Hello, welcome to the Qatar Islamic Bank. I would like to advise all participants that this call is being recorded. Thank you. I'd now like to welcome Shahan to begin the conference. Shahan, over to you. Thank you, Bella. Hello, everyone. I want to welcome you to QIB's 1st quarter 2023 financial results conference call. On this call from the company's management, we have the bank's CFO, Gourang Hemani. We will conduct this conference call with first management reviewing the company's results followed by a Q&A. I will now turn the call over to Gourang. Please go ahead, sir. Good day, everybody. Welcome to QIB Q1 2023 results call. QIB is happy to announce that our first quarter 2023 results was about QAR 905 million, up 5.9% compared to the same period last year. In terms of the operating performance, I think the balance sheet of the bank end of first quarter 2023 stood at QAR 178 billion, down 3.1% compared to December. Majority of the reduction coming from the drop in the interbank lending portfolio, as well as a marginal drop in the financing book driven by repayments by government from Ministry of Finance overdraft predominantly. Overall, the investment book was also kind of stable, marginally dropping by about QAR 400 million-QAR 500 million compared to December through maturity of State of Qatar Sukuk. Deposits of the bank were rationalized in line with the overall reduction in the assets. They now stand at about QAR 117.8 billion compared to QAR 122.3 billion end of December. The shareholders' equity is at QAR 22.6 billion after paying dividends for the year 2022 in the month of February. The capital adequacy of the bank is now at 19.6%, well above the QCB requirement and Basel III guidelines. In terms of the operating income performance, the bank posted a net operating income after payment of returns to unrestricted investment holders or the depositors at about QAR 1.52 billion, compared to QAR 1.59 billion in Q4 and QAR 1.6 billion in Q1 2022. This reduction was driven predominantly by some revaluation losses that the bank took on the investment portfolio. The higher cost of funding was well transferred to the deposit from deposits and funding was passed on to the lending book, keeping our net profit margin at same levels as Q4 of last year. The fee and commission income continued to show a good growth of 5% compared to Q1 of last year and 10% versus Q4 of last year. The bank continued to have a very conservative risk assessment of its portfolio. The NPF stands at 1.6%, almost around the same level as end of last year. The bank continues to maintain a healthy coverage of 96%. However, keeping in line with the bank's policy of building conservative provisions, the bank created financing provision worth QAR 317 million in Q1 of 2023. Lower than last year Q1, comparatively much higher than Q4 of 2023. Overall, I think it was a quarter whereby the overall economic activity continued to start slowly picking up from the highs that we had seen in Q4 of last year through the FIFA World Cup. Overall, I think the bank continues to remain in a very strong position to be able to deliver a decent set of results for the year as well as good returns for the equity shareholders. I think I've completed my high-level assessment of the Q1 performance. We can now go ahead with Q&A session. Over to you, Shahan. Bella, we can go to Q&A session now, please. All right. At this time, I would like to remind everyone in order to ask a question, press star then 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Waleed Mohsin of Goldman Sachs. Your line is now open. Thank you much. Good afternoon. Thank you much for the opportunity to ask a question. Three questions from my side. Number one, if you could kindly talk about the loan origination momentum in Qatar at this moment. Just wanted to get your thoughts on, you know, what kind of traction or pipeline you're seeing at this moment. Any thoughts on that will be highly appreciated. Secondly, in terms of margins, if you could provide some outlook, especially in the context of the shift that we've been seeing on an ongoing basis towards resident deposits versus non-resident deposits, which has put some pressure on cost of funding. How that plays into your NIM guidance and outlook, that would be much appreciated. My third and final question. When we look at, as you rightly pointed out, when we look at your first quarter provisioning, all of it is effectively Stage 1 provisioning. Your Stage 1 coverage of, you know, 3.6% is one of the highest I've, you know, seen across emerging market banks. You know, we completely get your, You know, conservative provisioning policy. How should we think about this? I mean, are you worried about certain NPLs? Are you worried about Stage 2 migration to Stage 3? You're covering 3.6% of your, you know, Stage 1, which effectively means that if Almost a 4% move happens in NPL, you're covered. I'm trying to understand where this stops, you know, when does this reverse or when does this process stop? What would you... What would make you comfortable that you don't need to add any more? Thank you much. Thanks, Waleed. I'll take your question in sequence. In terms of the loan growth, as I said, after the very strong Q4 where overall momentum in the economic activity was very high, the GDP growth was one of the better ones. We were expecting the kind of, let's say, and we had been telling that in Q1, Q2, the economic activity, at least on the lending side of it's going to not be very strong, and I think that's what it is. I think I'm... I will not... QIB numbers reflect what's happening in overall in the industry. If you look at the last statistics published by QCB at end of February, that gives you a good reflection of the fact that the overall loan book growth has been pretty much slow with a reduction happening on the public sector side, with the government repaying the Ministry of Finance repaying the overdraft facilities. Even in the private sector side as well, I think the first two months we saw, we've seen almost flat 0.2% growth in the private sector