United in purpose, inspired
by our country’s future
Annual Report 2017
His Highness
Sheikh Tamim Bin Hamad Al Thani
Emir of the State of Qatar
His Highness
Sheikh Hamad Bin Khalifa Al Thani
Father Emir
Contents
Business at a glance
Forward looking statements
Financial highlights
Key highlights
Chairman’s message
Board of Directors
Vice Chairman’s message
Group Chief Executive Officer’s message
Management review of operations
Annual Corporate Governance Report 2017
Independent Auditors’ Report
Consolidated Statement of Financial Position
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
Supplementary Information
6
8
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THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017
3
Standing strong
with Qatar
Commercial Bank stands united with His Highness The Emir Sheikh Tamim Bin
Hamad Al Thani and the people of Qatar in the face of the economic blockade.
We are proud to be a Qatari bank, loyal to His Highness The Emir and we believe
the economic blockade has made Qatar stronger than ever before.
As Qatar’s first private bank with over 40 years of history, we support our country
in every way we can. By providing innovative banking products and services,
financing major projects and small businesses, developing human capital as a
leading private sector employer and investing in Qatar’s community, supporting
Qatar’s National Vision 2030 and all-round national development is a common
thread in everything we do.
Qatar has proved to be remarkably resilient in 2017, defying expectations and
becoming stronger through unity. So too has Commercial Bank.
Living up to our belief that ‘everything is possible’ Commercial Bank has come
together by working as one team to deliver on our five year strategic plan to build
momentum for a new phase of sustainable growth. The foundation of our ambition
to be the ‘Best Bank in Qatar’ and the ‘Qatari Bank of Choice’ are the Five C’s of
Commercial Bank:
• Corporate Earnings Quality
• Client Experience
• Creativity and Innovation
• Culture
• Compliance
In 2017, we lived up to each of these Five C’s by taking real action to achieve
growth in the present and position Commercial Bank well for increasingly strong
performance in the coming years as we continue our transformation journey.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017
4
Proud to be Qatari
We take pride in being a Qatari
bank in our country. Commercial
Bank’s development over
more than four decades has
mirrored the spectacular growth
of Qatar, and as a leader in
the private sector, we have a
responsibility to give back to
our country. Commercial Bank
supports economic diversity
and sustainability through
our innovative approach to
business and we are helping
to build Qatar’s human capital
by investing in people and our
community of which we have
been part of since 1975.
Pictured: Commercial Bank Plaza, our
headquarters in the heart of Doha.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017
5
6
Business at
a glance
Our changing world
1974 Commercial Bank is incorporated as Qatar’s first private sector bank
1975
1981
The Bank begins operations under a management-services contract with
Chase Manhattan Bank
The contract with Chase Manhattan Bank officially ends and Commercial
Bank is fully independent
1987 A new Commercial Bank head office opens on Grand Hamad Street
1990 ATMs are introduced in Qatar by Commercial Bank
1991
Commercial Bank acquires the Diners Club franchise for Qatar
1992 Point-of-sale machines are introduced in Qatar by Commercial Bank
1997 A dedicated Customer Call Centre is established
2005 Commercial Bank forms a strategic alliance with National Bank of Oman
2006 Commercial Bank signs an agreement to become the title sponsor for the
Qatar Masters golf tournament
2007 Commercial Bank forms a strategic alliance with United Arab Bank in the UAE
2008 First Qatari bank to list GDRs on the London Stock Exchange
2009 Commercial Bank opens its new headquarters in Doha, Commercial Bank Plaza
2011
Incorporates Commercial Bank Investment Services (re-branded to
become Commercial Bank Financial Services)
2013 Commercial Bank acquires 74.24% shareholding in Alternatifbank in Turkey
2015 Commercial Bank celebrates its 40th anniversary milestone as Qatar’s first
private bank
2016 Commercial Bank signs a debut USD 166 million 3-year Ninja loan facility –
the first Ninja loan for a GCC financial institution
Commercial Bank successfully completes the acquisition of the remaining
25% shareholding in Alternatifbank
2017
Incorporates Commercial Bank Innovation Services, a management
operation services captive entity that has successfully on-shored previously
outsourced activities
About Commercial Bank
Incorporated in 1974 as the first private
bank in the country, Commercial Bank
is today one of the leading financial
institutions in Qatar with a profitable track
record since inception. We continue
to play an important role in driving
innovation and raising service standards
in banking across the region through
our investment in new technology, a
clear focus on customers and prudent
management. Our country-wide network
includes 29 full service branches and 179
ATMs, and we also own and operate an
exclusive Diners Club franchise in Qatar.
We are listed on the Qatar Exchange and
were the first Qatari bank to list its Global
Depository Receipts on the London
Stock Exchange. Commercial Bank’s
latest bonds issuance in June 2014 and
June 2016 are listed on the Irish Stock
Exchange.
Expanding its geographical footprint,
Commercial Bank is 100% owner of
Alternatifbank in Turkey and has a
strategic partnership with the National
Bank of Oman (NBO). These strategic
alliances enable Commercial Bank to
offer integrated services across the
region, including cross-border services
for corporate banking and capital
markets; trade services for Corporate
Banking customers; private banking
services; and, syndicated loans in all our
alliance markets.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 7
Commercial Bank Innovation Services
(L.L.C.) A fully owned subsidiary
incorporated in Qatar under the Qatar
Financial Centre Authority providing
the Bank with Operations management
services.
Associates
National Bank of Oman (S.A.O.G.)
An associate entity that operates through
60 conventional branches and 6 Islamic
branches in Oman, and one branch each
in Egypt, Abu Dhabi and Dubai.
Massoun Insurance Services L.L.C.
A joint arrangement entity that provides
tailored corporate and personal
insurance products to the Bank’s
customers.
Total assets: QAR 138.4bn
Up 6.2% from 2016
Capital strength: 16.1%
Total regulatory capital
adequacy ratio
Commercial Bank has entered into an
exclusivity agreement with Tabarak
Investment to negotiate terms of the
potential sale of the Bank’s stake in
United Arab Bank.
Our continual investment in technology
and people, together with our strong
capital base, provides a solid foundation
for further growth. Commercial Bank
has a robust financial position, with
total assets of QAR 138.4 billion at 31
December 2017 and a capital adequacy
ratio of 16.1%. The Bank enjoys strong
credit ratings of (A2) from Moody’s, (A)
from Fitch, and (BBB+) from Standard &
Poor’s.
True to our pioneering origins and
history of success, we are dedicated
to supporting Qatar’s economic
development and social infrastructure
through Corporate Social Responsibility
programmes and sponsorship of various
events, which help to raise Qatar’s profile
internationally.
Our business segments
Wholesale Banking Provides a range of
conventional commercial and investment
banking services and products to large,
medium and small enterprises, including
corporate lending, trade finance,
syndicated loans, deposits, letter of
credit and guarantees.
Retail Banking Provides a full suite of
conventional retail banking services and
products to retail customers in Qatar,
including current and deposit accounts,
wealth management, mortgage lending,
personal and vehicle loans and credit
card and other card services.
Subsidiaries
Alternatifbank (A.S.) A fully owned
subsidiary in Turkey that operates
through a network of 53 branches.
