Good day. Welcome to the Qatar National Bank fourth quarter 2021 results call. Today's conference is being recorded. At this time, I would like to turn the conference over to Rahul Bajaj. Please go ahead. Thank you. Good morning, good afternoon, good evening everyone on the call. This is Rahul Bajaj from Citigroup Research. We welcome you all to Qatar National Bank's fourth quarter 2021 results conference call, being jointly hosted by Citigroup and QNB Financial Services. On the call, we have QNB management team with us to give us view on the fourth quarter performance and also take investor and analyst questions. The group from QNB is led by CFO, Mr. Ramzi Mari. We also have Mr. Noor Mohamed Al-Naimi, General Manager of Treasury, and Mr. Mark Abrahams, Assistant General Manager of Trading and Treasury. At this moment, I will hand over the call to Mark to take it forward. Over to you, Mark. Thank you very much, Rahul and the Citi team for co-hosting our Q4 2021 earnings call today. Before we begin, I would like to highlight that this call is for investors and analysts only. Any media should please disconnect now. I will begin by giving an overview on the macroeconomic environment in Qatar. I will cover QNB's financial results for the year ended the 31st of December 2021. Finally, open the floor to Q&A. The ramp-up of preparations for the 2022 FIFA World Cup are driving a strong growth in Qatar's non-energy private sector. Indeed, the Qatar Financial Center's Purchasing Managers Index has been indicating expansion since July 2020 and has even accelerated in recent months, averaging 62.3 in Q4 2021. Sorry, whoever's got their line open, can they mute it, please? This signals sustained improvement in business conditions. Qatar has clearly demonstrated its ability to combine a prudent fiscal policy with a large program of capital expenditure for the effective delivery of both the Qatar National Vision 2030 and the World Cup. Kicking off in November of this year, the World Cup will be the largest event ever hosted in Qatar and will boost economic growth, particularly in transport, communication, media, hospitality, and other services sectors. World Bank estimates that Qatar's 2022 GDP growth is expected to be over 4%, the highest in the GCC region. Qatar has taken all necessary precautionary measures to protect its population and economy from COVID-19. Qatar's vaccination program has administered more than 4.7 million doses of the mRNA vaccines, with over 86% of the population now fully vaccinated and booster shots progressively being offered to the general population. This has helped Qatar significantly in reducing the impact of the pandemic. In the medium term, tailwinds from investment in increasing hydrocarbon production will drive economic growth, with six new LNG trains planned that will increase Qatar's LNG production by 64% to 126 million tons per annum. Importantly, the North Field expansion will make innovative use of both carbon capture and renewable energy to minimize carbon emissions and enhance sustainability. Positive spillovers from increased hydrocarbon production will combine with diversification efforts and structural reforms to boost economic activity and spending in the manufacturing and services sectors. Over the longer term, private sector growth will be further boosted by continued structural reforms, including ownership liberalization, the promotion of foreign direct investments, labor reforms, the permanent residency program, and several initiatives to support entrepreneurship, as well as self-sufficiency in strategic sectors. Qatar is therefore laying the foundation for continued GDP growth over the medium and long term through investment diversification and stronger private sector growth. I will now move on to QNB's annual financial results for the year ended 31st of December 2021. Key financial results are as follows. Net profit was QAR 13.2 billion, or $3.63 billion, up 10% compared to last year. QNB Group has continued on its operational rationalization exercise, which has resulted in reducing the cost-to-income ratio from 24.3% last year to 22.2%. Operating income has increased to QAR 28.3 billion, or $7.8 billion, up 11%, demonstrating QNB Group's success in maintaining growth across the range of revenue sources, even in these challenging conditions. Total assets are at QAR 1.093 trillion, or $300.2 billion, up by 7% from December 2020. This was driven by a growth of 6% in loans and advances to reach QAR 763.7 billion, or $209.8 billion. QNB Group remains successful in attracting deposits, which resulted in an increase in customer funding by 6% from December 2020 to reach QAR 785.5 billion, or QAR 215.8 billion. This improved the group's loan-to-deposit ratio to 97.2%. Despite several challenges and headwinds from the global pandemic, QNB Group was able to maintain the ratio of non-performing loans to gross loans at 2.3%, a level considered to be one of the lowest amongst financial institutions in the Middle East and Africa region, reflecting the high quality of the group's loan book and the effective management of credit risk. In addition, the coverage ratio on stage 3 loans is at 