Earnings call transcript: QNB Q1 2025 sees profit growth, stock steady

Qatar National Bank (QNB), with a market capitalization of USD 40.3 billion, reported its financial results for the first quarter of 2025, showcasing a solid performance with a 3% year-on-year increase in net profit, reaching CAD 4.3 billion (USD 1.2 billion). The bank’s revenue reached CAD 11 billion (USD 3 billion), reflecting a 6% growth. The bank maintains an attractive dividend yield of 8.57% and has maintained dividend payments for 22 consecutive years. Despite these positive results, QNB’s stock showed a modest pre-market increase of 0.93%, with shares priced at 15.25 USD. The earnings per share (EPS) came in at 0.43 USD, with the revenue totaling 10.97 billion USD.

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Key Takeaways

• QNB achieved a 3% growth in net profit year-on-year.
• The bank’s operating income increased by 6%.
• Stock price saw a slight rise of 0.93% in pre-market trading.
• Total assets grew by 7% to CAD 1.324 trillion (USD 364 billion).
• The cost to income ratio remains one of the best in the EMEA region at 22.7%.

Company Performance

QNB’s first-quarter results reflect a steady growth trajectory, with significant increases in both net profit and operating income. Trading at a P/E ratio of 9.32x and demonstrating low volatility with a beta of 0.27, the bank’s financial health is bolstered by a 7% rise in total assets and a 9% increase in loans and advances, highlighting its strong market position. According to InvestingPro’s analysis, QNB is currently trading below its Fair Value, suggesting potential upside opportunity. Despite global economic challenges, QNB’s strategic focus on economic diversification and expansion projects, such as the Northfield LNG expansion, continues to drive its growth.

Financial Highlights

• Net Profit: CAD 4.3 billion (USD 1.2 billion), 3% growth year-on-year
• Operating Income: CAD 11 billion (USD 3 billion), 6% increase
• Total Assets: CAD 1.324 trillion (USD 364 billion), 7% growth
• Loans and Advances: CAD 947 billion (USD 260 billion), 9% increase
• Customer Deposits: CAD 930 billion (USD 255.6 billion), 6% growth

Earnings vs. Forecast

QNB’s reported EPS of 0.43 USD met market expectations, with revenue reaching 10.97 billion USD. This performance aligns with analyst forecasts, maintaining the bank’s reputation for consistent delivery on financial targets.

Market Reaction

Following the earnings announcement, QNB’s stock saw a modest pre-market increase of 0.93%, with shares priced at 15.25 USD. This movement reflects a steady investor confidence, supported by the bank’s robust financial performance and strategic initiatives. InvestingPro’s Financial Health Score of 2.12 indicates fair overall condition, with particularly strong scores in profitability (2.96) and growth (2.47). The stock remains within its 52-week range, with a high of 17.8 USD and a low of 12.83 USD.

Get access to detailed valuation metrics and 10+ additional ProTips about QNB through the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Outlook & Guidance

Looking ahead, QNB has upgraded its profitability guidance, anticipating a 10-12% growth before global minimum taxes and a 2-4% growth after taxes. The bank expects balance sheet growth of 5-7% and projects a cost of risk between 80-90 basis points. Additionally, QNB foresees two 25 basis point rate cuts in the latter half of 2025, which could influence its net interest margin and overall profitability.

Executive Commentary

Mark Abraham, Group Treasury Trading, emphasized Qatar’s strategic projects, stating, "Qatar continues to lay the foundations for GDP growth over the medium and long term through new projects." The CFO highlighted the bank’s strong performance in Turkey, noting, "We are upgrading the profitability guidance primarily because of strong performance from our Turkish franchise on net interest income."

Risks and Challenges

• Global Minimum Taxes: The introduction of global minimum taxes could impact profitability.
• Interest Rate Changes: Expected rate cuts may affect net interest margins.
• Economic Conditions: Global economic volatility could influence asset quality and loan growth.
• Regulatory Changes: Potential regulatory shifts in key markets could pose compliance challenges.

Q&A

During the earnings call, analysts inquired about the impact of global minimum taxes and the dynamics of margins in Qatar and Turkey. The bank addressed loan growth and deposit strategies, providing clarity on its dividend payout ratio approach.

Full transcript - QNB (QNBK) Q1 2025:

Operator: Hello, and welcome, everyone, to the QMB’s Q1 ’twenty five Earnings Call. My name is Becky, and I’ll be your operator today.

If you have joined us online, you can submit a text question via the Q and A button on your browser. I will now hand over to your host, Janani Varmadeva, to begin. Please go ahead.

