Hello and welcome to the Qatar Islamic Bank conference call. Please note that this call is being recorded.

I will now turn the call over to our moderator, Shahan Keushgerian. Please go ahead.

Thank you. Hello everyone.

This is Shahan from QNBFS. I want to welcome you to QIB's 4Q and fiscal year 2025 financial results conference call.

On this call from management, we have Gourang Himani, the bank's CFO; Vinay Balakrishnan, Head of Business Reporting and Budgeting, and Investor Relations Officer. As usual, we will conduct this call with first management reviewing the company's results, followed by a Q&A session.

I will turn the call over now to Vinay. Please go ahead.

Happy new year and good good day, everybody. This is Vinay here, and thank you for joining the Qatar Islamic Bank's 2025 annual results call.

Qatar Islamic Bank yesterday announced financial results for the fiscal year ended 31st December 2025. Net profit attributable to the shareholders reached Qatari riyals 4,835 million for the fiscal year 2025 compared to Qatari riyals 4,605 million for the year 2024, marking an increase of 5% over the last year.

The basic earning basic earning per share for the year ended for the year 2025 is Qatari riyals 1.95 compared to Qatari riyals 1.86 for the previous year. QIB's board of directors have proposed an additional cash dividend distribution to shareholders of Qatari riyals 0.5 per share, that is 50% of the bank's nominal share value.

After considering the interim dividend of Qatari riyals 0.4 per share, the total cash dividend for the year is Qatari riyals 0.9 per share, which represents an increase of 12.5% compared to the previous year's share of dividend of Qatari riyals 0.8. The proposed dividends are subject to approval by the Qatar Central Bank and QIB's General Assembly.

The total assets of the bank now stand at Qatari riyals 221.1 billion as of 31st December 2025 compared to Qatari riyals 200.8 billion as of 31st December 2024, representing a growth of 10.1%. The growth drivers were from financing and investing activities.

The financing assets have now reached Qatari riyals 138.5 billion, having grown 10.5% compared to last year. While investment securities have now reached Qatari riyals 60.2 billion, that is up 13.7% against December 2024.

Customer deposits at the same point of time now stand at Qatari riyals 142.7 billion as of 31st December 2025, with the financing-to-deposit ratio at 97%, which remains below the industry average, reflecting the bank's strong liquidity position. The net financing margin for the year appeared by financing yields less cost of deposit was stable at 3.5%.

Net fee and commission income for the year ended 31st December 2025 was Qatari riyals 904 million, up by 4.2% as compared to 2024, which continues to reflect the bank's healthy core operating and banking services activities. The bank continues to strive to operate improve efficiency through digitization and automation, supported by efficient cost management, helping it to contain its annual operating expenses at Qatari riyals 1.08 billion, which is 6% lower than last year, primarily due to the impact of deconsolidation of a subsidiary, and thereby lowering the cost-to-income ratio to 16.3%, which continues to remain the lowest in the Qatari banking sector.

The bank has taken advantage of the good operating performance and and has continued to build total impairment provisions of Qatari riyals 708.6 million. The bank was also able to improve its stage 2 coverage ratio to 9% against 8.3% as at 31st December 2024.

Stage 3 provision coverage has been maintained at 95%, and stage 1 coverage ratio stands at 3.04%, which is well above the industry average. These actions taken by the bank reflect the bank's strong risk management framework as well as the conservative provisioning policy.

QIB was also able to reduce the ratio of non-performing financing assets to total fine performing assets to around 1.6% as of 31st December 2025. These results demonstrate the bank's ability to generate strong, stable, and sustainable profitability for its shareholders with the return on average equity of 16.6% and a return on average assets of 2.3%.

QIB continues to remain successful in maintaining strong capital positions and at the same time improved dividends and generate strong return on equity to its shareholders. The total shareholders' equity has now reached Qatari riyals 29.6 billion, an increase of 9.1% compared to 31st December 2024, improving the total capital adequacy as as per Basel III guidelines from 20.9% to 22.2%, which is well above the minimum regulatory requirements.

In the fourth quarter of 2025, the bank moved its head office to a brand-new premises at QIB Towers in West Bay, Doha. The bank has continued to advance its digital transformation by launching new mobile banking features and enhancing our customer experience across all channels.

Having taken through the key highlights of the financials, we can now go to the Q&A session. I'll hand it over to Shahan.

Thank you.

Thank you, Vinay. We can now go to the Q&A session, please.