credit. Overall, I believe, as expected, the momentum has been slow, but maybe little bit slower compared to even what we were expecting. In general, I think the only sector that has seen some growth, positive growth in the. I think believe the first quarter is the real estate sector. We also saw some growth in that bit of it. Whatever was left out of at the end of December on the Ministry of Finance overdraft, that was repaid to us in January and February. That took away a large part of the growth that we had seen from the private sector side coming in. In terms of NIM, as I briefly mentioned, I think our NIMs have fairly remained stable. If I just look at purely the financing NIM, where I'm comparing the financing yield and they're comparing with the deposit yield. I think for us the comparison is pretty much straightforward because we operate around 97%-98% loan to deposit ratio. It's a fair comparison if I say, if I just take the two. Overall, I think our NIMs have remained at 3.5% compared to Q4. So far, despite the fact that there are delays in the pricing on the asset side vis-à-vis the funding side, I think we still have been able to maintain our NIMs. I think if depending upon what how the Fed moves and how does QCB follow the hikes, I think we'll have to take a call on it as we speak. I think maybe all the market expectations are that maybe there could be a May hike or may not be. I think the probability is now more even at this point of time. We'll see how it goes, but I think overall, I think further hikes in the QCB lending rate or the would make it more and more difficult to be able to pass it on to the customers or to be able to book new business as we speak. Overall, I think if we are able to maintain the NIMs, I think we should be fairly happy as we speak. We might see some marginal downward pressure if the rate hikes continue because it might be getting more difficult to pass on the cost of funds. In general, if there's only one hike, I think we should be, we should be fairly okay in terms of the NIM maintaining the NIM for the bank. In terms of the provisioning, I think, we have always been saying that we have been building provisions. If we have a decent operating performances, I think you have seen that, given the fact that our operating income, dropped this year compared to last year, predominantly due to, let's say, reduction in the volume volumes that we have seen through repayment of government facilities and overall, I think the private sector facilities even in 2022 are a bit slow. Overall, that reduction did reflect in our reduction in operating income, and we took lower provisioning. As we've been saying, I think we will continue to remain conservative. I think you are right, we are reaching a point whereby, the Stage 1 ratio looks much higher than what the industry is doing. We will look at it. I think we will be going through a, let's say, a review of our portfolio and maybe in order to justify the level of provision we take, we might downgrade some customers from Stage 1 to Stage 2 or Stage 2 to Stage 3, so that at least we are able to better justify any incremental provisions that we might be taking. In sense of on a need basis, I think. Even in 2022, majority of the cost of risk that we took was allocated to Stage 1. That continues in Stage 2. However, we'll continue to look to see how we can better justify any incremental provisions that we take. Our strategy remains the same. We want to build balance sheet strength if the operating performances allow us to do it. We will see the level of incremental provision we take depending upon how we are able to justify the incremental provision, as well as to see how the net operating income evolves. I hope I've answered all your queries, Waleed. Yes. Thank you much, Waleed. That's very helpful. Thank you. Thank you. Your next question comes from the line of Chiro Ghosh of SICO. Your line is open. Hi, this is Chiro Ghosh from SICO. Two very quick questions. First one, I'm looking at the balance sheet side. From where would the next round of lending growth come from? If I look at the real estate and construction side, that I believe is already at the upper end and to which I think QIB would be comfortable with. If you can let us know whether you would be comfortable in raising the share of real estate and construction loan any higher? That is my first part. Second one is I'm seeing that the deposit have also continued to flow out. Is this a conscious strategy to maintain the loan-to-deposit ratio, or there has been a conscious withdrawal by corporates and other retail investors and public sector as well? If you can throw some light on this. That's it from my side. On the first comment, Chiro, for you on where the loan growth would come from, I think we've been saying in the... even when we had returned that December 2022 call, we had been saying that we expect that the hydrocarbon capacity growth that the country is planning will trickle down into the private sector loan requirements as we go into the second half of the year or as we go into the third, fourth quarter of the year. It's and that will eventually keep coming. However, as you said on the real estate side, it is not about, it is not about what is the percentage vis-a-vis the bank would be comfortable with. It is more about where the overall opportunities are going to be there in the market. I am sure you understand in that, in a market where the growth in the growth opportunities are not there, you will tend to find whatever the opportunities are available. It is not a 1-quarter look or 2 quarters look that we can take and say, "I'm not going to take because the% of my real estate will go up," and all. Overall, we are fairly comfortable with even if there are certain quarters where the%s may go up or down. I think in the medium to long run, we all know that real estate will continue to remain one of the key sectors of the growth for overall in the economy, if we want to take the non-hydrocarbon sector, growth in the country. Eventually, as I said, the overall LNG capacity