Qatar First Bank L.L.C. (Public) “QFB” held its Annual General Meeting (AGM) yesterday to discuss the bank’s results and future outlook after releasing financials for the year ended 31 December 2016 and announcing the launch of the second phase of the cost rationalisation plan.
QFB’s Board of Directors, chaired by QFB chairman Abdulla Bin Fahad Bin Ghorab Al Marri, along with shareholders and attendees of the AGM, discussed and approved, the bank’s audited financial results and the performance of the eight full year of operation, and QFB first year as a listed entity on the Qatar Stock Exchange (QSE). The AGM was held at the Le Crillon Ballroom at La Cigale Hotel in Doha – Qatar,
Abdulla Bin Fahad Bin Ghorab Al Marri, QFB’s Chairman, said:
“The year 2016 saw several key economic events that contributed to the stagnation of the global economy. The depreciation of major currencies, the plunge in oil prices, and the many country-specific macroeconomic and extraordinary factors; have all furthered the slowdown of the global economy. Closer to home, the geo-political unrest continues to hamper the growth of the MENA economies. Qatar, despite being one of the best performing economies in the GCC, has faced several challenges.”
“At QFB we were not immune to the prevailing global economic scene. We have recorded losses, the majority of which are unrealized, resulting mainly from the downward revision of the valuations of some of our private equity investments across several markets.” Al Marri added
Despite the write-down of QFB’s investment book, the bank’s total assets didn’t decline and closed at almost QAR 6 billion, mainly driven by the increase from financing assets, which increased by 33%. Moreover, the investment portfolio continued to generate healthy dividends (QAR 13 million). QFB’s Sukuk book continued to generate positive returns close to QAR 30 million. Last but not least, the bank’s income from placement with financial institutions has tripled mainly from cash deployment in Shari’ah compliant money market funds.
As the global investment market continues to go through major challenges since the beginning of 2016, QFB’s private equity portfolio has been negatively impacted by country-specific events mainly in Turkey and the UK. The decrease in the valuation of the bank’s investments reflects the effect of the macroeconomic and extraordinary factors that both countries have been facing. The main impact came from the depreciation of currency, Turkish Lira and British Pound Sterling, against the US Dollar and from the weakness of the real estate sector in the United Kingdom.
QFB’s private equity portfolio had consistently generated significant returns over the last 6 years. The bank’s Turkish investments are still 47% higher than their acquisition price and will continue to grow in sales and profitability and occupy leading positions in their respective industries of Healthcare and Retail. Additionally, QFB’s UK investments are still significantly above their acquisition costs, both in Pounds and Riyals.
Whilst the current volatility in the global markets has impacted the bank’s business, QFB continued to successfully manage its existing portfolio, as well as seeking out new lucrative opportunities. The management hopes that the portfolio will perform well in the years to come.
In line with QFB’s strategy, the bank will continue to seek exits on its existing investment portfolio book with the objective of maximizing value to shareholders and clients at opportune times; and to reinvest the proceeds in lucrative opportunities that will contribute positively to the bank’s returns.
Al Marri continued:
“The major challenges in the global investment market and the downward revision of our private equity investments have resulted in clearly disappointing results. Aside from these results, we continued urging the executive management to execute our strategy and focus on the most lucrative areas. Our aim was to fully match the evolution of the wider region’s investment direction, as well as continue to act as the gateway for investors, while building on our successes in the private equity area.”
QFB’s current portfolio of alternative investments are within various sectors including healthcare, energy, consumer finance, real estate, industrial, retail, luxury, food & beverage; spread across diversified geographies. Since its incorporation, the bank has closed a number of successful transactions across Qatar, Turkey, the United Kingdom, Africa and the MENA region with carrying value of total equity investments (including subsidiaries) of QAR 1.53 billion (31 December 2016). Over the years, the team has successfully exited six investments, in addition to three partial exits, and generated healthy returns to Shareholders with an average IRR of 36%.