We will now begin the question-and-answer session. If you would like to ask a question at this time, just press star followed by the number one on your telephone keypad.

Our first question comes from the line of Chiro Ghosh with SICO. Chiro, please go ahead.

Hi, this is Chiro Ghosh from SICO Bahrain. I have three questions.

The first one is on the margin side of it. It looks like that the fourth quarter margin was slightly weaker than the third quarter, but if you remind in third-quarter conference call, you were saying that NIM seems to have stabilized.

If you can give some color why deteriorated and how should we see it panning out towards the first half of 2026, that's on the NIM. Second one is on the fee income.

Your loan growth was quite commendable, quite strong, but the fee income on fourth quarter perhaps did not reflect something similar. Was it a quarterly blip, or how should we see that?

The third is the asset quality undoubtedly has further improved quite strongly. Just want to understand which sector led to the decline in non-performing.

These are my three questions.

Thanks, Chiro. Good morning, everybody, and happy new year to all of you.

This is Gourang Himani, the CFO. I'll take one question at a time, though a lot of them are quite related.

Yes, when you say, Chiro, when the margins are lower, yes, if you do a arithmetical calculation, the margins will appear to be lower due to couple of reasons. Is a lot of assets booking were done at the end of the year, which really skews up the averages when you take the averages.

However, more importantly, a large part of the growth, in fact almost all the growth in Q4 financing is coming from, basically, more related to accounting rather than real growth in the real growth in the financing book. It's basically acceptances that the bank have taken against certain deposits have gone up by roughly around 6 billion.

These are non-remunerating asset. The corresponding leg of this asset is sitting in the other liabilities, which you will also see has gone up by 6 billion.

If you take that out, you will see that the margins have really not moved significantly. They have dropped slightly, but that's also due to the fact that a bit of the timing issue in terms of the repricing of the rate cuts that happened in Q4.

As I also mentioned earlier, is late booking of assets in Q4. Fee income, as I said, again while you can believe that fee income should follow the financing book, but I just explained to you on that one that it has got not much to do with the fact that this is not a real financing asset, but more of an accounting of acceptances.

In terms of asset quality, I think our asset quality has been fairly stable. While the ratio has dropped, that's predominantly because of the fact that the asset book has gone up.

If you look at it on the absolute numbers point of view, our NPLs have remained flat almost throughout the year at around 2.4 2.5 billion riyals, there's been hardly any net new NPL generation. There was some new NPLs, but then we had some decent recoveries in the year as well, overall our non-performing assets have really been fairly flat.

A large part of the drop in the non-performing assets ratio is purely because the base has gone up while absolute levels have remained almost the same. Have I answered your questions,

Chirag? No, it did.

Just a small follow-up. The acceptances, please help me understand.

How does this contribute, because if it's not going to yeah?

Acceptances, these have been more that we have been successful in generating some long-term funding. As a guarantee to the depositor, we have done some acceptances for it, which basically, under the accounting standards, have to be shown under financing and the corresponding leg is to be in the other liabilities.

That's what contributes on the both sides of the balance sheet.

To summarize, it's the same reason why NIM is looking weaker, same reason fee is weaker, and same reason NPL ratio has come down, right, basically? To summarize.

NPL ratio has come down because of overall increase in the assets, which is including the acceptances as well as the growth in the assets that has happened for the full year. I'm not comparing quarter to quarter, but I'm just saying if you take the full year, quarter to quarter, yes, but full year is basically you have growth in the financing plus acceptance while the absolute level of NPF have remained flat.

Perfect. Thank you.

That's all from my side.

Your next question comes from the line of Jon Peace with UBS. John, please go ahead.

Yes. Thank you very much.

First question, please, is do you have any elements of guidance for 2026, whether it's financing growth, or margin, or cost of risk, et cetera? Second question, please, is just your capital ratios are extremely strong relative to your balance sheet growth.

How did you think about sizing the dividend for this year? I know on some previous calls, we've discussed possibility of a buyback.

Is that something that's featured at all in your discussions? Then finally, just a couple of real technical ones.

You give us your net margin on financing. Could you give us your all-in margin, including on the investments for 2025?

Just in terms of the presentation of the numbers, I know at the 9-month stage, you had the discontinued activities line. I understand that QInvest is now in associates.

Just for comparability between the 9-month figures and the full-year figures, should we move that discontinued line into associates and then it's comparable? Thank you.

