Hello, and welcome to the Qatar Islamic Bank conference call. I would like to advise all the participants that this call is being recorded. Thank you. I would now like to welcome Shahan to begin the conference. Over to you, Shahan. Thank you, Raya. Hello, everyone. I want to welcome you to QIB 2Q 2023 financial results conference call. On this call for management, we have the bank's CFO, Gourang Hemani, and Vinay Balakrishnan, the IR officer. As usual, we will conduct this call with first management reviewing the company's results, followed by a Q&A session. I will turn the call over now to Gourang. Please go ahead. Thanks, Shahan. Good day, everybody. Welcome to the Q2 2023 results call of Qatar Islamic Bank. As Shahan mentioned, we'll quickly take you through the main highlights of the first half results for 2023. The bank has reported net profit attributable to shareholders of QAR 1,955 million for the first half of 2023, representing a 7.7% growth against first half next previous year. The net profit attributable to the shareholders for the second quarter 2023 was QAR 1.050 billion, representing a 9.3% growth against corresponding quarter last year and 16% against first quarter 2023. Total assets of the bank now stand at QAR 183 billion. They are up 3% or QAR billion versus first quarter 2023, and marginally lower versus December 2022. Core activities of the bank, represented by financing and investing activities, continued to grow in second quarter 2023. Financing assets, primarily driven by increased private sector credit, now stand at QAR 120 billion, representing a growth of 2% or QAR 2 billion against Q1 2023 and marginally above December 2022 levels. Investment securities now reach QAR 48 billion, having grown 6% or 2.5% versus Q1 2023, and is up 4.5% on a year-to-date basis versus December 2022. Customer deposits at QAR 117 billion are almost flat compared to Q1 2023 and are down 4.5% against December 2022, as bank continues to optimize its cost of fund by repaying expensive deposits. On the profitability front, the total income of the bank before cost of funding has reached QAR 5.225 billion for the first half of 2023, against QAR 4. 283 billion for corresponding period last year. At the same time, the cost of funds paid to deposit and sukuk holders of the bank reached QAR 2. 116 billion, against QAR 1. 67 billion in first half of 2022. The bank was able to marginally improve its net financing margin, represented by financing yields less the cost of funds, both on a year-to-date basis versus corresponding period last year, as well as on a sequential quarterly basis between second and first quarter of 2023. Expenses of the bank for the first half of 2023 have reached QAR 549 million, representing a marginal increase of 1.8%. Continued efficiency measurement, measures enabled the bank to maintain its cost-to-income ratio at 17.7% for the six months period ended 30 June 2023, which remains one of the lowest in the domestic banking sector. Continued strength in operating performance enabled the bank to build precautionary expected credit losses on financing of around QAR 600 million in the first half of 2023, further improving the coverage ratios across all three stages of the financing portfolio. Impaired financing ratio was stable at 1.6%, with negligible new NPF generation in Q2 of 2023, with a healthy coverage ratio of 95.7%. The results continue to demonstrate the bank's ability to generate strong, stable and sustainable profitability for its shareholders, with return on average equity above 16% and return on average assets above 2.2%. We'll now take any calls, questions on the call people have. Over to you, Shahan. Okay, Raya, we can go to Q&A now, please. Hello, Raya? We can. Hi, good evening. Can you hear good evening. Can you hear me? Yeah, we're... Yeah, can we please go to Q&A now, please? Thank you. Sure. No problem. At this time, I would like to remind everyone, in order to ask a question, press star, then one on your telephone keypad. Okay, first question comes from Chirag Ghosh. Please go ahead. Hi. Hi, can you hear me loud and clear? Yeah, sure. Hi. First, congratulations for a good set of results. I mean, it's been a little challenging time for Qatar. I have two questions. First is related to the asset quality. Do you believe, looks like that you are still taking additional provisioning than perhaps what is required? I mean, the coverage continues to improve. Is it still in line with your older strategy of booking higher provisioning when the operating income is high? Is that the strategy that's continuing? That's my first question. Secondly, if you can give us some outlook on your loan growth for the rest of the year. Chirag, as I said, I already mentioned in the introduction to our results that, you know, we will continue to build precautionary expected credit losses as if we continue to have good operating profits. I know we have been building a decent level of coverage. However, I think it is, it is in line. As I said, we want to build stable, sustainable