Commercial Bank Financial Services
(L.L.C.) A fully owned subsidiary that
provides direct access to the Qatar
Exchange, online trading and brokerage
services.
Orient 1 Limited A fully owned subsidiary
that owns and manages an exclusive
Diners Club franchise in Qatar and Oman.
CB Global Limited. A fully owned
subsidiary incorporated in Cayman
Islands, an issuing vehicle for Euro
Commercial Paper and Certificate of
Deposit Programme.
CBQ Finance Limited. A fully owned
subsidiary incorporated in Bermuda
and organised as a special purpose
entity established to raise capital for
Commercial Bank by issue of debt
instruments.
CB Global Trading Limited. A fully
owned subsidiary incorporated in
Cayman Islands, an intermediary vehicle
for Derivatives.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 8
Forward looking
statements
Net
profit
QAR 604 million
Earnings
per share
QAR 0.90
Customers’ loans
and advances
QAR 89.1 bn
Customers’
deposits
QAR 77.6 bn
Total
assets
QAR 138.4 bn
This document contains certain forward looking
statements with respect to certain plans and current
goals and expectations of Commercial Bank and its
associated companies relating to their future financial
condition and performance.
These forward looking statements do not relate only to
historical or current facts. By their nature forward-looking
statements involve risk and uncertainty because they
relate to future events and circumstances including a
number of factors which are beyond Commercial Bank’s
control.
As a result, Commercial Bank’s actual future results may
differ materially from the plans, goals and expectations
set forth in Commercial Bank’s forward-looking
statements. Any forward-looking statements made by or
on behalf of Commercial Bank speak only as of the date
they are made. Commercial Bank does not undertake
to update forward looking statements to reflect any
changes in Commercial Bank’s expectations with
regard thereto or any changes in events, conditions or
circumstances on which any such statement is based.
The information, statements and opinions contained in
this presentation do not constitute a public offer under
any applicable legislation or an offer to sell or solicitation
of an offer to buy any securities or financial instruments
or any advice or recommendation with respect to such
securities or other financial instruments.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 9
2%
1%
5%
20%
3%
5%
13%
14%
71%
64%
Net Operating Income
Net interest income
Net fee income
Foreign exchange
income
Other income
Investment &
dividend income
Total Assets
Loans
Investments
Liquid assets
Other assets
Investments in
associates
4%
10%
15%
15%
Funding Mix
Customers’ deposits
Other borrowed funds
Shareholders’ funds
Due to banks and
financial institutions
Other liabilities
56%
4% 3%
9%
18%
46%
19%
3%
1%
7%
26%
13%
25%
9%
7%
9%
Shareholder’s Equity
Legal reserve
Tier 1 Note
Share capital
Risk reserve
Other reserves
Retained earnings
Loans and Advances
Real Estate
Services
Government
Industry
Personal
Contracting
Commercial
Non Banking
Financial Institutions
Other
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017
10
Financial
highlights
In QAR million, except per share amounts
and as stated otherwise
Net interest income
Net operating income
Net profit
Total assets
2017
2016
2015
2014
2013
2,518
2,341
2,534
2,581
2,188
3,529
3,578
3,949
3,903
3,434
604
501
1,434
1,940
1,605
138,449
130,380
123,421
115,652
113,111
Lending to customers
89,122
77,798
76,601
72,541
66,863
Basic/diluted earnings per share in QAR
0.90
0.78
3.92
5.93
5.40
Dividends declared per ordinary share
including bonus shares in QAR
Closing market price per ordinary share in
QAR (at year end)
Book value per ordinary share in QAR
1.0
28.9
51.94
0.5
3.00
4.50
4.00
32.50
45.90
68.50
59.09
52.96
59.60
70.8
66.90
Long-term debt (at year end)
20,908
22,495
20,523
18,885
17,105
Shareholders’ equity (at year end)
21,021
19,301
17,299
17,696
16,555
Return on average shareholders’ equity
Return on average assets
Capital adequacy ratio
3.0%
0.5%
16.1%
2.7%
0.4%
15.2%
8.2%
1.2%
13.5%
11.3%
1.7%
15.2%
10.2%
1.7%
14.1%
Full-time employees (at year end)*
2,251
2,138
2,286
2,374
2,567
* Group employees (Commercial Bank, Alternatifbank and beginning 2017 Commercial Bank Innovation Services)
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 11
Key
highlights
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Net profit of QAR 604 million, up by 20.4% compared to
QAR 501 million in 2016
Operating profit of QAR 2,204 million, up by 13.5%
Cost income ratio of 37.5% reduced from 45.7%
Total assets of QAR 138.4 billion, up by 6.2%
Customer loans and advances of QAR 89.1 billion, up by 14.6%, mainly
through credit growth in Government and Public sector and Services
sector
Customer deposits of QAR 77.6 billion, up by 9.5%
Provisions on non-performing loans at QAR 1,697 million, up by 33.8%
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017
12
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017
13
An international banking group
We are part of a connected global
economy and Commercial Bank’s
geographical footprint extends
far beyond Qatar through our
region-wide “Alliance of banks”
and international banking
business. Firmly aligned with
Qatar’s strategic trading partners,
Turkey and Oman are key markets
for Commercial Bank via our
Turkish subsidiary, ABank and
associate, National Bank of Oman,
with the Commercial Bank Group
well positioned to capitalize on
the increasing investment flows
between these countries.
14
Chairman’s
message
Sheikh Abdullah Bin Ali Bin Jabor Al Thani
Commercial Bank has made
good progress in cleaning up its
balance sheet, diversifying its loan
portfolio geographically to create
a healthier risk profile, and driving
efficiencies across the business.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 15
of Qatar as part of an integrated national
effort during the economic blockade.
I also want to take this opportunity to
convey our appreciation for the guidance
and support we have received from His
Excellency the Prime Minister and Minister
of the Interior, His Excellency the Minister
of Finance, His Excellency the Minister of
Economy and Commerce and His Excellency
the Governor of Qatar Central Bank.
I would like to thank the Board of
Directors for their continued guidance
and the Executive Management team
for their notable contribution to our
accomplishments this past year. We owe
our achievements to the loyalty of our
customers and support of our shareholders,
as well as the dedication and hard work of
all our employees who ensure Commercial
Bank continues to perform well in
challenging market conditions.
Looking ahead, in 2018 Commercial Bank will
continue its transformation journey under
our Five Year Strategic Plan. I am pleased
with the progress achieved so far and we
will continue to focus on positioning the
business to deliver long-term value and
sustainable earnings for our shareholders.
Abdullah Bin Ali Bin Jabor Al Thani
Chairman
I am pleased to present Commercial
Bank’s Annual Report for the year ended
31 December 2017 on behalf of the Board
of Directors.
2017 was best characterised by the
underlying message of security and strength
which His Highness The Emir delivered
through his “promise of prosperity and
glory” as the theme for the Qatar National
Day 2017. As a Qatari bank that is committed
to supporting Qatar’s all-round national
development, in line with the Qatar National
Vision 2030, Commercial Bank is fully
supportive of His Highness’ promise. We are
proud of our Qatari heritage and humbled to
be able to support the vision of His Highness
The Emir, especially during last year’s
turbulent market conditions.