117%. The board of directors have recommended to the General Assembly the distribution of a cash dividend of 55% of the nominal share value, QAR 0.55 per share. Total equity increased to QAR 100.1 billion, up by 3% from December 2020. The bank's capital adequacy ratio, at 19.3%, is comfortably higher than both QCB and Basel III requirements. The group is very well capitalized and comfortably exceeds other regulatory liquidity and leverage ratios. We will now turn to questions and answers. Thank you very much. Thank you. Ladies and gentlemen, 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. Once again, press star one to ask a question. We will take our first question from Waleed Mohsin with Goldman Sachs. Please go ahead. Your line is open. Yes, good afternoon. Thank you much for the presentation. Three questions from my side. Firstly, if you could, Mark and Ramzi, if you could please talk about the international business, particularly Turkey. What trends are you seeing on the funding side? You clearly have taken incremental provisions, which seem to be Turkey driven. Your thoughts on funding and asset quality would be much appreciated on the international business. Secondly, if you look at your coverage ratio, it's one of the best in the region, and you further boosted it during the fourth quarter. We wanted to get a sense of when can we see normalized levels of cost of risk for the bank, and what do you expect those normalized levels to be? Thirdly, if you could just update us on your 2022 guidance. You had provided some preliminary guidance at the third quarter results, if you could provide an update, that would be very useful. Thank you much. Waleed, I think your first question on international business and the third question on the guidelines, I think they can go hand in hand. I will start with the last question, which is the guideline. Based on the budget that was built and where we see the numbers are progressing, whether it was in Doha or international operation, the guidelines for 2022 will stand as the following. For the group as a whole, balance sheet, which is asset loans deposit, will be between 6%-8%. For the profit and loss, it will be between 7%-9%. Of course, these guidelines will progress quarter-on-quarter based on what we are seeing on the ground. For QNB Al Ahli, balance sheet will be between 12%-14%, and profit and loss, 18%-20%. For QNB Finansbank, balance sheet will be between 21%-24%, and profit and loss between 17%-19%. In summary, we still believe the main two home operations, other than Qatar, will continue to grow strongly, whether it was in Egypt or Turkey. Overall growth for the group will continue in line with what we have seen in 2021. Strong progress, but steady progress. No surprises whether it is positive or negative. Talking about the guidelines, I need to refer to what we have seen in the fourth quarter of 2021. Definitely, it was one of the best quarters that we have seen in the group for a very long period of time, which clearly shows the continued strong growth in the revenue stream of the group. This is where we need to focus. Fourth quarter stand alone, we have seen operating profit growing by close to 7%. Very strong growth in net interest income. Net interest income, the fourth quarter, probably was one of the best in the history of the group. We grew in one quarter by close to 7%. Overall growth in revenue was 6%. Fourth quarter 2021 give us a very strong momentum for 2022, and that's why we are very optimistic that progress and revenue generation will continue in 2022 if the group continue at current level. This will take us to the second question, Waleed, which is the coverage ratio. If we recall what I discussed in the fourth quarter last year, when I talked about the coverage ratio and cost of risk is materially impacted by the strength in revenue. If revenue continue to be very strong, this will give us more room to be more conservative. This is exactly what happened in the fourth quarter. That's why in the fourth quarter, we were able to materially improve our coverage ratio. If you compare December 2020 with December 2021, coverage ratio grew from 107 to 117. This is a number that we don't see probably in any other financial institution in the region. This will continue as long we are seeing very strong growth in revenue. The group will continue to be conservative in provisioning, this will continue as long as we see the market not stable. Impact of Corona, we are still seeing it impacting businesses, whether it was in Doha or in all other international operations where we are seeing. Numbers that we are seeing on NPL is much better than what we anticipated. Inflow of NPL is again much bigger than what we were expecting. This doesn't mean that we should be relaxed. We will continue to be conservative. We will continue to build on the coverage ratio. Until we see the market going back to normal, then this will give us room to be a little bit more relaxed. However, based on the revenue growth that we have seen in the fourth quarter, this will allow us to continue to be conservative and at the same time achieve good growth in the profit a lot. This is exactly where