Going on the guidance side of it, I think we believe that 2026 the financing book would grow again in the range of 5% to 6%. If you look at it, that's the guidance we gave for this year, and if you take out the effect of acceptances, which I was talking about, 6 billion, we ended up around the same growth range of about 5.4 5.3%, 5.4%.

Our guidance for 2026 also remains very similar. We believe that 5% to 6% is a fair medium-term growth range.

We'll have to see what is the 2027 onwards. Maybe the impact could be different because of once the North Field expansion comes in and we see how the government injects the incremental revenue into the system.

That could provide a further boost to the economy and the domestic growth, but overall we believe that our guidance at this point of time for next year is financing book growing by 5% to 6%. NIMs, we expect the NIMs to remain overall around the same level.

Maybe what we have seen is that the funding side of it, especially on the deposit side, have remained a bit sticky. I think, especially for the fourth quarter, I think it's a combination of the timing impact, and usually what we have seen is that corporates take advantage of the fact that the banks are willing to pay a slightly higher on Q4, so that's the reason why the Q4 cost of deposits tend to be slightly higher than normalized one, if I could say.

We believe NIMs would be more or less the same, but maybe a couple of basis points drop, but nothing very significant that we are expecting. On the cost of risk side, as I said, we've been saying for quite some time, and if you have seen even the results of this year as well, cost of risk for our case, we are very well-provided on a need basis.

If you look at it, even last year, majority of our cost of risk was allocated to stage 1. We did a significant downgrade in Q4 of 2024 to really allocate more to stage 3.

In 2025, our net NPL generation was actually minor, slightly negative, but still so we didn't have any much. From the need and we are very well-provided.

We are 95% covered on stage 3. Stage 2 coverage has been improved to 9%.

The stage 1 coverage is at 3%, but if you take out the acceptances, it will go up to 3.2%. Overall, from the need-based perspective, the need remains low.

However, we continue to, as we have been doing, we continue to review how the operating performances are, and if there is an ability to let's say, allocate to provisions, we do. I think if you look at it, 2025 is a very classic example of how our conservative risk management policy helped us.

We were able to absorb the entire Pillar 2 tax-related impact under the other provisions without really having any major impact in terms of our provisioning requirement or tax requirement. I think our prudent conservative policies have allowed us, and I think we will continue to follow the same.

On a need basis, I have really very little guidance to give. At this point of time, our asset quality remains to look strong, and have enough buffers under stage 1, et cetera.

We have room to absorb additional asset quality challenges from our existing coverages. However, it will all be depending on how the operating performance pans out.

Going to the second question on the capital ratios. Yes, I think if you would notice that we have already improved our dividend from 43 payout ratios as a dividend per share as a percentage of earnings per share from 43% last year to 46%, overall 12% increase in the dividend payout.

There is a room to pay out more. However, it's the board which has the prerogative to take the decision.

Again, we had provided them multiple scenarios, and they chose what they thought was the most optimal one from the bank's perspective. In terms of the buyback, as of now, there is nothing which the board has formally decided that can be shared with at any point of time.

However, the board is cognizant of the fact that we are very well-capitalized, and then there is a room to support our investors. However, relevant decisions will be taken at the right point of time and shared with the market if there is anything to share on the buyback front, but nothing I have at this point of time.

In terms of your overall margins that you talked about rather than taking investments and everything, I think it is in the range of about 2.93%, 9 93%, 94% for the full year. If you take all the investments and you take all the cost of funding, including sukuks and the bank borrowings and everything, that it is around 2.93 94% range.

I don't have the exact number, but that's what is there in the back of my mind at this point of time. Okay?

In terms of the 9-month, yes, you are right. The fact that on the classification of QInvest's share, in order to do a fair comparison, yes, you can move the discontinued operation numbers to associate number to get a fair comparison in terms of what is the thing.

The fact that it became an associate effective beginning of the year, that's the reason why everything has been moved to associate in the full-year financial statements. Did I answer your questions, John?

Yes, perfect. Thank you very much.

Thank you.

Your next question comes from the line of Adnan Farooq with Jadwa Investment. Adnan, please go ahead.

Hi, thank you for the presentation, the call. I just have a couple of questions.

One just to clarify on this QInvest movements. In the 9 months, you had loss from discontinued operations of around 40 million.

What you are telling us is the best way to look at it is to adjust it with the year-end member of loss from associate or profit from associates. Is that correct understanding?

Yes.

The second, just wanted another clarification on the acceptances that you mentioned. What sort of tenor do these have?