2017 was a challenging year. The land,
air and sea blockade imposed on Qatar
by its neighbours interrupted the flow of
goods and people through its borders.
What started as a diplomatic dispute and
a potentially serious economic risk has
become a source of incredible strength
for Qatar as the country has proved to be
remarkably resilient, and receptive to the
promise of His Highness The Emir.
Qatar swiftly recovered from the initial
disruption caused by the blockade,
successfully sourcing alternative imports
aided by the opening of Hamad Port and
healthy trading relations with countries
outside of the diplomatic dispute. Qatar’s
banking sector experienced an immediate
impact, with a withdrawal of deposits from
the blockading countries and a tightening
of liquidity in the Qatari financial markets.
Qatar’s banking system proved to be robust,
restoring equilibrium within months with the
government providing tremendous support.
Qatar’s main export of liquefied natural
gas (LNG) remains unhampered and the
announcement to raise production from 77
to 100 million tonnes per annum by 2024
will further cement Qatar’s position as the
world’s largest LNG exporter, while also
providing it with a competitive advantage in
the context of a lower oil price environment.
Despite the blockade, Qatar’s robust
macro fundamentals have not materially
changed, reflected by an AA- rating by Fitch
and Aa3 by Moody’s that take into account
the country’s large financial buffers of
approximately $35 billion in net international
reserves at the Qatar Central Bank and more
than $300 billion of assets managed by
the Qatar Investment Authority. Spending
is set to increase in education, health and
construction projects in advance of the FIFA
2022 World Cup for which preparations
remain on track.
With the visionary leadership of His Highness
the Emir Sheikh Tamim Bin Hamad Al Thani
and substantial economic resources, Qatar
remains in a good position to weather the
blockade over the medium to long term.
Taking a broader look, global economic
activity strengthened in 2017, although its
continued recovery masked a mixed picture
at a country level. Upswings in the European
Union, Japan, emerging Asia and Russia
more than offset downward revisions for
the United States and the United Kingdom,
with China’s growth expected to remain at
the same level as last year. According to
the World Bank, overall growth in advanced
economies is expected to moderate in 2018
to 2.2%. The region’s 2018 prospects are far
ahead with an expected growth of 3%, up
from 1.8% in 2017. Recent reforms, such as
the introduction of taxation and removal of
energy subsidies, are expected to stimulate
economic growth in the region. Another
positive factor is the stabilisation of the oil
price.
Looking closer to home, the impact of the
economic blockade and market conditions
on Commercial Bank have been minimal. I
am proud to announce that the actions taken
under our Five Year Strategic Plan initiated in
2016 are showing results. Commercial Bank
has made good progress in cleaning up its
balance sheet, diversifying its loan portfolio
geographically to create a healthier risk
profile, and driving efficiencies across the
business and is on track to build sustainable
earnings for its shareholders.
Commercial Bank, its subsidiaries and
associates announced its financial results for
the full year ended 31 December 2017, and
the Board of Directors have recommended,
for approval at the Annual General Assembly
on 21 March 2018, a cash dividend payout of
QAR 1.0 per share.
On behalf of the Board of Directors, I would
like to express our sincere thankfulness and
gratitude for the visionary leadership of His
Highness The Emir Sheikh Tamim Bin Hamad
Al Thani. We all stand united with the people
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 16
Board of
Directors
Sheikh Abdulla bin Ali bin
Jabor Al Thani
Chairman
Mr. Hussain Ibrahim Alfardan
Vice Chairman
H.E. Mr. Abdul Rahman Bin
Hamad Al Attiyah
Board Member
Mr. Omar Hussain Alfardan
Managing Director
Sheikh Jabor bin Ali bin Jabor Al Thani
Board Member
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 17
Mr. Mohd Ismail Mandani Al Emadi
Board Member
Qatar Insurance Company
(Representative: Mr. Ali Saleh Nasser Al Fadala)
Board Member
Sheikh Faisal bin Fahad bin
Jassim Al Thani
Board Member
H.E. Mr. Saleh Abdulla Mohamed Al
Ibrahim Al Mannai
Board Member
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 18
Investing in people
We are a bank that invests in
people. Through our National
Development Programme we
allocate significant resources
towards the skills and training
of young nationals to develop
Qatar’s human capital for the
benefit of current and future
generations. Commercial Bank
is committed to employee
health and welfare, and we
actively support initiatives that
contribute positively to the
holistic development of the
Qatari community as part of our
corporate social responsibility
programme.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 19
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 20
Vice Chairman’s
message
Mr. Hussain Ibrahim Alfardan
Growth was supported by the
Bank’s leading products and
services which led to a growth
of 15% in loans and advances to
customers and 10% in customer
deposits at a Group level.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 21
Against a challenging economic backdrop
driven by the economic blockade and the
prevailing lower oil price environment,
Commercial Bank maintained profitability
and successfully completed the first year of
our Five Year Strategic Plan. We have made
good progress in building the foundation
for the future of Commercial Bank and
in continuing to support our nation’s
development plans.
The economic blockade imposed in the
summer of 2017 has proved the resilience
of Qatar and its economy with both the
public and private sectors implementing
successful strategies to weather the
blockade. Commercial Bank reduced its
funding exposure to impacted GCC countries
to 0.7% and has established new interbank
relationships with countries such as Kuwait,
Oman and Lebanon to support adequate
liquidity levels. Conversely, its Qatar
residential deposit mix increased from 71%
to 83%.
Financially we delivered good results
for the year ended 31 December 2017.
Commercial Bank reported an operating
profit of QAR 2.20 billion, a solid increase of
14% over 2016. Growth was supported by
the Bank’s leading products and services
which led to a double digit growth of 15%
in loans and advances to customers and
10% in customer deposits at a Group
level. Consolidated Net Interest Income
was up 8% year on year to QAR 2.52
billion, demonstrating that in spite of the
challenging market conditions, Commercial
Bank continued to grow its business. Our
operation in Qatar reported 15% growth in
advances to customers, well ahead of the
market growth of 8%.
Growth in lending is in line with our Strategic
Plan and was supported by the public sector
and the real estate sector.
I am also pleased to report a significant
decrease in our operating expenses of
19% year on year, in line with our strategy
to drive efficiencies across the business,
streamline processes and reduce costs.
Operational efficiencies and automation
resulted in reductions in staff costs and lower
headcount that are expected to drive further
cost savings in 2018. Consequently, the Bank
reported a healthy consolidated cost to
income ratio of 37.5%, down from 45.7% at
FY 2016.
However, provisions and impairments of
QAR 1.70 billion were taken as part of our
strategy to provision for legacy assets
and de-risk our balance sheet. Net loan
provisioning for the Commercial Bank Group
increased by 33.8% compared to QAR 1.27
billion in 2016, while net loan provisioning
for our operation in Qatar increased 44.4%
from QAR 1.05 billion in 2016 to QAR 1.52
billion in 2017, a reflection of the current
economic environment.
The Bank delivered a consolidated net profit
of QAR 604 million for the year ended 31
December 2017, 20.4% higher from QAR
501 million in 2016. Going forward, we expect
to see a positive trend in profitability as the
majority of legacy provisioning is expected
to be completed in 2018.