expansion that the country is planning will have effects coming on the industry side, the services, industry services and general trade kind of the businesses will continue to benefit from the overall expansion of the economy that will come in with the higher revenues if the government will bring in, etc. On the second side, for the deposit, outflow, I think it's purely an ALM management. What am I going to do with the deposits if my loan book has gone down? As we have been explaining, the majority of the loan reduction came from Ministry of Finance, and that gave us the opportunity to be able to repay some of the expensive deposits and more focusing on non-resident deposits, because that's the one that are more sensitive to how the international interest rates evolve and how the liquidity is evolving in the non-resident deposit originating countries. If you look at it, a large part of the non-resident deposits, especially for Islamic banks like us, come from money market funds, etc., from the region. Some of the regional countries are themselves facing liquidity-related challenges, which is fortunately not there in Qatar. They are demanding much more returns, which we are not willing to pay. Effectively, it's a more of an ALM management whereby you try to repay expensive deposits, which this time happens to be more from the non-resident deposits. I'll follow up. I think it was a question which Waleed had asked and which I omitted to say that it's not about increased competition in the domestic market deposit market that is there, but it's more about the banks trying to repay the expensive deposits wherever it comes from, whether it be if it is non-resident deposits, so be it. A quick follow-up. Because I saw in first quarter 2023, I think, the Qatar deposit, the demand deposit actually came off and the time remained still. That, that was it. On that one, there was some short-term money that was there parked in a corporate account for with us. That it came in mid of November and then left in January. I think that's the one specific one that is really there. It's not a general trend in reduction. We knew that was a short-term increase in the current accounts that we were going to eventually see, whereby they used a part of the proceeds to repay the financing with us and also with other banks. Just one quick follow-up on the first question. yesterday there was you know, your peers conference call. There they were saying that the loans related to this North Field project tends to have very low margin. They will be very skeptical. Not skeptical, they will go a little slow on that project. How are you seeing it? I think it applies to the entire... I would not be able to comment on the very specifics of what my peers would have said, but all I can say is that direct participation in the North Field is not going to be there. That's the reason why the lag effect of the expansion is going to be there, because we would be financing contractors and subcontractors and service industries which take care of, let's say, LNG transportation and those kind of activities where we'll be funding. There is going to be a lag effect of the expansion coming in. There will be limited participation, if at all, from any domestic bank in the direct funding of the LNG expansion. It is the trickle-down effect that happens when the project gets awarded to contractors and subcontractors where we will keep participating. We're knowing very well that the ultimate paymaster will be the government. No, no. Thank you very much. This was very, very clear. Thank you. All right, your next question comes from the line of Lee Beswick of QNB. Your line is open. Hello, can anybody hear me? Yeah, we can hear you loud and clear. I think maybe just that. Can you hear me? Yeah, we can hear you now, Lee. Go ahead. You can hear me now? Okay. Sorry. I was just gonna say, congratulations on a good set of results. They were fine. Couldn't care less what your loan growth is, to be honest. The one I wanted to focus on was actually your capital. It's sort of in a similar line to what Waleed said earlier. Your balance sheet is very strong, extremely strong. Mm-hmm. Your capital is particularly strong. Mm-hmm. Your. If there is a moderation in loan growth in this market, which is natural, given what's happened over the last few years in Qatar, then your capital is going to continue to build up to the point where at a sort of, you know, you're approaching a 16% Core Tier 1. There's a point at which it must start impacting your return on equity because your balance sheet is just flush with capital. That sort of comes back to the payout ratio, which is frighteningly low. You know, you could easily double your payout ratio and continue to do all the things you want to do. Also, if you did that, it would stop the capital building up on your balance sheet and protect your return on equity, which if you don't start doing that, then your return on equity at some point is going to start coming off. Nice question, Lee. I'll just say, first of all, I thank you that you have faith in us that we'll continue to build strong returns, strong profits, which will be able to generate a lot of internal capital. At least we are happy that at least you are talking on the positive note side of it. Yeah. No, I think we are very cognizant of the fact. We are very cognizant of the fact that we do build a lot of internal capital is generated by through the retention that we do. However, it's a question of whether you want to take a short-term view on the Qatari economy and to really let go of the... I would say it's an ammunition that is available to you to be able to quickly grow vis-a-vis some of the peers who might have challenges related to capital. The way I always put forward is to say I think we have a very strong liquidity position. I think if you look at our loan to deposit ratio, I'm talking predominantly from the local Qatari sector, is very strong. I think the second ammunition that you need to grow is capital. I think the core equity capital which we are building and overall capital