm sure once you will see the numbers coming from other banks, you will see similar story. Maybe not exactly, but in general, the loan growth has been quite slow or negative in general because of the fact of the government repaying the certain facilities in order to improve the liquidity situation in the system. I said that Q4. I already mentioned to say that we have to wait. We are working on various on the private sector side. We are working on various transactions. We'll see how if we are able to close them or not depending upon, you know, how the overall economic activities remain during the World Cup. In general, we expect 2023 to be fairly positive. We still believe that the private sector credit growth for next year will be in the range of about 5%-7%. However, on the public sector side, very difficult to comment in the sense it's very much driven by government's decision that how they are going to inject the liquidity into the system, whether through increased deposits or through reduced borrowings from the banking sector. In general, right, as I said, top line, as I mentioned in just few minutes back, top line is just a driver for the ultimate goal of having a very healthy and a consistent bottom line growth. I think these reductions, especially on the private sector side, have really little or no impact on the bank's profitability because in these interest rate environments, the margin on those were kind of nil or negligible, if I can say. All right. Thank you. Thank you. Your next question comes from the line of Lea El-Hage of Bloomberg Intelligence. Please ask your question. Yes. Hello. Thank you for taking my question. I just wanted to ask you concerning your exposure to the real estate and the hospitality sector. Would you see more risk building up after the World Cup on these two sectors? And also, do you expect any kind of recoveries happening that would help your Cost of Risk? Uh, Lee- Thank you. Sorry to ask you, but are you from the analyst side or are you from the? Re- The BD side? Yeah. I work with Edmond on the Bloomberg Intelligence research. Okay. Thank you. So in terms of going back to your question on the impact on the real estate sector. I think thanks to World Cup, the real estate sector has seen a boost. We have to wait and watch whether it's going to be short term or a little bit more prolonged, but given the fact that most of the residential places have seen significant increase in the rentals, et cetera, boosting the real estate market. However, we need to wait and watch as to what happens after the World Cup and the FIFA in terms of the various rental market reaction to the extra supply that would come in. In general, real estate will remain one of the key sectors that are of the economy in general and always be one of the key potential for growth. It's all about ability to attract the right kind of exposure, I think, and that's what is always going to be critical when the bank increases their exposures to real estate market. So far we have been fairly, let's say, happy with the kind of exposures that we have been booking. As you can see, our NPLs have been fairly stable and I think the lowest in the market. We are not worried. We continue to work towards our objective of diversification and not focusing on single sectors or single markets. However, it will continue to remain one of the key areas that we will look at. In terms of cost of risk and implication, as I said, our cost of risk has not been driven, at least for the last one or two years, by the NPLs, but more in terms of the prudent risk management policies that we follow, whereby we consciously allocate operating performance towards building balance sheet resilience. Okay. Perfect. Thank you. Thank you. Once again, if you do wish to ask a question, please press star one on your telephone keypad and wait for your name to be announced. That is star one to ask a question. Currently there are no further questions. I'd like to hand back to our speakers. Thank you, everybody, for joining us on the Q3 call. Looking forward to talking to you again and therefore the final full year results somewhere, sometime in January. Do encourage everybody, those who are outside Qatar, to come and visit and enjoy the football World Cup in November, December. Thank you very much. This concludes today's conference call. You may now disconnect.