These are long-term ones, because these are related to longer-term deposits. They are all in the range of 3 to 4 years maturity.

Basically, your NIMs and all these ratios that you answer to Chiro basically will remain impacted by these for the foreseeable future.

Yes, at least for next couple of years, I see them remaining on the balance sheet.

Great. Thank you so much and best of luck.

Your next question comes from the line of Dan Mikhaylov with Verdant Asset Management. Dan, please go ahead.

Hi Gourang and Vinay. Congratulations on the results.

I just had two questions on the implications of the move of QInvest to associates. First of them, kind of what is the capital charge arising from that?

The second one is that, if I'm not mistaken, you've booked about half a billion Qatari riyals of tax provisions in relation to QInvest, should QInvest not have been sold, you'd have had to incur a higher tax charge. Would you be looking to reverse these provisions in 2026?

Answering to the first question on the capital charge implication related to QInvest. We had done our analysis, and one of the key reasons of moving QInvest away was not only from the tax point of view, but also from the CAR point of view.

It was a positive contribution for multiple reasons. Is that there are certain risk-weight charges and some deductions that we were obliged to take because of the nature of business which QInvest was in.

Currently, now as an associate, it is taken at a 250% risk weight. However, on a net-net basis, it did positive contribution in terms of our CAR rather than having a negative implication.

In terms of the second question related to tax provision, it is 540 million as we have mentioned in our financial statements. Unfortunately, the GTA has not yet published the executive guidelines, and we believe it is prudent that we retain them.

We evaluate once the executive regulations are formally published, we do an assessment in detail in terms of what is the implication. Then yes, it is available either to be reversed or to be utilized for any other purposes.

However, we believe that we have met the requirements of the transition rules that are available, but given the fact that we had the ability to be able to take the conservative approach, which the board and the management has been taking on a consistent basis on various aspects, whether it be asset quality or any other things, we continue to do the same. At this point of time, it remains a liability.

We'll see and evaluate as to what this liability translates to once the final executive regulations are published and the full impact analysis is done.

Do you have a rough timeline for when you expect those guidelines to be published? Is that a Q1 '26, Q2 '26, second half of the year?

I have no clue on this one, because that's something that is beyond our prerogative. Given a choice, we would have loved to have it before the end of the year so we would have had more clarity.

However, we are where we are.

Understood. Thank you.

Your next question comes from the line of Andrew Brudenell with Ashmore. Andrew, please go ahead.

Hi there. Thanks very much.

[unclear] quite a lot has been answered, but maybe if we could just talk about the real interest-earning asset growth. You've got this 5% to 6 5% to 6% growth target which you essentially hit this year as well.

Obviously that's picking up, and you're not including the North Field expansion until, as you say, you see where that capital goes. What are the areas you're seeing driving credit demand, which customer segments and then which sort of corporate sectors, how much is government, where are you seeing the interest in credit demand, please?

If I break down the financing book growth for 2025, we almost have roughly 3 billion coming from the government side. A lot of it was a long-term one, these are more project financing, et cetera.

We had personal banking, which is our strength as an Islamic bank, that has been one of the key contributors. That grew by almost roughly 3.3 billion.

Then we had a bit of growth in the real estate sector, but what we saw, some reductions coming in from NBFI's and commercial sectors that we saw that were reduction. Overall, we see businesses growing in the which are the main key areas in the government.

As I said, main three areas, once the government starts various projects, et cetera, and they come in as a part of North Field expansion driven, let's say, revenue-driven, I would say, once the revenues come in, I think the government will be embarking on more projects, some inside Qatar, some outside Qatar, where banks will have an opportunity to participate. Again, personal banking will again continue to remain one of the key sectors, and we also expect further growth to come from services sector and some of the industries which are hydrocarbon-related industries.

These are the primary sectors that we believe the growth will come from.

Thanks. Presumably, the North Field expansions would be more of a 2027 story in terms of credit demand

[unclear]? Exactly.

That's what I said. That's why I said for this year, that's why we put 5% to 6%.

For 2027, we'll have to wait and watch how does the North Field expansion revenue get allocated by the government in terms of the share of domestic versus their international investments, et cetera.

Yeah. Thank you.

Then just one

We just lost connection with the previous question. Let's go to the next.

Our next question comes from the line of Bijoy Joy with QIC. Bijoy, please go ahead.

Hi, thank you Gourang and Vinay. Thank you for the call.