profitability, allowing the bank to really be able to absorb any sudden or unexpected increases in non-performing financing, even though we can very well say that we are well positioned at this point of time to be able to take care of those. Going forward, we continue to look into our portfolio in the sense that maybe we'll continue to improve our coverages on the second, on stage 2, or maybe to, if required, even to justify increased ECL. We may voluntarily downgrade customers from stage 1 to stage 2 or stage 2 to stage 3. Yeah, we will continue to build provisions, but maybe the speed will vary depending upon how the operating performance goes on. In terms of the credit growth outlook, I think if you look at the industry numbers, I think they continue to see overall, the public sector, we've continued to see a reduction. We've seen for us as well, the public sector going down compared to the December numbers. However, we started seeing some rebound in economic activity starting from June. Though slow, we continue to expect it to grow. I think from our perspective, we believe that the full year growth in the financing book would be in the range of 3%-4%. Given the fact that not much is left in any short term public sector facilities, we are not expecting any major repayments there, because most of it has already been, if not all, has already been repaid. Almost all the growth will come from the private sector credit going forward. Just one more thing is the NIM also looks very good. Is this the peak or there is potential for it to go up? It's, you see, again, we've always been telling that, sometimes it's very difficult to really give a look at on a quarter by quarter on the NIMs and come back, because, you know, there is always a timing difference in terms of the repricing of assets and liabilities, which can really make a big impact in periods where the, you know, the rates are changing very frequently. I think overall, we believe that our NIMs will continue to remain stable, maybe a marginal improvement, but nothing very significant unless and until we see a big change in the monetary policies adopted by the central banks across the world. I think overall, we are quite happy with the fact that we've been able to maintain and marginally improve the margins, especially if I compare with some of the numbers that we have seen our peers publish. Okay, I think I have asked few questions. I will just go back in the line. I'll give somebody else a chance. Ray, do you have any more questions? Ray, are there any other questions, or is anyone or are people queuing up? Hello? Yeah. Can you hear me? Yeah, I can hear you. Hi, this is Dan from Jadwa Investment. I have a couple of questions. Thank you for your time, Gourang. One, can you give us some outlook on the real estate sector? How do you see that developing? Do you see any signs of stress in the real estate sector? Sorry, going back to your provision coverage, your stage 1 coverage is exceptionally high when by any standards, generally you would expect stage 1 coverage to be around 1%, but the stage 2 coverage is also around similar to stage 1 coverage. Do you see improvement in stage 2 coverage going forward? You mentioned that you might voluntarily migrate some accounts. Can you see which sectors or which segments in the market do you think they are in distress and you might want to migrate them? Okay, on the first question, on the real estate side, I think, I, you know, that this things have not changed significantly different compared to what we had seen in the previous quarter or even in the past as well. What we see is that the commercial real estate continues to have a bit of a challenge. On the residential side, things are pretty okay. The, you know, the rental levels, which were expected to drop sharply after the World Cup, have really not happened, so I think the rentals have continued to hold it. They've slightly normalized, there's not been a major significant drop in the rentals out there as well. Overall, we're pretty okay with the way the retail and the residential side is looking at this point of time. We'll need to wait and watch. I think there are still talks that certain amount of inventory is still held with the government, and once we'll have to see the impact once it is released, but as such, we are not significantly concerned. I think one thing we'll look into and we'll try to see how does it impact is on the hospitality side of it, whereby there has been significant, let's say, capacity expansions that happened, to say, how does it hold up? Very difficult to say at this point of time. This is the summer. These are the pretty much the lean months. Very difficult to build a, let's say, forecast, how does it look like. Overall, we'll have to. These are the areas that we will look into it. In terms of the second question when it comes to the ECL side, I said we again increase, we slightly increase the coverage on the stage 2, in this quarter. We will continue to look into it. We know that we have been