Qatar National Bank QPSC Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jon Peace - UBS Equities - Analyst : So my first question please is, you gave us some guidance last quarter that because of the impact of higher global taxes that net profit could be down 6% to 8% this year. You started stronger than that in the first quarter already. So I just wondered whether you still thought that guidance held or whether you were a little more optimistic now. And the second question would be could you just remind us please of your NIM sensitivity and has your view changed on potentially the number of rate cuts this year and what impact that might have on your net interest income? Unidentified Company Representative Yes. First, in terms of guidance. At the time of Q4 call, we gave a guidance of profitability growth before taxes of 7% to 9% and after taxes of negative 6% to negative 8%. Because of strong performance from our Turkish franchise in the top line, we are now upgrading the guidance. Before global minimum taxes, we now expect the profitability to be up 10% to 12%, and after the impact of minimum taxes, we now expect profitability to be up 2% to 4%. So we are upgrading the profitability guidance primarily because of strong performance from our Turkish franchise on net interest income. Our other guidance remains the same. Balance sheet growth of 5% to 7%, cost of risks to 80 bps to 90 bps, margin of 260 basis points to 265 basis points, which brings us to the next question of NIM sensitivity. And how many rate cuts are baked in. We haven't changed our guide guidance on rate cuts. We expect two further 25 bps rate cuts to happen in potentially second half of the year. And our NIM sensitivity as per our financial statements is for every 100 bps decline, the model predicts that if we don't take any action, our NIMs will decline between QAR600 million to QAR800 million for the full year impact.

Question: Olga Veselova - BofA Global Research - Analyst : One question is on net interest margin. Your presentation suggests that margin went up in Turkey in the first quarter. However, for the group, it did go down quarter by quarter. Could you help us to understand what was, domestic? So only Qatari margin dynamics and what was driving the dynamics in the first quarter? And my second question is on effective tax rate. I think when you were presenting the full year financials, you mentioned that expected full year effective tax rate should be in the range from 20% to 25%. It was lower in the first quarter, 18.5%. I understand there was probably impact from hyperinflation. Maybe you could update us on your outlook on full year effective tax rate. And finally, thank you for the update on your outlook on the full year net income guidance. What exactly has changed in your outlook? It's quite material change of the full year guidance. Unidentified Company Representative First, one by one. Margin sequentially went down from -- it was marginally lower. And the primary reason was the -- in the Qatar business, it was reset of asset yields which usually is after some time as we've always explained. It takes about six to nine months for assets yields to reset. And since the rate cuts happened towards the end of last year, Q3, Q4, that was the reason why margin went down in Qatar, which it was more than offset by a margin increase in our Turkish business. So on an overall basis, net interest income was almost similar. Our effective tax rate, as you have rightly said, when we were predicting last year, we were talking about 22%-plus, but as you are always aware, the very large number in our income statement hyperinflationary, monetary loss and hyperinflation is not tax deductible, which significantly changes the tax rate. Now for the full year, we expect to be close to the effective tax rate which we have for Q1. Obviously, impacted by if inflation comes down more materially, it will be -- it will become better. If inflation inches up, it will become worse. On your third question of what led to the change in guidance, as I've explained, we have strong performance from our Turkish franchise. On the net interest income side, they were materially up, which led us to change in the guidance. And as we expect, the performance will continue for Turkey in future in terms of top line.

Question: Olga Veselova - BofA Global Research - Analyst : If I can use this opportunity and follow up with one more question. There was a strong growth of corporate lending in the first quarter over 4%. Can you help us to understand if there were any one-offs and if you expect this one-offs to be reversed in the next quarters? Unidentified Company Representative Olga, you're right. There was sequential 4% growth in Q1. It was quite broad-based. We cannot think of any one-offs. But being a corporate bank, there are a lot of episodic transactions which come in, and then there are a lot of repayments also planned during the year. So we stick to our guidance. We haven't changed the balance sheet guidance, though we had very strong performance in Q1.

Question: Jon Peace - UBS Equities - Analyst : Yeah. Could I just ask a follow up question please on the share buyback? Would you expect to complete that over the next couple of quarters at a similar sort of pace that you've been enacting it so far? And what's your thinking on next year? I appreciate you might take the decision much later in the year, but if the share price remains at a fairly low level, would you consider another share buyback? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 14, 2025 / 9:00AM, QNBK.QA - Q1 2025 Qatar National Bank QPSC Earnings Call Unidentified Company Representative Jon, usually, Q1 has higher volume. So pace picks up. But we would expect to finish in the next two to three quarters and decision for it will be Board's decision at the -- once the execution of this current program finishes.

Question: Andrew Brudenell - Ashmore Group - Analyst : Yeah, could I just ask a little bit more on costs and cost growth? Obviously, the last few years, the numbers of OpEx like percentage growth has been higher. Obviously, there's been subsidiary in inflation, Egypt, Turkey. Could you just give me a sense please of OpEx growth? I know you give a cost-to-income ratio. But just to sort of single out costs and where you're seeing the pressure. And maybe something on the sensitivity. You touched on what inflation may be in Turkey. Like how that might impact like group OpEx growth for the year, please? Unidentified Company Representative Yes, Andrew. In terms of cost growth, if we look at it sequentially, the staff cost and depreciation are up 7% each and other expenses are down 1%. Of the cost growth, almost 70%-plus is still coming in from our Turkish franchise. So yet the quarter on quarter numbers are down and Turkey is managing its expenses very well in the current situation. But obviously, it's a hyperinflation economy and we cannot deny the fact. But having said that, we try to control it as much as possible knowing what exactly are limitations of that franchise. In our core business, which is Qatar and other international branches, the costs are quite well controlled and they are growing at very low single digits.