My question is on asset quality. See, given you are adequately provisioned, and you have mentioned that there have been some recoveries, can we expect the recoveries to continue, or how do you see the trend for this year?

See, in general, we have been following a very conservative policy where we cover 95%, effectively for every $100 we recover, we basically have recoveries of 95. It's a continuous process.

We will continue to see some recoveries as a part of normal process. We had some, I think, '24, '25, both the years have been excellent years in terms of the recoveries.

We continue to remain hopeful in terms of it, but difficult to give you any guidance on what would be the recovery. Overall, we believe our asset quality has been fairly stable and very strong compared to the market, very well-covered, I think we will continue to remain in that zone at least for 2025.

That's what we believe. In 2026.

Thank you. A second question is on the lending growth.

Given you're expecting 5% to 6%, if North Field kicks in, what is your expectation, how much more growth can translate for the private sector banks?

I think I just answered it. I said a lot will depend upon what's the allocation policy of the incremental revenues that the government is going to generate.

Would not like to put any number to it. We would like to have a better guidance.

Sometimes it can be positive or sometimes it could even be negative. They could decide to repay some of the borrowings that they have done from the banking sector, or they could decide to fund new projects.

I think that's a question which is very difficult to answer. We saw after the FIFA, government suddenly started coming and repaying the banking sector, and that really pulled down the public sector credit, and while the private sector credit grew in 2023 2024, but most of it was kind of absorbed or eaten away by the fact that there was a public sector repayment.

We'll have to wait and watch. I would avoid giving any guidance on the impact of that.

Perfect. Thank you.

That's all from my side. Thank you so much.

Our next question comes from the line of Andrew Brudenell again with Ashmore. Andrew, please go ahead.

Hi there. Sorry.

I don't know what happened there. I just wanted to talk a little bit about costs, the opex line, please.

Could you talk a little bit about the trajectory there, it's a bit lower than I was expecting at least. If you could just give us a sense of what the drivers are there, and what you would expect going forwards, given obviously the cost-income ratio is already very low.

Thank you.

Yes, Andrew. I think we take a lot of pride as a bank to be one of the most cost-efficient bank in the region, if not in the world, in terms of if you take any mid-sized bank and above.

I think the focus continues to remain. However, we continue to invest in technology.

If you looked into the Q4, the costs had gone up slightly. That's also partly because of the fact that we moved to our new head office and we started to take depreciation-related impact from the new head office, et cetera.

Overall, we believe that the costs will grow in the range of 5% to 6% per annum, taking into account inflation and other investments that we are doing. However, if the revenues continue to grow around that level, we'll see our cost-to-income ratio around between 16 16.5% to 17%.

We're not expecting any major change in our cost-to-income ratio over the next 1 or 2 years.

Great. Thank you.

Sorry, just one final thing from me. You said the tax provision is 540 million.

I think at the prior quarter, you said it was 233. Where does that sit in the P&L, please?

It sits under the impairment and provisions. I don't know which 233 million you're talking about.

Maybe that's the half-year number that you were talking about somewhere at that point of time.

In my head, it was 9 months. Okay.

You think it's

No, no, not 9-month. It's the half-year.

It was half-year, definitely half-year, not the 9-month number. That

was the half-year.

Yes. It sits under the impairment and total provisions line.

Yeah. Okay.

All right, great. Thank you for that.

Thank you.

Your next question comes from the line of Salome Peradze with Bloomberg. Salome, please go ahead.

Hello and thank you. I have three questions.

The question number one again going back to the capital adequacy and liquidity, which was quite high by end of year compared to the last year. Given you are not considering at this moment any buyback options, could the non-organic growth investments or kind of domestic consolidation be a realistic option for a bank?

The second question is if we see a turn in US policy and there is a case of rate increase actually, what does it mean for your strategy? Does it imply any rebalancing of your balance sheet and the securities portfolio allocation?

If you could give some sensitivity numbers on this. The third one, if you could break down a little bit more your digital strategy, you are mentioning a lot, but it's really hard to quantify.

Do you expect any further investments over the next years? What is the potential savings from the cost side from which kind of activities, from which departments, is it payroll-related, is it process-related?

Thank you.

Okay. On the CAR side, I think I've already mentioned that we've improved our dividend ratios.

There is nothing announced by the board at this point of time in terms of the buyback. CAR remains level of CAR, yes, it does provide us an ability.

However, I don't think so it is a related item. Consolidation is, at any point of time, is reviewed based on what are the synergies and what are the benefits that could happen.