In line with our strategy, we have focused
on an enhanced risk culture to significantly
reduce the cost of risk moving forward
which is expected to be around 1% in 2018
and to continue to decrease significantly
by 2021. Our underlying business remains
robust and the actions taken under our Five
Year Strategic Plan have already started to
reshape our business towards sustainable
growth.
Commercial Bank’s balance sheet is being
re-shaped through sector diversification to
reflect the market opportunities. Exposure
to the Government and public sector has
grown from 10% in 2016 to 13% in 2017
and is targeted to reach a minimum of 16%
under the Five Year Strategic Plan. Real
estate exposure has gone down from 28%
in 2016 and will continue to be reduced
from 26% in 2017 to 20% by 2021. We
will continue to diversify liquidity channels
and explore new funding opportunities.
Costs will also be aligned to the market and
Commercial Bank has made good progress,
with its cost to income ratio at 37.5% for
2017, already close to achieving a target of
between 32% and 36% by 2021.
To support our strategy, Commercial Bank
enhanced its capital through a QAR 1.5 billion
rights issue which was completed in January
2017. The successful completion of this
transaction demonstrates the confidence
investors continue to have in the Bank.
Our associate bank in Oman, National Bank
of Oman (NBO), reported a net profit of
QAR 416 million, supported by an increase
in customer deposits and maintained its
customer loans and advances compared
to last year. In Q4 2017 Commercial Bank
entered into an exclusivity agreement with
Tabarak Investment to negotiate terms of
the potential sale of Commercial Bank’s stake
in United Arab Bank (UAB). The sale of our
stake in UAB would allow us to reallocate
capital in line with our Strategic Plan.
2017 saw ABank return to profitability to
deliver QAR 49 million in Net Profit. Loans
and advances to customers were up 24%
while customer deposits grew 32% year on
year. I am pleased to report ABank enacted
changes to its CEO and board of directors
in 2017. Mr. Cenk Kaan Gür was appointed
CEO of ABank in September 2017, while Mr.
Zafer Kurtul and Mr. Turgay Gönensin were
elected non-executive directors of ABank
in August 2017. Commercial Bank Group
CEO Joseph Abraham, who was previously
an ABank Board Member, was appointed
as Vice Chairman of ABank in August 2017.
With the new leadership team and increased
commercial relations between Turkey and
Qatar, we will create significant value for our
customers.
ABank remains a strategic asset and an
important opportunity for us to leverage
outside the GCC market. The full ownership
of ABank, completed in 2016, provided us
with a closer integration and alignment of
risk management and business strategy.
We remain confident in the Bank’s ability to
build its future and generate sustainable
earnings for its shareholders.
On behalf of the Board of Directors, I would
like to convey our sincere gratitude for the
visionary and gracious leadership of His
Highness the Emir, and His Excellency the
Prime Minister and Minister of the Interior,
His Excellency the Minister of Finance, His
Excellency the Minister of Economy and
Commerce and His Excellency the Governor
of the Qatar Central Bank for their wisdom in
guidance and support, which we continue to
greatly appreciate.
Hussain Ibrahim Alfardan
Vice Chairman
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 22
Group Chief Executive
Officer’s message
Mr. Joseph Abraham
Looking ahead to 2018, we will
continue investing in technologies
and practices that improve the
way we work for the benefit of our
customers and Qatar itself.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 23
Our achievements in 2017 demonstrate
that we are on track to deliver on our Five
Year Strategic Plan and that we have the
right strategy in place to build sustainable
earnings and growth for the future. Looking
ahead to 2018, we will continue investing
in technologies and practices that improve
the way we work for the benefit of our
customers and Qatar itself. We will continue
to launch new products including a mobile
wallet and lead in innovation for the benefit
of our clients.
With our Five Year Strategic Plan and the
motivation of our people, Commercial Bank
is at the forefront of innovation in banking
and remains committed to building a better
future for our clients and our business.
Joseph Abraham
Group Chief Executive Officer
In 2017 we successfully executed on the
first full year of our Five Year Strategic Plan
which is designed to reshape our business,
build sustainable earnings, diversify risk and
achieve growth. Actions taken under our Five
Year Strategic Plan led to a strengthening
of our capital position, improved asset
quality through a balance sheet reshape,
provisioning for legacy loans and reduction
of costs whilst also for the first time in
three years growing our loan book ahead
of market. We also successfully navigated
the challenges of the blockade in terms of
liquidity management and have diversified
our deposit and investor base to ensure
continued strong liquidity to support our
business growth.
The intent of our Strategic Plan is to make
Commercial Bank the “Best Bank in Qatar”, on
the foundation of the Five C’s of Commercial
Bank: Corporate Earnings Quality; Client
Experience; Creativity and Innovation;
Culture, and Compliance. Solid progress has
been achieved in each of these areas.
During 2017, in line with our Strategic Plan
we reduced our cost to income ratio from
45.7% to 37.5%, this was achieved by
reducing waste and eliminating unnecessary
expenditure. We also ended the outsourcing
arrangement of our Operations services
with TCS (Tata Consultancy Services) in India
and insourced these operations to a wholly
owned subsidiary in Doha with the creation
of Commercial Bank Innovation Services
(CBIS). This entity provides the scalability
needed to handle greater client volumes at
lower costs and introduce new technologies
such as robotics and machine learning
while improving client experience and risk
management. CBIS is a prime example of
the type of initiatives we are focusing on to
improve productivity and client experience.
In our loan book we have made solid
progress in proactively reshaping and
diversifying loans while simultaneously
growing the portfolio. During the year our
government and public sector concentration
grew form 10% to 13%, while our Real Estate
concentration fell from 28% to 26%. This
was achieved while our loan book grew
15%, ahead of market growth of 8%. We are
also focused on generating fee income and
our Wholesale Bank was awarded for the
second year, the Asian Banker’s “Best Cash
Management Bank in Qatar”.
Within Retail and Consumer Banking, in
2017 we continued to build the business
to provide better market coverage and
drive growth in digital transactions through
innovation and end-to-end process
automation. One example, is our 60 second
remittance service, launched to major
markets during the year such as India, Sri
Lanka and the Philippines, where we have
seen substantial increase in volumes,
supported by 95% customer satisfaction
scores across all parameters. We have
been recognised with many prestigious
awards across the year, including The Asian
Banker’s “Best Retail Bank in Qatar,” “SME
Bank of the Year in the Middle East” and,
during 2017, for our Visa Signature Credit
Card for SMEs “Best New Product in Qatar for
2017” by Visa Inc.
The focus with our subsidiaries and
associates during 2017 has been on
working with them to deliver a good level
of sustainable returns in line with our
investment. A new management team has
joined our subsidiary in Turkey, ABank, and
we are confident that with this team we have
the capabilities to grow and develop this
business. Our associate, the National Bank
of Oman continues to deliver solid returns.
We have announced the potential sale of
our stake in United Arab Bank, which would
enable us to reallocate capital, in line with our
strategic intent, to our businesses in Qatar
and Turkey.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017
24
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017
25
Our culture
A bank is only as good as its
people, and its people are only
as good as their teamwork.