we want to be. Waleed, I hope this answered your three questions. Yes, Ramzi, that's very helpful. Just one follow-up and link to the point about the international business. The 7%-9% guidance that you've given for profits, there seems to be quite a lot of conservatism or prudence in that number. Is it the FX rate that you're assuming for Turkish lira, Qatari riyal? Is that where you're factoring in the prudence? Is it the provisions, as you said, that's where If you look at the momentum, as you rightly said in the last quarter, you had 6% revenue growth quarter-on-quarter. If I look at your year-on-year pre-provision operating profit number, fourth quarter versus fourth quarter last year, we are almost 20% growth. From that perspective, this 7%-9% looks very conservative. Very good question, Waleed. This will take us to a very important point that I wanted to highlight. Everyone need to clearly understand this point, especially in the first quarter, where this point will be very clear. Last year, the average rate for the year in which we took QNB Finansbank number were around 0.4. The average this year, based on current exchange rate, will be around 0.21. Technically, the contribution of Turkey to the group this year will be around 50% of what we have seen in 2021, and more importantly, the first quarter. The average rate we have used in the first quarter last year was around 0.55, whereas it will be 0.21-0.22 this quarter. Technically, the contribution of Turkey to the bottom line in the first quarter will not be more than 40% of what we have seen last year. That's why this is a very important reason why we are talking about profit or loss 7%-9% this year, whereas it should be 8%-10% if Turkey number was normal. Saying this, all the investors that have been following QNB numbers for the last 10 years, my guidelines for the last 20 years, all of you know that I tend to be conservative and we build on this number quarter-on-quarter, still, 7%-9% with the impact of Turkey is a very good growth momentum. Got it. Thank you much. Lastly, maybe de-risking, how you're dealing with the volatility in Turkey on the funding side? Well, again, very simply, managing the process month-on-month, very carefully, very conservatively. One example of how we are managing this, if you look at loan-to-deposit ratio. The loan-to-deposit ratio for QNB Finansbank in December was 96.5%. For Turkish banks, this is a number that is not known. Turkish banks tend to operate between the 120-125. Now, QNB Finansbank is materially less than 100%. This is how we are managing the operation in QNB Finansbank. Very conservatively, very carefully, especially considering that no one knows exactly how things is going to progress, and that's why we manage even the growth in loans very carefully. We focus on short-term funding, TRY funding, in order to ensure that net impact on the operation is at a minimum. This is what we have seen in how interest in the fourth quarter in Turkey was progressing. It was one of the best quarter in the history in QNB Finansbank since we acquired them in terms of net interest income. This is how we want to manage the operation quarter-on-quarter, very carefully based on the condition on the ground. At the same time, build in cost of risk, build on coverage ratio. We started the year with an average of coverage ratio of 100%. We ended the year at 122%. A clear conservative approach on how we are managing the operations in QNB Finansbank. Still, we were able to generate a return on equity of very strong, of close to 20% on Turkey. Again, it is one of the highest return equities that we have seen for our operations in Turkey since we acquired the entity. All right, Ramzi. This is very helpful. Thank you so much, as always. We will now take the next question from Chiradeep Ghosh with SICO. Please go ahead. Your line is open. Hi. Thanks for the call and congratulations for our good set of levels, especially the revenue part. I have two questions. First is, you have been giving guidance that the net interest margin would be under pressure, but you have been fairly resilient, in my opinion. If you can throw some guidance of how to expect things to pan out over 2022 and onwards. Another thing is, again, related to Turkey. I am just trying to understand it better. Tactically, there are two options for you. One is to go with the USD-based loans. That will protect your value of your investment, but then the probability of default by customer would be high. While if you lend out in Turkish lira, then the probability of default is low, but there is a devaluation risk for QNB. How are you trying to tackle this strategy? That would be interesting for me to know. Okay, thank you. Net interest margin. We started the year talking about a drop of about five to seven basic points. We ended the year with a drop of only two basic points, clearly showing that we were able to manage our margin much better than we originally anticipated. Good momentum from the team in treasury on managing our cost of funding, managing overall liquidity for the group. International operation, whether it was in Turkey or in Egypt, again, in the fourth quarter, we're