Janani Varmadeva, Host, Farquhar Capital: Thank you, Becky. Good morning, good afternoon, everyone, and thank you for joining us today. This is Janani Varmadeva, and on behalf of Farquhar Capital, I’m pleased to welcome you to Qatar National Bank’s Q1 twenty twenty five Earnings Conference Call. I have with me here today from Q and D management, Mr. Ramzi Mare, the Group’s Chief Financial Officer Mr.

Nour Mohammed Al Naymi, Group Treasury and Financial Institutions and Mr. Mark Abraham, Group Treasury Trading. Without further ado, I’ll now turn the call over to Mark. Over to you.

Mark Abraham, Group Treasury Trading, Qatar National Bank: Thank you very much, Denali and Arkham Capital, for hosting our call today. Before we begin this call, it is customary to remind everybody that this call is for investors and analysts only, and media should disconnect now. We will begin by giving a brief overview of the global and regional macroeconomic backdrop. We will then present briefly the quarterly financial results of the bank. Finally, we will open the floor to questions and answers.

Global economy is set to expand moderately in 2025, growing at a similar pace as last year and within its long term trend of around 3%. The macroeconomic environment is volatile on the back of significant increases in U. S. Policy uncertainty and existing geopolitical challenges. Central banks and advanced economies have front loaded a significant process of monetary easing, and more is expected as policy rates are taken from restrictive territory towards neutral levels by the end of this year.

Moderate oil and gas prices continue to support fiscal and external revenues in the GCC, resulting in either twin surpluses or the execution of large investment projects. This adds to the momentum created by structural reforms. Amid commodity price pressures, non oil GDP growth in the GCC remains favorable, mainly based upon population growth, a large pipeline of CapEx projects and robust FDI inflows. With total exports of USD 128,000,000,000 and central government revenues of USD 59,000,000,000 over the last four quarters, Qatar benefits from a robust fiscal and current account position. Domestic activity has also been strong and gained further momentum, with an expansion of 2.4% in GDP and 3.4% of non hydrocarbon GDP in 2024.

This was driven by dynamic sectors such as wholesale and retail trade, accommodation and food services and financial services. Importantly, Qatar continues to lay the foundations for GDP growth over the medium and long term through new projects. On the hydrocarbon front, tailwinds for investments in increasing gas production will drive economic growth, with eight new LNG trains planned under the flagship Northfield expansion project, one of the largest capital expenditure projects in the region and industrial engineering projects in the world. These investments to be executed in three phases are expected to increase Qatar’s LNG production by 85% to 142,000,000 tonnes per annum by 02/1930. Qatar is also ramping up efforts to diversify its economy and increase private sector engagement.

On the non hydrocarbon front, the country further consolidated its position as a regional and international hub for business, investments, commerce, tourism and culture. This accelerated the execution of Qatar National Vision 02/1930 and assisted in the ongoing transition towards a knowledge based economy. The Northfield expansion project will also include an equivalent expansion of Qatar’s refining, downstream and petrochemical capacity. Positive spillovers from these projects will combine with diversification efforts and structural reforms to boost economic activity and spending in the broader manufacturing and services sectors. GDP growth is expected to remain strong and then accelerate in the coming years, projected at 2.4% in 2025, ’5 point ’2 percent in 2026 and seven point nine percent in 2027.

As a result, the economic expansion continues in Qatar, while the banking sector is resilient and healthy, presenting significant growth, ample liquidity, adequate levels of capitalization, high asset quality and robust profitability. I will now move on to Q and B’s financial results for the three months ending 03/31/2025. Key financial results were as follows: net profit was CAD 4,300,000,000.0 or USD 1,200,000,000.0, growth of 3% compared to last year. The growth in net profit was partially impacted due to global minimum taxes effective in 2025. Excluding the impact of these taxes, on a like for like basis, net profit is actually up 11%.

Robust revenue growth resulted in an increase in operating income to CAD 11,000,000,000 or USD 3,000,000,000, up 6%, demonstrating QMB Group’s success in maintaining growth across the full range of revenue sources. QMB’s cost to income ratio remained strong at 22.7, which is one of the best ratios among large financial institutions in the EMEA region. Total assets were at CAD1.324 trillion or USD $364,000,000,000, up by 7% from the same period last year. Loans and advances reached CAD947 billion or USD260 billion, up 9%. UMB Group remained successful in attracting deposits, which resulted in an increase in customer funding by 6% from March 2024 to reach CLP $930,000,000,000 or USD 255,600,000,000.0.

The group’s regulatory loan to deposit ratio remained stable at 96.5%. QMB Group’s ratio of non performing loans to gross loans reduced to 2.8%, reflecting the high quality of the group’s loan book and the effective management of credit risk. In addition, the coverage ratio on Stage three loans remains at 100. Total equity increased to CLP114.1 billion, up by 8% from March 2024. The bank’s capital adequacy ratio at 19.3% is comfortably higher than both QCB and the latest Basel III reform requirements.