Our ‘One Bank’ and ‘One Team’
culture is based on values of
respect, collaboration and
teamwork. We firmly believe that
‘everything is possible’ and lived
up to this belief in 2017 through
our everyday actions and by
completing a number of large,
complex cross-departmental
projects in record time by
working together as ‘One Bank’,
‘One Team.’
26
Management Review
of Operations
Financial Results
QAR million
Net interest income
Non-interest income
Net operating income
Operating expenses
Provisions for
impairment losses
Share of results of associates
Income tax expense
Net profit for the year
2017
2016
2,518 2,341
1,011
1,237
3,529 3,578
(1,325) (1,636)
(1,743) (1,395)
148
(5)
604
(46)
0
501
Operating Expenses
QAR million
Staff costs
General and administrative
expenses
Depreciation and
amortisation
Total operating expenses
2017
713
2016
872
404
572
208
192
1,325 1,636
Our deposits increased by 9.5%, to QAR
77.6 billion. The increase in deposits is
mainly due to increase in time deposits. This
reflects our strategy to ensure continued
diversification of our funding base in tight
liquidity conditions.
Investment securities increased by 27.6%
to QAR 19.6 billion at 31 December 2017
compared with QAR 15.4 billion at the end
of December 2016. The increase is mainly in
Government bonds.
Net Operating Income
Commercial Bank’s net operating income
decreased by 1.4% to QAR 3,529 million for
the year ended 31 December 2017, down
from QAR 3,578 million achieved in 2016.
Net operating income for the Bank in Qatar
decreased by 4.9% to QAR 3,057 million
compared to the same period in 2016.
Net interest income for the year ended 31
December 2017 was 7.6% higher than in
2016 to QAR 2,518 million, mainly due to
increase in interest income as a result of
higher interest rates compared to last year.
Net Interest Margin remains stable at 2.2%
compared to 2016.
Non-interest income decreased by 18.3%
to QAR 1,011 million for the year ended
31 December 2017 compared with QAR
1,237 million in 2016. The overall decrease
in non-interest income was due to lower
income from investment securities as equity
holdings were scaled down in line with the
strategic plan and foreign exchange income.
Operating Expenses
Total operating expenses were tightly
managed and decreased by 19.0% to
QAR 1,325 million for the year ended 31
December 2017 compared with QAR 1,636
million in 2016. The decrease in operating
expenses was mainly due to lower staff costs
and administrative expenses.
Rehan Khan
EGM, Chief Financial Officer
Financial Results
In 2017, Commercial Bank delivered a net
profit of QAR 604 million, an increase of
20.4% compared to the QAR 501 million
achieved in 2016.
Loans and advances to customers grew by
14.6% to QAR 89.1 billion at 31 December
2017, compared with QAR 77.8 billion at the
end of 2016. The growth in lending in 2017
was generated mainly through credit growth
in the government and public and services
sectors. Loans and advances in the Bank in
Qatar grew at a higher rate of 14.5% to
QAR 75.5 billion compared to market growth
of 8%.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 27
2%
1%
5%
20%
Net Operating Income
Net interest income
Net fee income
Foreign exchange
income
Other income
Investment &
dividend income
71%
4% 3%
9%
18%
46%
Shareholder’s Equity
Legal reserve
Tier 1 Note
Share capital
Risk reserve
Other reserves
Retained earnings
Provisions for Impairment Losses
Provisions for loans and advances increased
by 33.8% to QAR 1,697 million for the year
ended 31 December 2017, compared to
QAR 1,268 million provided in 2016. The
non-performing loan ratio has increased to
5.65% at 31 December 2017 compared with
5.01% at the end of December 2016 but the
coverage ratio has increased to 81.0% as
at December 2017 compared to 78.9% in
December 2016.
The Bank sets aside a risk reserve against its
lending as part of shareholders’ equity. At 31
December 2017, the risk reserve was QAR
1,890 million, meeting the minimum level set
by the Qatar Central Bank for the end of 2017.
Impairment provisions on the Bank’s
investment portfolio decreased to QAR 46
million for the year ended 31 December 2017
compared with QAR 77 million in 2016.
Total Assets and Funding
Commercial Bank delivered balance sheet
growth of 6.2% in 2017, with total assets at
QAR 138.4 billion compared to QAR 130.4
billion in 2016.
Balance sheet growth was driven by QAR 11.3
billion in loans and advances and QAR 4.2 billion
in investment in securities, this was partially
offset by a decrease of QAR 8.8 billion in due
from banks and financial institutions.
Customers’ deposits increased by 9.5%
to QAR 77.6 billion at 31 December 2017,
compared with QAR 70.9 billion in 2016. The
increase was primarily in time deposits.
Capital
Commercial Bank’s capital position remains
strong and improved with a capital adequacy
ratio of 16.1% as at 31 December 2017
compared with 15.2% at the end of 2016,
which is above the Qatar Central Bank’s
required minimum level of 13.88%.
19%
The Board of Directors is recommending, for
approval at the Annual General Assembly,
the distribution of a cash bonus of 10%.
Subsidiaries
AlternatifBank
AlternatifBank (ABank) delivered a net
profit of TL 49 million for the year ended 31
December 2017, with total assets of TL 20.6
billion and lending of TL 14.1 billion.
ABank provides its customers in the
corporate, commercial and retail banking
segments with high value products, services
and solutions. ABank has 53 branches
widely distributed around Turkey. In 2017,
ABank continued to work closely with
its counterparts in Commercial Bank to
implement best international practice and
continue to realise synergies.
Commercial Bank Financial Services
Commercial Bank Financial Services (CBFS)
is a fully owned subsidiary of Commercial
Bank. CBFS provides direct access to the
Qatar Exchange and offers seamless
online trading capabilities for individuals,
institutions, corporate and foreign
counterparties. In addition to its electronic
trading platform, CBFS is also licensed by
Qatar Financial Markets Authority to act as
Liquidity Provider for certain securities at
Qatar Exchange. In 2017, CBFS delivered a
net profit of QAR 5.5 million.
Orient 1 Limited
A fully owned subsidiary that owns and
manages an exclusive Diners Club franchise
in Qatar and Oman. In 2017 Orient 1 delivered
a net profit of QAR 5.1 million.
CB Global Limited
A fully owned subsidiary incorporated in
Cayman Islands, an issuing vehicle for Euro
Commercial Paper and Certificate of Deposit
Programme.
CBQ Finance Limited
A fully owned subsidiary incorporated
in Bermuda and organised as a special
purpose entity established to raise capital
for Commercial Bank by issue of debt
instruments.
CB Global Trading Limited
A fully owned subsidiary incorporated in
Cayman Islands, an intermediary vehicle for
Derivatives.
CB Innovation Services LLC.
A fully owned subsidiary incorporated in
Qatar under the Qatar Financial Centre
Authority providing the Bank with Operations
management services.
Associates
National Bank of Oman
National Bank of Oman (NBO) achieved net
profit of OMR 44 million, compared with OMR
56 million in 2016. Operating income was
marginally down by 3% to OMR 132.1 million
from OMR 136.1 million in 2016.
During 2017 NBO maintained its customer
lending at OMR 2.7 billion and customers’
deposits increased by 2.5% to OMR 2.5
billion compared to 2016.
Massoun Insurance Services L.L.C.