able to manage their net interest margin very efficiently. I think all these factors materially helped in maintaining our net interest margin at 247 basic points. What we are seeing for 2022, to be honest, I'm optimistic about margin 2022, because as we always said, QNB is materially helped when Fed rate is down, and we start to benefit when the Fed rate is going up. How much up? We need to wait and see. However, historically, calculations show that 100 basis points can add around QAR 400 million-QAR 500 million of interest overall. That number is materially impacting how we are going to continue to manage our cost of funding, and how we are going to be able to reflect the increase to our loans. Considering that most of our loans are floating, this give us a very good indication that QNB will be able to benefit once rates have gone up. In the budget, we only anticipated, because we have to be conservative, only two increases during the year, and in the late part of the year. With what we are hearing today, I think there will be more than two increases, and they will be much faster than what we anticipated, which give us, again, hope that our net interest margin for this year will be very strong. The 7%-9% includes only two rate hikes, right? Yes The statement. Yes. Okay. Yes. Two times, and late in the year. Yes. On Turkey, how we are able to manage the overall growth on the balance sheet, at the same time managing the devaluation. By taking the best trade-off. Since the devaluation started in Turkey three years ago, we tried to be as far as possible from the dollar loans, because the hit on NPL will be huge. We focused mostly on short-term Turkish lira loans, and floating. At the same time, hedging all positions that we have in order to ensure that the impact on net interest income will be as minimum as possible when changes takes place. This is how we have been able to manage this. By using the best trade-off that allow us to grow the balance sheet, and at the same time, to absorb as much as possible the impact of the devaluation. Just a back-of-the-envelope calculation. When I did, I found that the comprehensive income hit which you had to take did not include a very big amount of hedging, right? The hedging benefit was not that significant. Am I right or? No, hedging is significant in Finance Bank. Technically, Finance Bank hedge everything in their balance sheet. They hedge the mismatch in the balance sheet, they hedge the mismatch in interest, they hedge their FX positions. If you look at the detail of their balance sheet, and you look at the detail of their off-balance sheet, you will see there is billions of hedge positions that they have. It's quite clear. Understood. Thank you very much for your call. Okay. Thank you. We will now take the next question from Edmond Christou with Bloomberg Intelligence. Please go ahead. Your line is open. Hello. Hi, this is Edmond Christou from Bloomberg Intelligence. Thanks for the call today. First question is on the staging downgrade into Stage 2. Can you just give some light on which account, which region that moved the Stage 2 from 6%-6.6%? How do you expect this to evolve into next year? I believe you have been doing a lot of proactive downgrades and provisioning against it. Just some clarity on the guidance for next year on this. The other one on the margin. Very strong margin for Q4. I sense from your conversation that you expect some normalization of margin into the first half of next year before we get the rate hike to filter into the margins in the second half of next year. What's your expectation on the cost of funding? Will it still be supportive in Turkey? What's your expectation on the cost of funding in Qatar, given the tapering that's happening and the expectation for rate hike by the second half of next year? The last one, if possible, on the CET1. Very strong capital generation. Your CET1 moved from 13.5 in Q3 into 14.2 in Q4. I'm not able to reconcile this in terms of I did an adjustment for dividend, and I added the profit as a cash generation, but I'm still not able to bring the number close to each other. If you can, walk me through, what is the impact on the lira there, and also your capital generation on, if there is anyone of. Thank you. On the last question, Edmond, I don't think I will be able to give you the details on the breakdown on the phone. I will let one of the team in financial control to send you the exact calculation of the CET1 on the first quarter. Now, in terms of margin and cost of funding, please understand that these two go together. We manage interest-bearing liabilities and interest-earning assets at the same time, so you cannot take them in isolation. What is important here is to what extent our funding or our assets is floating. Clearly, the bulk of this is floating, and that's why the impact of an increase on the Fed rate is material. It is positive. With the higher the Fed rate in movement, this will add more value to our overall margin. That's why I anticipate this year our margin will continue to be strong, and I'm optimistic that we will hopefully be able to maintain the 247 basis points. On the staging again, if I want