extra precautionary compared to some of our peers, but I think that is something that enables us to make sure that, you know, we are better prepared compared to some of our peers in terms of the ability to handle any natural NPF generations or maybe in terms of some voluntary downgrades that we might do. In terms of the industry and sector that you asked the question, it's a Given the fact that it is not a, let's say, a requirement at this point of time, because we don't see any specific stresses that we nearly need to take care of, it will be more being going on a name-by-name basis rather than going on a sector-by-sector basis or an overall portfolio basis. We will look into it. We don't have any specifics at this point of time, but it's just more to say that if we want to build up more provisions, we will need to be able to justify through increased stage 2 or stage 3. Yeah, thank you so much. Just to confirm, the 26%, I'm talking about year-end numbers here now, 26% or 27% of your overall loan book is real estate classified. That includes hospitality as well as commercial and residential, all real estate, right? Yeah, it includes all real estate. It's also, personal mortgages as well. Hospitality would be also included? Yeah, depends. Sometimes the facilities may have been given to an overall working capital facilities of large groups where it's not specifically assigned to real estate or hospitality, but those would not be very significant. Thanks a lot, Gaurang. Yeah. All right. Next question is from, Varuna. Thank you. Please go ahead. Hi, this is Varuna Kumarge from SICO. Gaurang, I have one, sorry, two questions. On the... I'm not sure whether you touched base on this earlier, but in the OpEx side, there was a reduction in compared to sequentially and even compared to fourth quarter last year. This, is this like a it's like a sustainable improvement or what kind of, you know, run rate can we see in the OpEx side? That's my first question. Secondly, you mentioned part of the real estate includes individual mortgages. Can you disclose how, what% of the overall portfolio is individual mortgages, and what is your take on the, you know, prospects of this segment going forward? Okay, on the first question on the expenses side of it, as I said, there could be some quarterly increases or decreases on the expenses, especially the, let's say, the non-discretionary kind of a spend that could come in. But in general, we are, as we have said, I, we again keep saying, please do not look quarterly numbers can sometimes not give you the full trend. Overall, we continue to believe that we should be able to maintain our cost-to-income ratio below 18%, at least for this year. So we are pretty okay with that kind of target at this point of time. I. Very difficult to give you on a quarter by quarter. Yes, we did see some decreases because. There were some lower spend on certain items, et cetera, which could be more seasonal. I would not read too much into a quarter by quarter number as such. On the the second question which you asked, Varuna, it was on sorry, I missed it. Sorry, no, it's regarding the individual mortgages. You said it's a part of the real estate exposure and? I don't have the numbers readily available with me. I can ask my investor relations team to reach out to you and give you. It's again, majority of the retail or let's say personal mortgages are more towards the Qatari population, et cetera. I would say out of the 25% exposure on the real estate side, it will be something around 4% if not. I don't think it will be more than 3%-4%. In general, it is a area that will continue to grow. Again, it's definitely not a major growth provider, given the fact that, given the demographic mix in the country, you have more expats who tend to more, let's say, rent it out rather than buy it for their own, funding their own, any personal real estate investments in the country. Okay. The, the recent, you know, introduction of Golden Visa schemes, hasn't really encouraged some of these expatriates to, apply? It's a process. What we're trying to talk about is more about the immediate one, then so there is. Immediate. significant, immediate. It's a process whereby, you know, even if you go and take countries which have announced it earlier, it just takes a bit time to really those kind of initiatives to pick up and come into momentum. For the time being, we in the, in the mid short term, we do not expect it to be the major growth provider. However, it is definitely in line with the country's policy to attract people and then make this country more of a longer term home for expatriates. I think it would keep growing, but I think at a relatively slower pace, at least to start with as we go. Got it. This is the only personal, like, individual, lending category which is under real estate. All others will be under the personal category, right? The loan classification. Yes. Okay, right. Thank you. Thank you so much. Thank you. Thanks, Varuna. Next is Ashwath of Goldman Sachs. Thank you. Please go