Commenting at the AGM, Ziad Makkawi, QFB’s CEO, said:
“2016 witnessed several key economic events, marked by economic volatility and challenges across our target markets, which caused us to record losses, resulting mainly from the downward revision of fair value gains recorded in previous years.”
“Our strategy, going forward, focuses on our role as a trusted advisor, a gateway for investors who wish to tap into innovative, Shari’ah compliant, investment opportunities in local, regional and global markets. QFB will continue to diversify our portfolio, tapping into new and attractive geographical markets. The bank is well positioned to provide capital solutions to growing businesses in the region, utilizing our expertise and network. We look to partner with market leaders, private and institutional investors, attracting third party money with the objective to create value while following international best practice and the highest levels of corporate governance.”
QFB aims to continue building its distribution and placement capability. Investment opportunities and financial solutions are personalized to the goals and risk profile of both individual and corporate clients. To support this initiative, the bank has signed several agreements with internationally recognized players expanding the range of offerings to meet the changing needs of clients across several markets.
Alongside the distribution and placement capability, QFB will continue working with its strategic shareholders and clients, enabling the bank’s team to benefit from the wider network and from access to regional and international markets.
In line with the results, QFB’s management confirms the launch of the second phase of its cost rationalisation plan, originally launched in June 2016. The objective is to continue raising efficiency levels through strict and tight cost cutting measures including strategic reduction to the workforce caused by the consolidation of the placement and distribution capabilities of the bank’s corporate and private banking business lines; which going forward will focus more on fee generating services. The aim is to focus on capitalizing on the bank’s human resources and maximizing their experience to boost performance during the coming years. Moreover, the efficiency action plan will enable accelerating the focus on business lines that are expected to generate income, and hence raise shareholders’ value and enhance profitability levels.
“2016 was a difficult and challenging year for QFB and our shareholders. However, the changes instituted are the necessary first steps in laying the foundations for a successful future. We recognize that there is still a considerable amount of work to be done, but we take comfort in the prospect of new business opportunities after refocusing our efforts on alternative investments. In particular, the combination of capabilities in private equity, real estate, and product structuring solutions; with dedicated origination and placement capacity; will create a business model that we hope to produce genuine growth and profitability for the bank.”
Since the beginning of 2016, QFB has been witnessing strategic achievements marked by listing the bank’s shares on the Qatar Stock exchange, following the approval of the Qatar Financial Markets Authority (QFMA). Following this significant milestone, QFB has leveraged on the in-house and international breadth of investment solutions and structuring capabilities to offer an attractive range of products and services. The bank announced the placement of the ‘Ijarah Aviation Structured Product’ that was met with great enthusiasm by individual and institutional clients. Additionally, the bank’s team of professionals catered clients with a wide range of investment opportunities and innovative financial solutions to grow, manage and protect their wealth and assets. Besides, QFB, after the completion of its second residential project in London, announced offering specialised real estate services to individuals and corporates seeking to add value to their portfolios by owning, occupying and investing in real estate across the world. Last but not least, the bank continued to focus on liquidity optimization through the interbank market and money markets. Also, the team was actively involved in investing and managing the Sukuk book which continued to perform well and growing its private equity deal pipeline.
Al Marri concluded:
“Looking ahead we envision that the global economic backdrop will remain challenging specifically as the GCC region adjusts to low oil prices and slowing economic growth. In spite of these challenges QFB will continue adopting an opportunistic outlook to source viable investment opportunities that surface in such market conditions in order to generate sound returns for the Bank, our clients and shareholders.”
Al Marri concluded by expressing his sincere appreciation for the visionary leadership of His Highness, the Emir, Sheikh Tamim Bin Hamad Al Thani. He continued by thanking the bank’s shareholders for their patience and loyalty, employees and business partners for their faith and support, and respected Shari’ah Supervisory Board for their wise counsel and guidance.