to be conservative on Stage 2, I need to move some accounts to Stage 2 to allow us to take more provisions. Otherwise, central bank and external audit will not allow this to happen. Some of the movement into staging from Stage 1 to Stage 2, and even to Stage 3, is again, to be conservative. Again, at the same time, we are seeing some accounts, especially at the SME side, who show delay in some payments, and that's why we need to do some staging. What is my expectation in 2022? Again, it highly depends on how strong our revenue will be. If revenue continues to be very strong and cost of risk will be between the 75 to the 85 basis points, that means more staging needs to be done. Otherwise, I will not be able to achieve that 75 to 85 basis points of cost of risk. What is the percentage of Stage 2 to the overall book? Will it continue to be around the six? I think it will be more than six. I think it could reach 7.5%. Again, all these are a reflection of how strong the revenue momentum will continue to be, how the business will cope quicker to life beyond COVID. Let's wait and see how the progress will be quarter on quarter. Okay. This is very helpful. On the margin for 1H, do you see a lower margin on Turkey, or you still expect low cost of funding to be supported? Where, sorry, Edmond? Where? Okay, in Turkey. The low cost of funding in Turkey, do you expect it to be supported for 1H margin the first half of this year? From what we have seen in the last quarter, I think first quarter will continue to be strong. Second quarter, we need to wait and see how the progress will be in the first quarter. Fourth quarter margin will continue to be very strong in Turkey. Okay. Very helpful. Thank you very much. As a reminder, to ask a question, press star one. We will now take the next question from Aybek Islamov with HSBC. Please go ahead. Your line is open. Yes. Thank you. Three questions, if I may. The first one is, I was curious, in a scenario that 10-year U.S. yields rise materially, and they started to rise from end of last year, how you think that may impact your cost of funding, your wholesale funding costs? If U.S. yield curve also steepens, how will that impact your NIM position? That's my first question. The second question is- Sorry. Just for me to understand this question, again, we're talking about the Fed rate movement and how it will impact margins? No. Fed rate is a short-term rate, right? We're thinking about Fed rate as short-term three-month rates. These are long-term interest rates, like 10-year interest rates, U.S. Treasury yields, 10-year yields I'm talking about. The impact of this is very small, because most of our loans is maximum three to six months mature in terms of repricing. What is important to us is, number 1, three months, and second, six months. More than that, it's not that important. On the funding side, is there any type of funding, maybe CDs or long-term wholesale notes, which are sensitive to five years, seven years, QAR 10- There are- QAR. No, we don't have those. What we have is mostly what is important here in terms of materiality. You'll always have some of this, but these are very small. You have the EMTN one which is mostly fixed, you will benefit from this. Again, we talk about a balance sheet now of QAR 300 billion. All this, let's talk about QAR 15 billion-QAR 20 billion. Not 50% of them are fixed. Technically, even though there will be a major benefit, but the overall materiality is not that big. The bulk, 90% of the funding is three months, maximum six months in terms of repricing. CD, the bulk of it is even one month. Okay. In terms of repricing. Yeah. That's very clear. Thank you. I'll move to the second question. You mentioned several times that revenue growth will continue to be strong in 2022, which is great. You said that you will set aside some of your revenues for provision reserves, loan loss provision expenses. What about operating costs? Do you see any areas where you feel like you need to increase your OpEx? Any sort of CapEx plans on the operating cost side? Okay. The last question. The last question, I just want to know your view on the return on equity outlook. Do you feel that in a scenario of rising interest rates and very good provision coverage, can you improve your return on equity, 100 basis points, 200 basis points? We can take a two, three-year view here. Okay. Thank you. The second question about operating costs. cost-to-income ratio during the year materially improved 22.2 from 24, so there was a major drop, about 200 basis points in efficiency ratio. Very strong performance, materially helped by international operations during the year. How we managed our cost in Doha. Is this sustainable? I remember last time when we talked about this, I said 23 is more sustainable than 22.2. We will continue to manage very carefully our costs, and this is what QNB has done historically. It is extremely important to the group to maintain a very efficient operation because this allow us to be very flexible when hits come. We saw this happening in 2008. We saw this happening in 2017, when there was a big shock to the system, whether it was international or local. Having