At this point of time, we don't see any immediate opportunity that is available or present in the market that could really happen. In terms of the rate increase, at this point of time, to be very honest, our assumption for 2026 is very fair to say that we are expecting either one cut or maximum two cuts.

We are not incorporating any rate increase at this point of time, and so I think it would be yes, it will be an exercise that we would look at it depending upon how the Fed decisions keep evolving as keep going the year, but 2026, we believe that there is not much room for any rate increase happening at this point of time. In terms of the digital strategy, I think all I mentioned was, and then we have been saying, is that we continue to invest.

It's an ongoing process. The focus remains on various digital channels and various internal processes that get automated.

The impact comes in terms of you are able to service a larger customer base, a larger balance sheet with a similar size and capacity in terms of the people. It's not about getting rid of the people, but trying to say how you better utilize your manpower resources and how you readjust in terms of areas of automation you save and you redirect them in the areas of growth.

It's more about a holistic strategy that comes in. We remain very proud in terms of what we have been doing on the digital space.

We have been fairly recognized by our customers, by the market, by various agencies in terms of what we've been able to offer. We've been able to integrate a lot of features and services compared to what the market does.

Many a times you could have the first-mover advantage, and there could be a catch-up by other player, and in terms of what the offerings are, or other way around, right? Overall, I think it's an important aspect of the customer offering that continues to be there.

Direct translation into specific savings is sometimes very difficult to achieve, but overall if you look at it over the last 5 to 6 years, whether you look at it from the cost-to-income ratio perspective or even the growth in the absolute cost perspective, I think you will find very few banks that have been as cost-efficient as what we have been. Despite the fact that I'm talking about last 5, 6 years, is that's the point of time where we really started going big into our digital strategy.

What we see is we don't open very many new branches, et cetera, then those requirement goes down. Sometimes it's not purely about cost savings, but it's also a large extent about cost avoidance that happens because of your investments in digital strategy.

I see. Thank you so much.

It's very helpful. Just one more thing to specify on the buyback side.

As I remember correctly, during the past calls, you have linked the capital adequacy and capital level with the ratings. Is there any threshold or any internal limits that you would prefer to maintain?

What is the excess buffer that you would be able to use as a buyback or any other strategies? As I said, at this point of time, there's nothing much I want to talk on buyback, because there is nothing specific in the pipeline at this point of time.

In terms of the capital levels, yes, as a management, we believe that we are well-capitalized, we are carrying surplus capital, which allows us the room to distribute more to the shareholders. However, that's purely a board prerogative.

We give them different options, and they've chosen. I think the board has been fairly this for the while the net profit grew by 5%, the dividend payout increased by 12%.

I think you can appreciate that the board is also cognizant of the fact that we are maintaining very high level of capital adequacy. I see.

Thank you very much, Gaurav. Thank you.

Your next question comes from the line of Murad Ansari with EFG Hermes. Murad, please go ahead.

Yes, hi. Good afternoon, Gourang and Vinay.

Thank you for the presentation. First was I just wanted to get an understanding of these acceptances in terms of where they show up in terms of your loan book segmental breakup, if you could just help us understand to understand where

In terms of the products, it sits under the others. In terms of the segment, it sits under the commercial.

You need to Okay?

Great. Thank you.

Now with that, the other thing was your risk density has actually improved, right? Your RWA growth over last year December has just been 1%.

Take the acceptances out, your loan book has grown by about 4 5%, as you said. What has helped that improvement?

Is that mainly a reflection of lending to the GREs, government, or has there been some other efforts to reduce the risk density? Thirdly, on fee income growth, if we look through the subcomponents, over last year, the biggest increase has come in bank services, which is roughly about 17% growth over last year.

I just wanted to understand if there has been any revision in charges that has helped this, or this is business-as-usual kind of improvement that has come through this year? Thank you.

Okay. Fine.

On the first question on Murad, on the RWA, I think it relates to one of the questions that I had answered earlier in terms of QInvest. A lot of QInvest assets were very high RWA consuming assets, overall when we deconsolidated the QInvest, we did get benefit from there in terms of the RWA and the capital adequacy.

Also, as I mentioned, I had mentioned that the almost 3 billion of the growth for this year came from government-related, which is basically zero risk weight. Combination of these factors really show that the RWA has grown at a slower pace compared to the overall asset growth.

Even if you look at investments, the investment growth majority of it is from the State of Qatar sukuk, again, those are zero risk weight. That's how the RWAs growth has been slower compared to the overall balance sheet growth.