ahead. Hi, congratulations on your results. I had just one call, I mean, one question. Wanted to know exactly, your thoughts around some of the key metrics for any views and then for 2023. I think you mentioned, you expect financing growth around 3%-4%, and NIMs to be broadly, that may be slightly positive, but maybe something on other important metrics like cost of risk, and cost to income, et cetera. Thank you. I said I've already covered most of it, but I'll, I'll repeat. As I said, we've told you that we expect 3%-4% growth in the financing book, the NIMs to be stable or marginally better than last year. Cost-to-income ratio, I already mentioned that I think, we are at 17.7%. I think we expect to be below 18%. Cost of risk, as I said, it is for us, it is not, it is not a, not a need-based provisioning. It is more about precautionary provisioning that we have been taking. That will be more driven by how our, how our operating performance is there. There is no, let's say, specific requirement or guidance that I can give you based on the portfolio or position at this point of time. Overall, I would say that if unless and until we see a significant increase in the NPF formation, which we don't see at this point of time, or we see a significant drop in the operating performance, which we are still continued to remain strong, we'll continue to build provisions. Maybe the speed will vary depending upon how much we can really absorb on the existing portfolio, and also in terms of how the operating performance is going to move forward. Thank you. Just a quick follow-up. You were saying, on NPLs, you expect it to level the ground going forward? I think you missed. I said that we do not see any significant pressures, but if we need to justify more ECL formation, we might do some downgrades from stage 1 to stage 2 and stage 2 to stage 3. Below, we are well below industry average, I think we're not really worried from that perspective, that even if the NPLs do generate, the NPL, NPF ratios will be well below the industry average, we all have already built an appropriate cover for it as well. Even if there's a downgrade, it's not going to have a significant immediate bottom line impact for us as well. That's the guidance I can give you for the time being. All right. Very clear. Thank you. Thank you. Next question is from Aybek of HSBC. Yeah, thank you for the conference call. A couple of questions from me. When we discuss asset quality, can you remind us where you may be downgrading your loans to your customers? Is this still real estate predominantly? If not, can you just elaborate further? That's my first question. Secondly, your Net Interest Margin performance is always quite impressive, and second quarter, no exception to that. I've heard you about your guidance for the full year. Yeah, thank you for that. Can you remind me, please, you know, the funding cost, what makes your funding cost different from others, right? Because I definitely see your funding cost is not rising as much as some other peers in Qatar, right? I think on the asset side, when you're, for example, downgrading your loans, maybe it's done based on negotiation with the customer. Can you also revise your interest rates on loans at that time? You know, is there such case where when loan is downgraded, you get to increase your interest rates on the loan? Is there such thing? Okay, going by your first question in terms of the sector by which we downgrade, I told you it is not sector-based as of now. If we are going to do voluntary downgrade, it will be more on a case-by-case basis and a name-to-name basis. There's no specific guidance I can give you. Overall, I already discussed our views on real estate side of it, there are certain challenges and pressures, but we don't see it really significantly increasing unless and until something were to change. On the second question of NIMs, I think I briefly touched upon it when I introduced the results call, whereby we said that we have been letting go of certain expensive deposits. We... What makes us a little bit more different compared to some of the industry average is, I can say you can clearly look into the loan-to-deposit ratios that we have compared to the industry average. I'm talking about the domestic market only, right? If you look at the domestic market, the sectoral numbers that are published by QCB show that the loan-to-deposit ratios are around 125%-128%, in that range, while we have been around 100%. That gives us a bit more leeway in terms of how we can really manage our funding profile and try to let go of deposits without really putting a significant pressure on our liquidity profile of the bank. I think, I had mentioned to you, I think at some point of time, that, you know, in terms of the overall liquidity positions, I think we sit fairly comfortable. We shall be publishing our Pillar 3, Num Pillar 3, disclosures this time, whereby you will get a little bit more idea. Overall, our LCR and NSFR are above the QCB limits. I think our LCR is usually above 