a very strong efficiency ratio and very low efficiency ratio allow us to absorb these shocks and continue to well-perform within the group. That's why it's extremely important. Now, to what extent we will continue to invest in CapEx? We were always very active in investing, especially in our IT infrastructure in the group. This will continue, whether it was in Turkey, in Egypt, or in Doha. Again, this investment will focus on profit-generating projects and projects that will allow us to manage our growth in costs. Now, going to ROE. During 2021, we were very successful in growing our ROE from 15.4 to 16.4, so 100 basis points, which is very good. This is a reflection of the growth in revenue and how we are managing our payout ratio. We could have grown this even higher if we wanted to move to a payout ratio of 50%. We want to continue to have a payout ratio around 40%. As long we continue to grow the operation around what we have done during 2021, we are going to see our return on equity growing between the 75 to 100 basis points. Mm-hmm. Yeah. Thank you, Mr. Al-Ramahi. Very helpful. Thank you. Thank you. We will now take the next question from Naresh Bilandani with JPMorgan. Please go ahead. Your line is open. Thank you very much, Alastair. It's Naresh from JPMorgan. Just a few questions from my side, please. Sorry, coming back on the interest rates. Keen to understand in your numbers, what kind of policy assumptions are you building in from a rates perspective in Egypt? If you are expecting any policy changes in Turkey that could offer an upside or a downside risk to your current expectations? That's the first question. Second is on growth in Qatar. Sorry, Naresh, sorry. Can you expand on the first question, please? Yes, please. Just trying to understand. Because it's not very clear to me policy assumptions that you're building in. Just to put it in other words, what quantity of rate hikes are you expecting in Egypt? If you are building in, at this stage, any potential rate hikes in Turkey over the course of 2022, or these assumptions are based on the current policy situation as is? That's the first question. My second question is on growth in Qatar. Over the course of 2022 and 2023, could you kindly provide some insight to what extent will the growth be driven by the gas infrastructure expansion until 2025 and 2027, as you've highlighted consistently over the calls, or based on incoming tourism and the activity around the World Cup? That would be super helpful. Thank you. In terms of the first question and what is our assumption about interest rate in Turkey and Egypt. In Turkey, it is close to impossible for you to build a one-year budget. We run this on a quarter by quarter based on the condition on the ground. That's why we don't tend to be long-term in how we are expecting the changes on rates. The budget was built on the conditions that were available during fourth quarter of last year. Quarter on quarter, we continue to update these parameters and the budget will be impacted by these changes. In Egypt, no major changes to where we stood in the fourth quarter in terms of expectation. We do not expect major changes on interest rates from where we were in the fourth quarter. Egypt is more stable in terms of our expectation, whereas Turkey, definitely we have to run this quarter on quarter. In terms of infrastructure projects. If we take an update from what MEED published just recently on where investment will take place in Qatar beyond 2022. I will give you the most important projects where we see more and more investment. We talk about Lusail City, and there is an expectation of close to QAR 37 billion more investment there. We have the airport, close to QAR 18 billion further investment, and this is a project until 2025. We have in the expressway, additional QAR 13 billion of investment. Again, completion is 2025. We have local road and drainage, additional QAR 18 billion of investment, and this is out until 2026. Whereas for the Qatar Rail, close to QAR 40 billion of additional investment, and this again will continue until 2026. Projects that we talk about, which is not oriented with the North Field, is close to QAR 164 billion. This will range from the year 2022 until 2026. Again, major investment in infrastructure projects across the board, whether it was the expressways, the port, the airport, the rail, Lusail City. If we add the project that will come ancillary to the North Field, we talk about more than QAR 200 billion of additional investment for the next 4 to 5 years. This will give us a lot of room for growth because this is where we have participated very strongly in the last 4 to 5 years. Naresh, did this answer your question? That's very helpful, Mr. Andy. Thank you. I was more curious to understand for the year 2022, will the growth be driven more on the hydrocarbon and other infrastructure investments, or will the growth be driven more by the World Cup-related activity? I think that was the question that I was much more curious to get an insight on. Direct World Cup activities was never an important added value to the operation. Most of the added value we got from the World Cup was the