In relation to the QMB buyback program, QMB has completed buyback of approximately 91,400,000.0 shares at a cost of Cattariyas one point five billion dollars up to 03/31/2025. The buyback execution is in progress. We will now turn to Q and A. Thank you.

Operator: Our first question comes from Jon Peace from UBS. Your line is now open. Please go ahead.

Jon Peace, Analyst, UBS: Hi. Thank you for taking the question. 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? What impact that might have on your net interest income? Thank you.

CFO, Qatar National Bank: Yes. Hi, John. 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 taxes, we now expect the 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 to 90 bps, margin of two sixty to two sixty five 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 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 hundred bps decline, the model predicts that if we don’t take any action, our NIMs will decline between 600 to 800,000,000 for the full year impact.

Jon Peace, Analyst, UBS: That’s great. Thank you very much.

Operator: Thank you. Our next question comes from Olga Veselova from Bank of America. Your line is now open. Please go ahead.

Olga Veselova, Analyst, Bank of America: Good day and good morning. Thank you for taking my questions. 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 over quarter.

Could you help us to understand what was domestic only category 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 10 20% to 25%. It was lower in the first quarter, ’18 and a half.

I understand there was probably impact from hyperinflation, but 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. Exactly has changed in your outlook? It’s a quite material change of the full year guidance. Thank you.

CFO, Qatar National Bank: Thank you, Olga for the questions. First, one by one, margin sequentially went down from it was marginally lower. The primary reason was the recent in the cutter 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 end of last year Q3, Q4, that was the reason why margin went down in Qatar, which it was more than offset by 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, 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, 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 a Turkish franchise. They 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.

Olga Veselova, Analyst, Bank of America: And these changes in Turkey, are they based on first quarter results? So you incorporate potential changes in the rest of the year given the recent turbulence in Turkey?

CFO, Qatar National Bank: It is based on what we know as of now, including everything that has happened.

Olga Veselova, Analyst, Bank of America: Fantastic. Thank you so much. Thank you.

Operator: Thank you. Our next question comes from Salon Skirtslada, and it reads, hello. Thanks for the call. Could you please reiterate your cost of risk guidance for 2025? Additionally, could you provide an update on growth and asset quality for Turkey and Egypt?

CFO, Qatar National Bank: Our cost of risk guidance for the full growth continues to be 80 to 90 basis points. We are at around midpoint of this guidance in Q1. In terms of the Turkey asset growth, we expect them the loans growth to be around 32%, thirty five % in local terms.

Operator: Thank you. Amazing. The next question is from Nikhil Poutin from Commercial Bank of Qatar. And the question reads, overall, it looks like the overall Turkish banking sector loans grew at a higher rate during q one twenty twenty five as against the finance bank loan growth. This is against what we normally see as the trend of finance bank doing better than the overall banking sector in the past.

So can we know the reason behind the slowdown?

CFO, Qatar National Bank: I can’t think of a very specific reason. We are about a 5% market share bank. Obviously, there will be differences in products and services, but we don’t have any further details at this time.

Operator: Thank you. We currently have no further questions. So I will hand back to the speaker team for closing remarks. Sorry. We have another question from Olga Veselova from Bank of America.

Your line is now open. Please go ahead.

Olga Veselova, Analyst, Bank of America: Thank you. 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?

Thank you.

CFO, Qatar National Bank: Although you’re right, there was sequential 4% growth in q one, 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 have we had very strong performance in Q1.

Operator: Thank you. We have another question from John Peace from UBS. Your line is now open. Please go ahead.

Jon Peace, Analyst, UBS: Thank you. 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?

Thank you.

CFO, Qatar National Bank: John, usually Q1 has higher volumes, so pace picks up, but we would expect to finish in the next two to three quarters. And the decision for it will be Board’s decision at the once the execution of this complete current program finishes. Thank you.

Operator: Thank you. As a reminder to ask a question, it’s star followed by one on your telephone keypad, Our next question is from Andy Brudenell from Ashmore. Your line is now open. Please go ahead.

Andy Brudenell, Analyst, Ashmore: Thanks very much. Yes, 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 have been higher. Obviously, there’s been subsidiary inflation in Egypt, Turkey.

CFO, Qatar National Bank: Could you just give me a sense, please, of

Andy Brudenell, Analyst, Ashmore: 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? Thank you.

CFO, Qatar National Bank: 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 coming in, still coming in from our Turkish franchise. So we yet the year the quarter on quarter numbers are down and Turkey is managing its expenses very well in the current situation. But obviously it’s a hyperinflationary economy and we cannot deny the fact.