175%, and NSFR is also above 100%. From us, our strong liquidity position allows us to better, let's say, manage the deposit profile and try to let go of the expensive deposits. One thing which is basically has always been one of our key strengths, is being an Islamic bank, we have certain access to certain low-cost deposit pools that allow us to have a better cost of funds. What was the third question, Aybek? Sorry, I think I did cover it. Yes. I, unless, until I missed something, maybe you can remind me? Yeah, on loan pricing. When you downgrade your certain customers, to stage 2, for example, can you raise loan prices, loan rates? No, the loan. Do you? The same customers from stage 1 to is more of a risk evaluation bank and has got nothing to do from the customer point of view. There are no loan covenants that really, or covenants that really increase your finance stage to be. The loan pricing and staging are completely independent. However, as normal, once we will be downgrading anything from stage 2 to stage 3, you automatically stop recognizing any revenues on those financing. Mm-hmm, understood. Thank you. Next question is from Jad Vish of Everlong Global Research. Please go ahead. Hi, congratulations for good set of results today. I just, most of my questions are covered, but I have just one question that is on your fee and commission income and fee income. You have been almost flat in this quarter. Can we see some improvement in next coming quarter? Thank you. From the fee and commission side, I think Q2 was definitely not one of the best quarters. Especially you can take into consideration that there were two Eid breaks that came in, so that really puts some of the economic activities on a bit on a lower trajectory compared to the past. So we do believe that Q2 was definitely not one of the strongest quarters, especially when it comes to areas like trade finance, et cetera, where the Eid breaks, et cetera, do really impact the overall economic activities and those kind of businesses. Overall, we continue to remain bullish for the remaining half of the year when it comes to fee and commission, noting the fact that Q2 had its own, let's say, nuances. Any guidance the same? No, there's no specific guidance. I think we have been showing a decent low single digit growth when it comes to commissions on an ongoing basis, we should be able to continue to be able to do that. We are fairly comfortable in terms of where we see our fee commission evolving based on the trends that we are seeing at this point of time. Okay. Thank you. Thanks a lot. Our final question is from, Chira of SICO. Thank you. Please go ahead. Just a quick one, in case I missed it. Is there the international deposit issue, is this sorted, or, where do you stand on international deposit? It has never been an issue for us. We have always been well below the market, but we continue to reduce it, and that reduction is not coming because we want to reduce the international deposit, but it's predominantly that they were one of the more expensive deposits. We are trying to get rid of those deposits as we keep moving forward. Overall, I think our non, even when the industry was at about the non resident funding was about 41%-42%, we are now well below 20% threshold. We are fairly comfortable with our non resident funding. The reduction has been more not driven by the fact that we needed to reduce non resident. It is just a combination of the fact. You know, one of the major areas from where the non-resident deposits used to come as well, was Saudi, where they themselves are facing a lot of liquidity related let's say, pressures are there, given the fast growth in the credit that you're seeing. It's, you see those flows also slowing down from their side. From our side, they would when they start demanding more rates compared to what we can generate, otherwise, we are happy to let go of them. Hypothetically, if you find a favorable deposit from international, there is nothing which is stopping you from taking it, right? No, not hypothetically. Realistically, if I'm getting a cheaper deposit internationally, I will continue to take it. We are well within the let's say, comfortable thresholds which we have set in place. As I think we have mentioned in the past as well, that internally, we have a very strong diversification strategy in place, whereby we have limits put in place in terms of counterparty, country, maturity, et cetera. As long as it comes from diversified sources, diversified maturity profile, we will continue to accept international deposits, depending upon how the pricing is compares to what we can generate otherwise. That's all from my side. Thank you very much. Thank you. Okay. I don't see any questions. I will now turn the call back over to management for closing remarks. Thank you very much, everybody, for joining the call today. Hope to see you again next quarter. Thank you. Thank you, Gaurang, for giving us an update, and we'll pick this up again next quarter. Have a great day. Thank you. Bye-bye.