indirect one. The rail, the highways, the infrastructure projects, which is indirectly related to the World Cup, but they are not directly related. We never participated in stadium. Very small participation in anything direct to the World Cup because the state doesn't need us to finance these projects. Whereas we benefit from the indirect project, this is what will continue in 2022. All indirect projects, especially the expressways, the highways, the phases that is supposed to finish in the port, we will benefit from these projects the rest during the year. That's fair. This will be the main contributor to the growth in loans during the year, more than the direct North Field. As I mentioned before, QNB participation directly in North Field expansion is very small, because these projects tend to be very efficiently priced. QNB don't participate in these deals because some of these will be less than 60-70 basis point margin. We tend to stay away from this project because we do not add value to our margin. We materially benefit from all projects surrounding this project, which is indirectly this project. This is exactly what we have done during the previous expansion of gas production in Qatar. Thank you. That's a very clear point. Moachie, my final question literally is related to Egypt. Could you also please spare two minutes and just throw some light on what will be the growth strategy in Egypt? If you could please provide some key guidance on how the balance sheet will be driven, the 12%-14% guidance that you have kindly provided. To what extent will this be driven by credit versus the investment book? If there's in credit, what sectors are you planning to, sort of like, or targeting to grow further? In the last few years, we focused much more than other banks in Egypt, especially the private banks, in growing the credit. That was on the account of the investment book. That's why we have seen loan-to-deposit ratio growing from around 55% to, at some point, around 72%. If we have seen in December, that ratio dropped to 61%. In December 2020, loan-to-deposit ratio was 72%, it dropped to 61%. There was a little, a marginal shift in that strategy. We want to continue to focus on credit, but at the same time, investment is becoming very important for the group to maintain strong growth and profitability. We have changed management. The changes that took place in management clearly show the direction we are heading in the future in Egypt. We want in new blood. We want to focus on retail business. We want to focus on low funding, especially on the savings and current deposits. That's why the bulk of the growth we have seen in the fourth quarter and in 2022 in funding will be on CASA. We will give more emphasis to the retail business. We will continue to expand our branch operation. We will give much more focus to digital expansion, in term of digital channels to grow the business. This is where most of the growth is going to come in Egypt. Hopefully, this will answer your question, Naris. Indeed. This was very clear. Thank you very much. We will now take the next question from Waruna Kumarage with SICO Bank. Please go ahead. Your line is open. Hi. Good afternoon. Thank you very much. I have couple of quick questions. The first one, related to the capital adequacy of QNB Finansbank. What I've seen from the slides, that the value of the equity has fallen from quarter to quarter. If I look at the CET1 ratio currently, are you comfortable with the level that you are in? My second question is on the impact of foreign currency translation on provisions. I think that's one reason why you had to provide a lot in the fourth quarter to counter the effect of foreign currency translation. If that is coming from Turkey, going forward, how significant is this foreign currency translation impact is going to have on provisions going forward? The first one, capital adequacy ratio. We started the year in Turkey with 13.8. We ended the year with 15.8. Technically, the capital adequacy ratio materially improved during the year. One of the reason of this is definitely the size of the balance sheet, because the devaluation reduced the size of the balance sheet. Their equity is in Turkish lira, so it's not impacted by devaluation, and that's why they benefit. At current capital adequacy ratio, we still believe that as entity can continue to grow between the 20% and 22% that we talked about. That's why we do not see any pressure on capital adequacy ratio for the group. Excess provisioning, to what extent it contributes to the overall cost of risk during the fourth quarter? Of course, it is a factor. Turkey in the fourth quarter was extremely conservative in the extent of provisioning that they have taken. One of the reasons for that is they were materially enjoyed very strong growth in net interest income during that period of time. That allows them to build more on provisioning. If we look at their cost of risk in the fourth quarter, it moved from 126 basic points in September to 184 basic points in December. There is a major movement during the fourth quarter, third quarter. As I mentioned, again, we adopt in Turkey exactly what we are doing at