adequacy, that's another ammunition available to us. I think overall our medium-term outlook on the Qatari growth is continues to loan book continues to remain quite positive. I think it is... 2023 is more of a transition year whereby you are coming from the highs of 2022 FIFA World Cup buildup that we have. I think overall there is a bit of the period of introspection in terms of identifying the key areas of growth and how you want to pace the growth in line with the overall 2030 Vision. I think we believe that there is decent opportunities to grow the balance sheet in the medium term. Maybe 2023 could, at least the first half would be a slowdown as we, as you also mentioned. It's very natural to have. We do look at going back to the specifics that you said to say on the payout ratio is to say that, yeah, we do keep looking into the payout ratio. However, it is a question that you also want to see how you position yourself vis-à-vis your peers. It's not only about how what is the payout ratio that you would like to do, but it's overall you try to take into consideration what the overall banking sector is doing. I think if at some point of time we do reach a situation whereby we are having a lot of surplus capital, then we could look into various options that could be there available for capital management without rather than purely looking at payout ratio, which is one of the tools which is there, right? Yes, we will look into it, but I think so far we've. I think we have been very successful in generating very decent high teens of return on equity that we've been generating. I think if we do come across a situation whereby we believe that we will not have adequate opportunities to deploy the capital, we will look at various capital management options that could be available, including the payout ratios, but nothing specific planned at this point of time. We are still at the beginning of the quarter. I think we still have about nine months or 10 months to even think about what could be the payout ratio for this year. I think, yeah, something where we will look out for, but nothing that I think we are thinking about it at this point of time, to be very honest. Yeah, okay. Yeah, I mean, that's fine. The only point I would sort of pick up is, it doesn't matter what the other banks do. There are a lot of smaller banks here which are incredibly weak. You're not one of them. You're a strong bank, so it doesn't really matter what the other banks do. That's completely irrelevant. You should do what is best for QIB. Yeah. I said that is one of the criteria. I never said that is the only criteria. Yes, that's sure. Sure, sure. I understand that. I'm just being as transparent as possible with you and trying to give you that there are various considerations that are taken. To be more honest and more precise, also one of the other factor is how does the board look at it? It's not purely a management decision which is there. It's overall how the board feels as well in terms of how you want to manage the payout ratio on a medium term to long-term basis. I'd say it's one of the decisions that sits in a various ways where you not only look into the short-term view, but you also take the medium-term and the long-term view as well. The way we look at it. Sure. is the higher capital adequacy also helps us in trying to maintain good ratings for us. I think if you, if you look at the Moody's ratings, I think we are rated one notch below QNB, but above most of the other local banks as well. That, that comes because of the fact that we have a strong asset quality, strong capital base, and that in effect, reflects in terms of how we are able to manage and monitor our cost of funds, because the better the asset quality, better the ratings, the better the expectation. I think people are get more comfortable in terms of how you are able to price your funding portfolio. I would say it's, it's a tricky one that needs not purely looking. The return on equity is one of the criteria, but you have to look into various other factors before you take any decisions on payouts and capitalizations and et cetera. Okay. Thank you. Thank you. Your next question comes from the line of Mohammed Agil of AFI. Your line is open. My question has been answered. I tried to get out of the queue, it didn't work. Thank you. Your next question comes from the line of Nikhil Phutane of CDFS. Your line is open. Hi. Good afternoon, sir. Well, this is regarding your, you know, real estate exposure and the recent decision which has come, Amiri Decision regarding establishment of public authority for regulating the real estate sector. Do you think so, you know, in terms of real estate portfolio which you have got, that could see some kind of, you know, provisions coming into picture? Given the fact that they're trying to regulate it now, you know, maybe in terms of rent, rates and other things. Just wanted to have your views, sir. Thank you. I think, the way I look at it, regulation is to say it is more to strengthen the real estate sector and make it more stable rather than to identify the weaknesses that could come out. Yes, it could be that you could have a certain real estate exposures that could have challenges, but I don't think so. I would like to correlate it anything with the regulations that come in. I think on the contrary, the regulations are welcome. I think that allows banking sector to get a better view in terms of how what kind of real estate that you are trying to take an exposure on. I take it more as positive rather than anything negative fallouts that could come because of the new regulations coming in. Okay. Thank you. Thank you, sir. If you would like to ask a question, press star, then 1 on your telephone keypad. There are no further questions at this time. I'd like to turn the call back over to Shahan. Thank you, Gourang, and thanks for everyone participating. We'll pick this up again next quarter. Thank you, everybody, for joining the call. See you back again in July. See you. Bye-bye. This now concludes today's conference. You may now disconnect.