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Strong growth in NFI steers CB to outperform peers in Q2: Report.

Satyendra Pathak Doha Commercial Bank (CB) delivered a good second quarter financial results fuelled by non-funded income (NFI) and cost cutting, QNB Financial Services (QNBFS) has said in a report released on Tuesday. "A sharp drop in opex and a strong growth in non-funded income drove bottom-line in the second quarter of 2019. The bank generated a net profit of QR503 million, growing by 11.7 percent year-on-year. "The bank's stock price performance, thus far, has rewarded investors' optimism in the company's change in strategy and as a result has rallied, outperforming its conventional banking peers," the report said. "We maintain our market perform rating on the bank with a price target of QR4.3 per share," QNBFS said in the report. "Total revenue of the bank increased by 3.5 percent due to weak net interest income. However, non-funded income supported revenue by growing 22.8 percent. "Moreover, opex declined by 11.5 percent, leading to a 10.6 percent growth in net operating income, while net provisions and impairments increased by only 4 percent. Hence, net income increased by 11.7 percent," the report said. Citing that the bank's impoved asset quality, the report said, "Non-performing loans (NPLs) dropped by 12.4 percent sequentially to QR4.4 billion, while the NPL ratio improved to 4.9 percent against 5.6 percent in the first quarter of 2019 and 2018 financial year. Net provisions and impairments increased by 4 percent to QR207.7 million." Management has more or less completed provisioning its legacy NPLs, the report said adding the bank's CoR is expected to further decline in 2019 and 2020. "Operating efficiency continued its positive trajectory, generating strong jaws. The bank posted opex of QR273.6 million, down 11.5 percent, while total revenue increased by 3.5 percent. Hence the cost-to-income (C/I) ratio fell to 27.6 percent against 29.5 percent in the first quarter of 2019," it said. Moreover, the bank's efficiency ratio in the first half of 2019 improved to 28.6 percent against 32.3 percent in the first half of the previous year. Highlighting that improving efficiency is part of CB's strategy, the report said the bank generated positive jaws of 11.7 percent in the first half of 2019. "The management continued to diversify the loan book as part of its strategy. Real estate and contracting loans receded by 21.1 percent year-to-date. Hence, real estate and contracting loans currently make up 23 percent and 4 percent of the loan portfolio, respectively. Growth in the loan book was mainly driven by the public sector reaching 30.8 YTD, which is a segment management is strongly targeting," the report said.

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Publication:Qatar Tribune (Doha, Qatar)
Date:Jul 24, 2019
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