the group level. As long you are seeing very strong opportunistic growth in revenue because of how overall the system rate is going. This give us a good opportunity to be very conservative in building more and more provision. That's why we have seen a big jump in their coverage ratio during the fourth quarter. Okay. Thank you very much. We will now take the next question from Manish Akeza with Avalon Global Research. Please go ahead, your line is open. Hi, sir. Actually, it's a very nice presentation that you've given. On your Egypt operations, you have mentioned in the presentation right now that change of management has brought a very good low-funding business through ATM and also, of course, focusing on CASA, which has improved your margins. Just to further highlight, Ali, you seem continued with increasing your corporate exposure. Those are Stage 3 loans that your corporate has increased. Is the management confident that these loans will not create further impairment in future? Now, when you grow your credit, this definitely will reflect on your Stage 2 and Stage 3. We were very active in the last five years in growing our credit in Egypt. It's natural with the impact of COVID-19, that we are seeing an increase in Stage 2, Stage 3. At the same time, there was a major push by the regulator on supporting SMEs in Egypt. You know that most banks, the contribution of SME were expected to grow to around 20%. This naturally, in the first couple of years, will reflect on your Stage 1, Stage 2. However, what differentiate us from others is to what extent you want to be conservative. Okay? The strong growth or the strong revenue stream that we are seeing in Alahli, similar to what we have seen before, allow us to be very, very conservative. Now, let's wait and see whether other banks in Egypt will be as conservative as we were. It is a rule of thumb. Once you start to invest more and more on the SME, especially in the first phase, you will see a growth in your Stage 2 and similarly Stage 3. Okay. You are comfortable with your current provision ratio for Stage 3 loans, or you could be seeing much more higher from 76% going after? I think in Egypt, the first six months of this year, you will continue to see continued growth in provisioning. Beyond the first half, the level of provisioning will stabilize. Okay. Thank you, sir. Thank you. Thank you. We will now take the next question from Valentina Stoykova with Barclays. Please go ahead, your line is open. Yes. Hi, thank you very much for the presentation. My first question is on QNB Finans. Can you please update us on the primary subsidiary status of the entity given the volatility in Turkey? More importantly, if we see assets falling below the 10% threshold of the group this year, will that automatically mean that QNB Finans will lose its primary subsidiary status? My next question is on your issuing plans for the year, both on seniors and sub debt. Thanks a lot. What is the second question, please? Second question is on your issuance plans. Issuance plans. Hello? Okay. I will let the team handle this question. Durraiz, can you handle the first question, and Mark, can you handle the second question? Yeah, sure. No problem at all. Yes, Valentina. For the principal subsidiary, as we would say, we refer to the prospectus, which says that this determination is done at the start of the year. As we understand, this determination would continue. Of course, we don't know what will be the position of the currency during the year. We will get back to you exactly what is the current percentages. At least for this year, it continues to be a principal subsidiary. As we always say, you have to refer to legal advice because it is specifically mentioned in the prospectus. Mark will take over the second question. Hi there. On the issuance side, on sub-debt, I don't think there's any plans to issue QNB this year. On the senior side, our stance remains the same as it's always been. We're very opportunistic. We have no formal funding program per se under the MTN program. We have relatively light maturities during 2022. The plan will be just to monitor the market closely, remain opportunistic, both in dollars and other currencies. That's in the public space for large deals. Also, do understand that we remain very active indeed, on private placements throughout the year. Obviously, depending on how that goes, that can mitigate our requirement to go to the market for a public deal, in the way that last year was a very light year for QNB as well. Primarily opportunistic, no formal plans, but I think you can expect to see us in the senior space at some point in the coming months. Thank you. That's very clear. Thanks. There are no further questions at this time, I would like to turn the conference back to our host for any additional or closing remarks. Mark? Rahul, nothing further from my side. Thank you very much, everybody, for your interest. Please stay safe, and we'll speak to you again next quarter. Thank you ever so much for your time. Thank you, everyone, and have a good day. Thank you very much. Bye now. Conference today is closed. Thank you for your participation. You may now disconnect.