But having said it, we try to control it as much as possible, knowing what exactly are limitations of that franchise. In our core business, the costs which is Qatar and other international branches, the costs are quite well controlled and they are growing at very low single digits.

Andy Brudenell, Analyst, Ashmore: Okay. Yep. Great. Thank you.

Operator: Thank you. Our next question comes from Abhinav Sinha from Leisha Bank, and it reads, the impact of tax was CHF $325,000,000. So for the full year, would it be CHF 1,300,000,000.0?

CFO, Qatar National Bank: Assuming profitability remains the same, of course, but variation between quarters and profitability is always there.

Operator: Thank you. Our next question is from Nikhil Poutain from Commercial Bank of Qatar, and it reads, can we know your deposits in euro currency exposure by the end of Q1 twenty twenty five?

CFO, Qatar National Bank: We don’t have currency as exposure of deposits but we can we have the full balance sheet by currency in our annual financials and you can have a look over there as to how much our exposure by each, by assets and liabilities in each currency.

Operator: Thank you. Our next question is from Salome Skertslada from Bloomberg and reads, how would rate hike in Turkey affects groups in groups NIM?

CFO, Qatar National Bank: Rate hikes on its own of course have a negative impact on, especially Turkish franchise because liabilities price much more quickly and assets reprice late but our expectation is and our Turkish franchise expectation is that the rate hike which had towards the March was not because of inflation and the factors and at some point in time, this rate hike is going to reverse probably in second half of the year.

Operator: Thank you. Our next question is from Rahul Rajlan from Bank of America, and it reads, is there any update on the dividend distribution for 2025 given the upgraded net profit guidance? Will the payout ratio go up?

CFO, Qatar National Bank: There is no change in our payout ratio guidance. It continues to be 35% to 40%.

Operator: Thank you. And our next question is from Marad Ansari from GTN Middle East and reads, deposit growth was strong in q one twenty five mainly on demand deposit growth. Can you please give some detail on key drivers of this growth?

CFO, Qatar National Bank: Like loan growth, it was quite broad based. And if you recall towards the end of the last year, we talked about that we were very, very selective in deposits because we wanted to be very, very efficient in costs and some of that some of those deposits actually came back which resulted in slightly higher growth than normal. I would like to just go back to the question on the dividends. If the tax impact as we as we’ve always talked about, if the tax impact is going to be material on the profitability, then we will basically add back the taxes to compute the payout ratio.

Operator: Perfect. Thank you. As a reminder, if you wanted to ask a question, that is star followed by one on your telephone keypad, or you can submit a question online via the text box on your browser. We currently have no further questions, so I will hand back. Sorry.

We have another question reading, is there any update to the loan growth guidance for this year? Are trading profits largely driven by lira and Egyptian pound’s mortality? What is a fair expectation for the through the cycle level of contribution from the trading desk?

CFO, Qatar National Bank: Loan growth guidance as we have stated at the start of the call continues to be the same. Trading profits are principally driven by client transactions. Yes, there are some positions but the growth principally comes from the client transactions and there was not much volatility on an overall basis in, TRY and EGP compared to previous quarters. Can you repeat the third question?

Operator: Yep. The third question was what is a fair expectation for the through the cycle level of contribution from the trading desk?

CFO, Qatar National Bank: If you can take the q one number, and that’s more representative of what’s client flow transactions during the quarters during the period.

Operator: Thank you. Our next question reads, did the management have been aggressive in hyperinflation accounting for any future contingencies during Q1 twenty twenty five?

CFO, Qatar National Bank: We there is no aggressive or passive posture in hyperinflation accounting. It’s simply a formula that needs to be followed, and that is what we have followed, as always during this quarter as well.

Operator: Thank you. Our next question is from Rahul Raojan from Bank of America and it reads, could you please repeat your comment on adding back the higher taxes while computing the dividend payout ratio? Do you mean to say that the dividend payout ratio guidance is on profit excluding the higher taxes?

CFO, Qatar National Bank: See, when we had the when we initially were contemplating about taxes and we we take this discussion last year, our view was if our profitability is significantly impacted because of new global minimum taxes, we are going to add back the impact of taxes to the profits and then compare payout ratio. So yes, your readout is correct. But again, operative condition is if our profitability is significantly impacted by global minimum taxes.

Operator: Perfect. Thank you. As a reminder to ask a question, it is star followed by one on your keypad, or you can submit a question via the text box on your browser. We currently have no further questions, so I’ll hand back to the speaker team for closing remarks.

Mark Abraham, Group Treasury Trading, Qatar National Bank: Thank you very much indeed, everybody, for taking the time for Q and B today and us sharing our Q1 results with you. We look forward to speaking to you again in three months’ time, and I wish everybody a very good day. Thank you.

Operator: Thank you for joining today’s call. You may now disconnect your lines.

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