Massoun Insurance Services is a Qatari
incorporated joint venture company
between Commercial Bank and Qatar
Insurance Company. The company provides
a range of insurance products which have
been tailored to meet the specific needs of
the Bank’s retail and corporate customers.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017
28
Management Review
of Operations continued
Business performance
In 2017, Wholesale Banking’s business
represented a majority of the Bank’s total
loan book, and generated almost half of the
Bank’s total revenues.
In line with the Bank’s 5 Year Strategic Plan,
Wholesale Banking proactively instituted a
number measures:
• Strategically re-shape the composition of
the balance sheet to reflect the market
• Proactively de-risk the balance sheet for
sustainable growth
Rajbhushan Buddhiraju
EGM, Wholesale Banking
Wholesale Banking
Commercial Bank’s Wholesale Banking
Department offers a comprehensive range
of financial services to corporate businesses
in Qatar, international companies trading
or implementing projects in Qatar, and
corporate relationships across the Bank’s
strategic markets in Turkey, the GCC and
other target geographies with high growth
potential. These services include commercial
banking, treasury, investment banking, cash
management, trade, transaction banking,
corporate finance and advisory services
across different industries.
Wholesale Banking comprises Domestic
Corporate Banking and Transaction Banking,
and has strong and longstanding banking
relationships with leading Qatari businesses
nurtured over the years through excellent
customer service, tailored financial solutions
and the application of innovative technologies.
• Build a strong pipeline of the right
customers, with the right risk profile and
the right quality of assets
• Focus on Transaction Banking
• Diversify revenue streams
• Working closely with Alliance banks
Re-shaping Wholesale Banking’s balance
sheet
The composition of the balance sheet
was re-shaped in two key areas to reflect
stresses in the market and to ensure a quality
mix of assets:
• Growth of government and public sector
lending from 13% of Wholesale Banking’s
portfolio in 2016 to 17% YTD Sep 2017
• Rationalisation of real estate exposure
with a reduction from 37% of Wholesale
Banking’s portfolio in 2016 to 31% YTD
Sep 2017
Growth of government and public sector
lending and rationalisation of real estate
exposure remains a strategic aim, with a 5
year target of 21% and 25% composition of
the Wholesale Banking book respectively.
De-risking selected exposures
As part of prudent risk management,
Wholesale Banking identified some clients
where exposure will either be partially or fully
reduced in order to ensure Commercial Bank
does not have very large exposure towards
any one client. In 2017, the total amount
intentionally de-risked was in excess of
QAR 1.5 billion, with a target of over QAR 2.0
billion by 2018, for an optimised balance sheet
containing high quality customers and assets.
Growth and strong lending pipeline
Wholesale Banking achieved strong balance
sheet growth, with Wholesale Banking’s
asset book growing approximately 20% in
2017, outperforming the market growth of
around 9%. Viewed in conjunction with the
strategic aims of re-shaping and de-risking,
this represents sustainable growth with the
right customers, with the right risk profile
and the right quality of assets. To maintain
growth and ensure a sustainable revenue
stream in the future, the lending pipeline
originating from the public sector was over
40% of the total lending pipeline.
Cross-Selling
Increasing fee income that is not lending-
based is an important strategic aim of
Wholesale Banking for diversification of
revenues. Fee income increased in 2017 to
approximately 20% of Wholesale Banking’s
total operating income, resulting in part
from cross-selling innovative new services
to customers across Domestic Corporate
Banking and Transaction Banking.
Working with Alliance Banks
Wholesale Banking contributes to the efforts
of enhancing synergies with our Alliance
banks, ABank and NBO, through cross-selling
activities, supporting Turkish companies as
well as Qatari business in Oman.
Domestic Corporate Banking
Domestic Corporate Banking provides a
comprehensive range of cross-product
banking solutions to corporate clients
operating in Qatar. This unit services
client relationships across the following
sectors: large corporates, mid-market
corporates, contracting, ultra high net worth,
government & public sector.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 29
Domestic Corporate Banking was active in
arranging large financings in the domestic
syndicated and club loan markets, and was
associated with the following successful
transactions in 2017:
• Facilities extended to Musheireb
Properties for developing various assets
including a five star hotel next to the Qatar
National Convention Centre and for the
development of Zulal Destination Spa at
Al Mafjar, Al Ruwais
• A finance package to support
warehousing in Manateq Warehousing
Park for a build-operate-transfer (BOT)
project for 25 years
• A facility for Qatari Diar to support their
operations
In 2017, Domestic Corporate Banking
continued to focus on organic growth of
operations by delivering the best client
experience and service quality through
innovative banking solutions with state of the
art technologies. This includes introducing
host-to-host connectivity, providing a direct
link with our customers to enhance the client
experience.
Wholesale Banking continues to work very
closely with Retail Banking through the
successful ‘Banking at Work’ unit where a
key strategic focus has been to enhance the
Total Relationship Value for each customer
across all business portfolios. This channel
produces approximately 40-45% of Retail
acquisitions.
Transaction Banking
Commercial Bank is the market leader for
Transaction Banking in Qatar, covering
a range of services in areas of Cash
Management and Trade Finance.
In 2017, several new service and digital
technology initiatives were implemented to
improve the client experience:
• A fully automated and online Trade
Finance Processing Systems ‘Trade
Innovations’ (TI+) to significantly improve
the customer experience in supply chain
finance through enhanced features and
shortened turnaround times
• An upgraded Corporate Trade Portal,
providing an advanced online platform
to conduct day to day trade finance
transactions digitally
• A feature rich online Corporate Internet
Banking service providing state of the art
payment solutions
• A bulk bill payment solution for the first
time in Qatar allowing customers to pay
multiple utility bills (Ooredoo, Qatar Cool
and Kahrama) online and in bulk
• A Corporate Premium Service Counter at
Commercial Bank’s dedicated corporate
branches
• A Customer Care Unit within the Trade
Services Department, and document
preparation assistance to Corporate and
SME customers
• A door-to-door banking service to collect
and deliver both cash and other trade
documents
• Workshops for customers focusing on
trade best practices and encouraging
adoption of the Bank’s online channels
Transaction Banking concluded a number
of notable deals in 2017 including cash
management mandates for Texas A&M
University and Northwestern University,
and host-to-host services for QAFCO.
Transaction Banking also handled structured
trade transactions between an important
oil importer from India (Reliance) and Qatar
Petroleum.
Recognising its continued focus on
enhancing products and services for
corporate customers and leading role in
cash management, Commercial Bank was
awarded the “Best Cash Management Bank in
Qatar” award at The Asian Banker Middle East
& Africa Transaction Banking Awards 2017,
adding to the same national award in 2016.
Commercial Bank and Ooredoo partner to offer a
unique bulk bill payment service
Commercial Bank’s excellence in cash management was recognised with a second national
award in a row at The Asian Banker Middle East & Africa Transaction Banking Awards
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 30
Management Review
of Operations continued
Commercial Bank’s cross-border business
strategy remains cautious and focused on
portfolio diversification and revenues from
trade finance flows, banks and strategic
relationships with large corporates in
the EMEA region, Turkey, and selectively
across North America, Asia Pacific and Sub-
Saharan African markets. The lower risk and
mostly short-term trade finance book saw
reasonable activity in 2017 as credit demand
picked up for strategic commodities across
markets linked to Qatar. Another key pillar
of our strategy was to collaborate more
closely on correspondent banking services,
credit products and other cross-border
business activities of Commercial Bank with
our Alliance bank partners: ABank in Turkey,
National Bank of Oman and United Arab Bank
in order to benefit from synergistic growth
across the Commercial Bank Group.