In terms of the bank services, I think it's a combination of the fact that on the personal banking side, we continue to generate very decent revenues from the big increase that we have seen from the various services that we offer to the customers, whether it be card product-related services, whether it be related to various other products that we sell to them. Those are the ones that would come in.

On the corporate side, there has been a conscious effort from the part of our wholesale banking team to review the tariff of charges and try to see where there is a potential in terms of ability to charge visa-vis what is the normal market practice and based on the customer behavior. Most of it is coming from a combination of improvement in the business activities as well as in the way we are processing them and the way we are managing those revenue line items.

Your next question comes from the line of Waruna Kumarage with SICO. Waruna, please go ahead.

Hello, hi. Am I audible?

Waruna. Go ahead, please.

Yeah. Just one question, Gourang.

On the personal side, the growth, just want to know whether it's mainly driven by housing, or something else?

It's a combination of all the products that we offer to our customers. Housing is there, but as if you look it in Qatar, predominantly the housing financing is to Qatari population.

Expatriate financing of housing is very very very limited on the consumer side of it. It is both predominantly clean lending that we do against the salaries to our customers as well as from high-net-worth lending that is there in driving this growth predominantly.

All right. That's clear.

Thank you very much, and all the best.

Your next question comes from the line of Adnan Farooq with Jadwa Investment. Adnan, please go ahead.

Hi, just one follow-up. This year, took 700-odd million in provisions, 540 of that was related to the taxes.

I think in the third and fourth quarter, actual credit provisions were reversals. In the past, you have always maintained that the bank is a conservative bank, and as long as you're making good operating profit, you will continue to be cautious and continue to take provisions.

Now this year, although credit provisions were not there, the tax provisions were there. How should we read this going forward, because if I just take out the tax provisions out, which hopefully won't need, I don't see a need for you to keep the cost of risk elevated, or do you think you will remain cautious and prudent and continue what you have done over the past few years?

Again, on the first question to say that you see reversals in Q4, but that's a very normal thing. If if you look if you look in the majority of the reversals, even if you look into last year, our stage 1 we in the in the big- we we as a bank have a kind of approach whereby we take larger part of the provisioning in the beginning of the year, and at that point of time, we predominantly allocate it to stage 1.

If you look at it, in Q1, Q2, we had allocations to stage 1, which got reversed in Q3, Q4, because overall, our our our stage 1 coverage is is definitely much much higher than what the industry average is. In the first quarter, it's just an allocation that we put it out there, and then as you come to the closer to the end of the year, we evaluate how the asset quality has moved, and then we we do the allocation to the relevant stage 2, stage 3, as the case may be.

If you look at this year, effectively almost 160 million has been allocated to stage 2. That was the conscious objective to improve the coverage from 8.3 to 7 to 9%.

Stage 3, as I explained, there's hardly been any NPL generations this year. In fact, there's been a negative NPL marginally, so that's why the net allocation this year for stage 3 required was only 50 million.

Going forward, if there is not much new stage 3 evolution or new new stage 3 generation, the the need for the need for financing provisions would continue to remain low. However, we've seen two years.

Last year, we did do a significant allocation to stage 3 at in the Q4 of last year, but that was again predominantly because the bank had very significant recoveries and we decided to on a in 2024, we decided to conservatively downgrade few customers in in in Q4. Overall, if the asset quality remains good, the need does not remain.

However, as I said, they if if there is a room and if the asset qualities don't deteriorate, we'll evaluate as to what what is what would be the best approach at that point of time. Very difficult for me to give you a guidance, because it is not a need-based at this point of time.

Sure. Thank you.

Thank you.

Our final question comes from the line of Murad Ansari with EFG Hermes. Murad, please go ahead.

Yes, thank you again. Just a follow-up question on your asset quality.

Specifically on stage 2 loans, so that base has been kind of relatively flattish in terms of the absolute amount, it's been around that 18 billion mark since I think mid of 2024 or third quarter 2024. I just wanted to get a sense of is there anything that you're foreseeing that could help or what would it take for this number for the stage 2 loans to shift back into stage 1?

One of your peer banks have had earlier indicated that they're talking to the central bank regarding some of these exposures and they expect them to move back to stage 1 as they normalize. Would it be similar for you?

I just wanted to understand if this number can potentially go down. On a related note, you've achieved your targets or raised coverage on stage 3 exposures, you've allocated more to stage 2 in terms of coverage, you're at 9%, you're comfortable, or would you be also looking to improve this coverage over 2026?

