Qatar National Bank QPSC Q3 2021 Earnings Call Transcript

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

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Mark. (Operator Instructions) So we have the first question coming from Rahul Bajaj, Citi. Any comment on guidance for 2021 or early thoughts on 2022 guidance.

Question: Aybek Islamov - HSBC, Research Division - Analyst : So there is a follow-up question from Rahul Bajaj. QNB historically sees a jump in the cost of risk during the fourth quarter. Is it fair to assume a similar jump this year?

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Ramzi. (Operator Instructions) So in the meantime, Ramzi, I'd like to go ahead and ask the question from my side. So we've seen a pretty dramatic increase in gas prices since the start of the year. Any market you look at or any export destination you take, I mean what's your read across for QNB's business? Does it ease liquidity? Does it also mean a stronger government spending or stronger loan growth? What would be your take on this?

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Ramzi. So we have a question from Chiro Ghosh, SICO Bahrain. And the question is about risk-weighted assets, which are at highest level ever, given that the loan portfolio continues to rise. Where do you see risk-weighted assets going?

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Ramzi. (Operator Instructions) So the next question is from Vikram Viswanathan, NBK Asset Management. So a follow-up on the answer you just gave us, Ramzi, in which areas do you expect this private sector investments to come from. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 13, 2021 / 9:30AM, QNBK.QA - Q3 2021 Qatar National Bank QPSC Earnings Call

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Ramzi. We have the next question from Waleed Mohsin, Goldman Sachs. When do you expect cost of risk to start normalizing given the current macro backdrop, which is obviously quite good? What is your target NPL coverage? And why is Stage 3 average above 100?

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Ramzi. So the next question is coming from Ayisha Zia. What is the outlook in Turkey and especially on NIM side?

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Ramzi. (Operator Instructions) So I guess, in the meantime, I wanted to ask you about the fact that, obviously, the macro backdrop is good, current count turning positive in the first quarter of this year. But despite that, we've seen some volatility in the exchange rate, Qatari riyal/U.S. dollar exchange rate, not as big as we had in 2017, of course, but there is some pickup in currency volatility. Is that a sign of some currency, foreign currency deficit in Qatar? And how would you interpret this volatility?

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Mark. So we have a question from Talal Samhouri, Aventicum Capital. And the question is about any plans for expansion inorganically.

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Ramzi. Next question is from Rahul Bajaj at Citi. So you have done really a good work on costs during the last couple of years. Is 23%

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Ramzi. So next question comes from Edmond Christou, Bloomberg Intelligence. Now clearly, the asset quality has held very well and there's a buildup in the buffer on Stage 3 loans. Now how do you see Stage 2 and Stage 3 loans progressing into next year? And what is your assessment of domestic private sector as they repay back dues?

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Ramzi. So there's a follow-up question from Edmond Christou of Bloomberg Intelligence. So how should we think of the inflation risk impact on the bank, either domestically as Qatar as an importer for goods and in a global context, namely Turkey and Egypt exposure? Now additionally, given your reliance on dollar funding, how do you see cost of funding progressing into the first half of next year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 13, 2021 / 9:30AM, QNBK.QA - Q3 2021 Qatar National Bank QPSC Earnings Call

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Ramzi. So the next question is from Mohamed Adel, Al Faisal Investments. Now the question is about the regional performance. Now Turkey grew 7% and Egypt was almost flat. And however, international net profit declined around 17% year-on-year. So I guess the question is around the -- what's behind this weaker performance in international net profit?

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Ramzi. So we have 2 questions from Talal Samhouri, Aventicum Capital. The first one is about foreign currency, well, net FX assets. So we are seeing a continued decline in banking sector net FX assets. What is the reason for that? And would that have any effect on QNB? That's the first question. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 13, 2021 / 9:30AM, QNBK.QA - Q3 2021 Qatar National Bank QPSC Earnings Call The second question is about dividend payout ratio. It's been around 43% to 60%, but last year was at the lower end due to COVID-19, as we know. Now would the payout ratio to go back to normal this year or compensate for last year's decline?

Question: Aybek Islamov - HSBC, Research Division - Analyst : Well, yes, I think the question was about decline in the banking sector net FX assets, and what's the reason for that?

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Mr. Ramzi. Now next question is from Mujib Moosa from Commercial Bank. Well, impact of continued Turkish lira depreciation in the third quarter and the fourth quarter on NPLs and asset quality of Finance Bank.

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Mr. Ramzi. So there is a repeat question on cost growth, which was well-controlled. So if income would grow at around 6% to 8%, can cost to income ratio drop to 20% in the medium term?

Question: Aybek Islamov - HSBC, Research Division - Analyst : Okay. Thank you, Mr. Ramzi. (Operator Instructions) I think in the meantime, I'll just ask about your subsidiary in Egypt. And in Egypt, there's quite a bit of growth, which is driven by some public sector projects in the country. Now the question is, so where does QNB Egypt sit in terms of its ability to gain market share in this state-led project finance.

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Mr. Ramzi. So the next question is coming from Bloomberg Intelligence, Edmond Christou. Given the expected growth in the credit and private sector in the near term, how do you plan to integrate ESG metrics into operating framework as regional players have been issuing green debt and ESG-linked loans.

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you. So there's another question, ESG-related. So please stay on the line. And the question is on that -- well, the question is from Valentina Stoykova, Barclays Investment Bank. And the question is on debt issuance plans and the ESG initiatives that you're currently working on. Well, in particular, do you plan to commit to net zero targets, Scope 3 emissions reporting or any other social or corporate governance initiatives that you can share with us? And how are these are linked with your issuance plans for this and next year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. OCTOBER 13, 2021 / 9:30AM, QNBK.QA - Q3 2021 Qatar National Bank QPSC Earnings Call Unidentified Company Representative I think on the issuance side, I'll actually allow Mark to answer that because that's really dependent on market conditions. On net zero, we have seen a lot of announcements coming out. And honestly, these are very positive commitments and pledges that we're seeing. I think anything that aligns to Paris Climate Accord is extremely positive news. On net zero, again, I -- from a state perspective, the State of Qatar has recently issued their updated and second national determined contribution. This is a very positive development for the states. And we, as QNB, will actively support them as they try to achieve the targets that they've outlined within this. Mark, I think you can answer...

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Mark. I'll move on to our next question from Andrew Brudenell, Ashmore Investment Management. And the question is about asset growth. So asset growth of 6%, 8% in the future looks low, given the macro outlook overall. The North Field expansion in Qatar and the management's comments of accelerating private investment in Qatar. What would we need to see for growth to be north of 8%?

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Ramzi. I'll move on to the next question from [Nikhil Puthran]. So it seems write-off of Stage 3 loans has been on an increasing trend. Can we see continuity in this going forward?

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Mr. Ramzi. I'll go on to the next question from Maya Bou Kheir, Schroders. Now the question is about the medium-term return on equity for the group. Where do you see your medium-term ROE? And what would be the key driver of the change from the 15% level?

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Mr. Ramzi. Well, we appear to have no further questions at this time in the queue. I think on this note, I would like to thank everyone for their participation in today's conference call. And I would like to thank the entire management team of Qatar National Bank for their insights.

Question: Aybek Islamov - HSBC, Research Division - Analyst : Thank you, Mr. Ramzi.