Turkey remains a key market for Commercial
Bank post acquisition of ABank in 2013
and the International Banking Department
is providing complimentary support
through its balance sheet and products
platform in order to capitalise on the
increasing strategic investment and trade
related activity between Qatar and Turkey.
Trade loans to financial institutions and
relationships with large diversified corporate
groups in Turkey have been a key driver for
the Commercial Bank Group with a particular
focus in strengthening ABank’s business
franchise in the country. Commercial Bank
continues to work closely with its Alliance
bank partners to develop a network of
Group-wide lending and cross-selling
opportunities, in addition to implementing
a coordinated Group financial institutions
strategy for its correspondent banking and
corporate business.
The International Banking Department also
plays a key role in supporting the Bank’s
funding needs by leveraging its global
relationships and supporting the Treasury
Department in diversifying the Bank’s
funding. This is achieved by arranging
bilateral and syndicated loans for the Bank,
and expanding treasury and corporate
deposit relationships with regional and Asian
sovereign wealth funds, asset managers and
other non-bank financial institutions.
Supporting major business initiatives that
are relevant to the Qatari banking sector
remains a key pillar of the International
Banking business. In 2017, the Bank
sponsored and participated in several major
banking industry events and conferences.
These included:
• The Annual Meetings of the IMF and the
IIF where Commercial Bank was joined by
its subsidiary, ABank and Alliance bank
partner, National Bank of Oman
• SIBOS in Toronto, a major industry event
for banks and financial institutions across
the world
Commercial Bank continues to support its
financing and services network with global
trade and development institutions such
as the ICC Banking Commission, SWIFT,
Institute of International Finance, the
International Finance Corporation, IMF, Arab
Trade Finance Program, ISDA and other
development institutions.
Moving forward, our strategic priorities in
2018 and beyond will be to manage and
expand the business along the following lines:
• Focus on opportunistic growth in the
network countries of our Alliance banks,
with a view to strengthening the client
proposition and create synergies in these
markets;
• Diversify into Asia and Africa as trade and
investment flows pick up and also grow
into developed markets like the US, UK
and select OECD countries for portfolio
diversification and risk management
purposes;
• Enhance the value proposition by
developing structured finance, and
distribution, trade and treasury
capabilities which will lead to increased
cross-selling and improve International
Banking’s portfolio returns;
Fahad Badar
EGM, International Banking
International Banking
International Banking at Commercial Bank
is responsible for providing correspondent
banking services, corporate cross-border
loans and other Wholesale Banking products
to financial institutions, large corporates,
sovereigns, non-bank financial institutions,
and high to ultra-high net worth family
offices based outside of Qatar. In 2017, the
Bank’s international corporate loan portfolio
saw growth in the transport, industry and
services sectors with strong Qatari angles.
The corporate lending business grew
significantly in 2017, as the strategic drive
towards diversification took shape and
landmark opportunities were captured
both on direct balance sheet transactions
and cross-selling activities such as FX and
derivatives.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 31
• Maintain a well-diversified portfolio with no
large concentrations in line with regulatory
and the Bank’s governance standards
focusing on tangible collateral and security
support for risk mitigation in order to
withstand any credit event downturns;
• Support the Commercial Bank Group’s
funding initiatives and balance sheet
growth by leveraging on Commercial
Bank’s international corporate network.
Amit Sah
EGM, Consumer Banking
Retail and Enterprise Banking
Introduction
Commercial Bank’s Retail Banking business
manages the banking and financial needs
of individuals, and through our Enterprise
Banking team we also cater to small and
medium enterprises (SMEs) in Qatar. We
provide a full range of products and services
including transactional accounts, deposits,
loans, credit cards, insurance and wealth
management solutions.
Retail and Enterprise Banking provide world-
class financial services that help the people
of Qatar realise their financial goals and life
ambitions. Our teams remain focused on
developing innovative products and services
to meet customers’ many and changing
needs.
To further grow our banking service, Retail
and Enterprise Banking have started a
transformation journey in line with the Bank’s
Five Year Strategic Reshape Plan to achieve
the vision of becoming the “Best Bank in
Qatar” and the “Qatari Bank of Choice”
- recognised for the increased value we
generate for customers, shareholders and
our wider society:
• Corporate Earnings Quality: We aim to
drive revenue growth across a set of
diversified products and customers, whilst
maintain high quality credit, together with
an efficient and cost-effective delivery
structure;
• Client Experience: Our goal is to be the
“Qatari Bank of Choice” for our clients by
providing best banking service and best
customer experience;
• Creativity and Innovation: We are
embarking on a digital transformation
journey and we will continue to be
pioneers of this change in the market by
introducing best in class products and
services;
• Culture: Our focus is on a “One Bank’ and
‘One Team” culture, based on values of
respect, collaboration, and teamwork;
• Compliance: Our aim is to be the
market leader for compliance and good
governance to achieve sustainable
growth for our business.
Awards
In 2017, Retail Banking further grew its
customer base through improved core
banking products and the introduction of
innovative services to meet the needs of
our customers.
The following is a list of recent awards:
• “SME Middle East Bank of the Year 2017”
from The Asian Banker
• “Qatar Best Retail Bank of the Year 2017”
from The Asian Banker
• Commercial Bank’s Visa Signature Credit
Card for SMEs was awarded the “Best SME
Credit Card” from The Banker Middle East,
a leading regional financial magazine in
Jan 2017.
• Our SME Card also won the “Best New
Product in Qatar for 2016” by Visa, Inc. in
May 2017
• “Best Franchise in Europe, Middle East
and Africa” from Diners Club International
in August 2017.
Business Performance
Retail Banking remains an important
contributor to the overall success of
Commercial Bank, built on a strong franchise
of customer service and innovation. Despite
tough market conditions, particularly in the
second half of the year, the Retail Banking
business delivered a strong performance
in 2017.
The Retail and Enterprise Balance sheet
remained stable with lending to customers
at QAR 21.6 billion in 2017, compared to QAR
21.4 billion in 2016 and deposits at QAR 21.5
billion in 2017 from QAR 21.4 billion in 2016.
With a large expatriate population, customer
acquisition continues to remain a strategic
focus area and despite the environment
in 2017 the Bank witnessed 2% growth of
all salaried customers through an ongoing
focused acquisition and sales strategy.
With increased focus on automation, control
on direct costs, improved fee income
revenue stream and effective net interest
margin management, Retail Banking
improved its contribution to the Bank’s
revenues by maintaining healthy margins
and operating income.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 32
Management Review
of Operations continued
Contactless cards are the latest innovation
from Commercial Bank to make banking
simple and convenient for the best client
experience.