Thank you.

I'll answer the question in reverse order from what you said. Stage 3 95% has been there since quite some time.

That's what we had maintained. We had seen a dip at the end of 2024 because of the big downgrade that we did, but other than that, it was just one quarter.

Other than that, if you look at last couple of years, 2, 3 years, it's been around 95%. Stage 2 coverage, we have been consistently improving there.

In terms of the coverage, I think if you look at the overall coverage, I think you will find a very few bank that have got a especially if you take the excess that is there in stage 1 compared to the market, that corroborates what we have been saying that we remain a very conservative bank. In terms of first question of movement from stage 2 to stage 1, I think, while you need a central bank approval, I don't think so that's what is really the driving factor or the reason why stage 1 or stage 2 are at these levels.

I think at this point of time, there are certain cases that we would continue to like to observe them. We would like to see there are clear indications that we can move them to stage 1.

For us, I think we have a bit more unique problem in terms of we carry excess provisions and we need room to justify. As I was mentioning, I have very little room to allocate in stage 3, if at all anything.

Stage 2 is 9%. Any movement I do from stage 2 to stage 1 would really push up my coverages in stage 1, which are already at very high levels of 3.2%, 3.3% kind of range.

We also are fairly comfortable in the sense is as long as we know that they're not going to migrate to stage 3, we really don't mind even if they are in stage 2. I think the staging is more from the guidance perspective to say whether is more room to go up rather than down, or down other way around.

At this point of time, we are fairly comfortable with what we have classified here and the coverages that we have. If we build more provision, I think we will definitely need to maintain certain stage 2 so that we are able to allocate more, but so it's not something that I would say it has got anything to do with the regulatory approvals.

At this point of time, we are fairly comfortable with our levels.

All right. There's no automatic kind of shift.

It's more of a subjective call from the management's part, yeah.

There is no automatic upgrades. The downgrades are more automatic, driven by QCB guidelines in terms of where we are obliged to in certain cases, while reverse migration from stage 3 to stage 2 or stage 2 to stage 1 requires a lot more judgment and requires a lot more cure period before you see that you want to move up, and also requires an additional central bank approval.

It's more about the first two items that drive rather than if you have a valid reason for them to be moved to stage 1, central bank doesn't object at all.

All right. Thank you so much.

We have new additional question coming from Ashwath P.T. with Goldman Sachs.

Ashwath, please go ahead.

Thank you. Thank you, Gourang.

Thank you, Vinay, for the presentation. I just have one question regarding some of the guidance metrics that you had mentioned earlier.

Perhaps my call dropped earlier. I think I recall you saying 5% to 6% for the loan growth, and you also expect 5% to 6% on the opex side, but maybe I missed on the asset quality and the NIM trajectory.

If you could kindly repeat those, that would be great, please.

As I said, on the asset quality side, I think we've we've we've been around 1. 1.7%, 1.8% range for quite some time, and I think we we continue to see ourselves around that range unless and until something unforeseen event were to happen.

At this point of time, we believe around 1.7%, 1.8% range is is is is the fair level that which we we expect to remain going going forward. On the NIM side, as I said, we we believe that the NIMs would be fairly stable.

We are we our plan is we have projected one rate cut or at best two rate cut, the second rate cut coming at the very end of the year 2026, if at all. Overall, while there could be quarterly variations in terms of our NIMs depending upon the repricing and the timing of the cut, et cetera, but overall, we believe the NIM will be fairly stable or maybe a couple of basis points compression, but that's it, nothing nothing significant.

Thank you very much. Lasting on the fee growth, is there any particular guidance there?

We continue to work towards to say around 7% to 8% growth is what we would love to achieve again. Some of it is also related to how the loan book will grow, but other than loan book growth as well, as you've seen, majority of our growth this year came from the banking services that we continue to work towards to see how we can improve it both on the corporate side as well as on the retail side.

At this point of time, we are looking at about 6%, 7% growth for the fees.

Thank you very much.

There's no further questions at this time. I will now hand it back over to our moderator for closing remarks.

Shahan?

Thank you. There aren't any more calls.

We can wrap up this conference call, and I'd like to thank management for giving us an update on 2025 and the fourth quarter, and we will pick this up again in the first quarter. Thank you very much.

Thank you, everybody. Thank you.

Thank you.

Thank you.

This concludes today's conference call. You may now disconnect.