Commercial Bank was awarded the “Best
Franchise in Europe, Middle East and Africa”
by Diners Club International in August 2017
at an exclusive event in Switzerland attended
by Diners Club franchise holders and Diners
Club senior officials. The Bank has the
exclusive rights to issue and acquire Diners
Club cards in Qatar and they form a key
product proposition in a range of credit card
packages offered by the Bank. Commercial
Bank also offers the highly exclusive Diners
Club Black credit card as a flagship product
for high net worth individuals in Qatar.
Commercial Bank, in partnership with Xpress
Money, launched an easy to use mobile
remittance application in April 2017 for
Commercial Bank’s PayCard customers.
PayCard customers are now able to send
money, check rates, view balance and
statements, and change their PIN using the
app. Remitting money via the mobile app has
many additional advantages and benefits to
PayCard customers, as it eliminates the need
to spend time in long queues at ATMs and
exchange houses.
Commercial Bank has partnered with The
Supreme Committee for Delivery and
Legacy (SC), the organisation responsible
for delivering the stadiums for the 2022 FIFA
World Cup, to help workers send money
back their home countries through the
Bank’s digital platforms, providing secure
international money transfers at a low cost.
Commercial Bank is also one of the few
banks to have enabled the 3D secure facility
for its debit card users that allows customers
to use their cards for online transactions.
We continue to be the market leader in the
payroll card (PayCard) business, with a total
card base of over 600,000.
Commercial Bank wins “Best Retail Bank in Qatar” award at The Asian Banker Middle East & Africa
Regional awards 2017
A growth in our operating income in 2017
versus 2016 by over 5% on a stable balance
sheet is testament to improved business
management. Our innovative and intelligent
product positioning and ongoing customer
campaigns have helped Retail Banking
maintain consistency in performance
through 2017, despite the challenging
conditions.
Products and Services
Cards
Commercial Bank’s Cards and Payments
teams continued their innovation journey
in 2017 by launching new and innovative
products and winning awards throughout the
year. Their contribution to Retail Banking’s
overall performance remained significant.
Commercial Bank’s Visa Signature Credit
Card for SMEs was awarded the “Best
SME Credit Card” from The Banker Middle
East, a leading regional financial magazine
in January 2017 and same product was
awarded the “Best New Product in Qatar for
2016” by Visa, Inc. in May 2017. These awards
were made in recognition of Commercial
Bank’s innovation to introduce a customised
product to meet the needs of the market.
Commercial Bank launched the first
contactless debit cards in Qatar on Visa’s
NFC platform in November 2017. The
contactless debit card enables Commercial
Bank’s customers to conveniently “Tap
& Go” at NFC-enabled Point-of-Sale
(POS) terminals and cardholders are not
required to enter a PIN or sign receipts
for transactions up to QAR 100 per day.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 33
As part of our increased focus on
digitization, we have successfully migrated
two-thirds of all WPS salary transactions to
digital channels. We upgraded our online
Corporate Trade Portal and launched Supply
Chain Finance to provide SME customers
with innovative and cost-effective solutions
to meet their banking needs.
We enhanced our proposition tailored
for young Qatari entrepreneurs called
“Sanaduk”, allowing them to cultivate
important entrepreneurial skills and
simultaneously catering to the development
of their overall business. This aligns well
with the vision of the country to develop
its capabilities, diversify economically, and
become more self-sufficient. With this
product, Commercial Bank is seen as actively
supporting Qatar’s future business leaders.
Enhancements in Delivery Infrastructure
Branch and ATM Networks
Continuing our branch strategy to align our
presence with emerging geographic and
economic zones in the country, we opened
two new branches in Mall of Qatar and Doha
Festival City. We introduced two Corporate
Cash Centres with extended hours to offer
greater flexibility to SME customers and
provide a better experience for Retail
customers in mall branches.
Commercial Bank opened two dedicated
Collection Centres at City Centre Mall and
D-Ring Road working across three shifts
with extended working hours on evenings
and weekends, offering customers greater
convenience to collect cards, PINS and
Internet banking tokens.
Our branch network is supplemented by
over 179 ATMs that are strategically located
around Qatar to ensure optimum usage
of the network by customers. More than
60% of our ATM machines offer both cash
withdrawal and cash deposit facilities.
Commercial Bank deploys a low cost
operating model to serve this segment
allowing us to support Qatar’s National Vision
for WPS and the needs of our own Corporate
and SME customers
Product Innovation
In partnership with HEC Paris in Qatar, we
launched an exclusive arrangement to
provide interest free financing for customers
intending to complete specialised
educational programs at HEC Paris in Qatar.
2017 also saw the launch of one of the
biggest domestic campaigns encouraging
customers to save with an opportunity to
win one of 365 cash prizes in an annual year
including a grand prize of QAR 1 million.
Life in Qatar
Commercial Bank leads the market for new
arrivals to Qatar with our innovative expat
offer, “Life in Qatar.” This banking service
continued to move from strength to strength
in 2017 by enhancing the delivery of the
proposition and tactical approaches. Tailored
specifically for people moving to Qatar, it
provides ease and convenience for those
relocating and has already helped over
70,000 customers from over 144 different
countries worldwide. The “Life in Qatar”
website is filled with useful information for
those relocating and multiplied its daily
visitors in 2017.
Considerable investment has been made
in 2017 towards building our wealth
management capabilities with particular
focus on investing in upskilling people.
Over the course of the year, individuals
from various Retail businesses have
obtained The International Certificate in
Wealth and Investment Management from
The Chartered Institute for Securities and
Investment, the leading professional body for
securities, investment, wealth and financial
planning, and widely recognised in the region
as the foundation for offering wealth services.
Enterprise Banking
Commercial Bank remains committed to the
development of the SME sector in line with
Qatar’s National Vision 2030. As part of our
SME strategy in 2017, we focused on building
strong and diversified transactional fee
income streams to complement the asset
based income stream.
We have achieved selective and controlled
growth largely from deepening existing
customer relationships with continued
emphasis on diversified loans of smaller
values, steady volumes, tight controls and
more stringent underwriting criteria.
We continued our partnership with Qatar
Development Bank’s “Al Dhameen”
programme in 2017, supporting key sectors
of the Qatari economy in their drive to
become self-sufficient.
Commercial Bank wins Visa award for “Best SME Credit Card” from The Banker Middle East
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 34
Management Review
of Operations continued
In support of the “Go Green and Paperless”
initiative, we updated all our ATM machines
with the capability to issue card PINs. This
feature allows customers to generate or
change their debit and credit cards PINs by
following a few easy steps.
Internet and Mobile Banking
Commercial Bank’s strategic intent to
deepen digital leadership continued to be an
area of greater focus in 2017.
Our dedicated Enterprise Mobile Banking
App witnessed a 467% increase in mobile
transaction volumes in 2017. The App offers
SME customers a convenient banking
experience with exciting features including
complex, rule based signatory approvals for
payments and transfers.
We launched our PayCard Mobile App in
2017, the first in the Middle East, offering
online banking with easy remittance facilities.
This has helped reduce our customers’
reliance on exchange houses for their
transfer needs.
The introduction of 60-second remittance
capabilities to India, Philippines and Sri
Lanka, allows customers from these
countries to send money home almost
instantly. Adding these services have
resulted in a significant increase in
transaction volumes and over 95%
remittances are now processed through our
digital channels.
In recognition of these innovative features
for customers, Commercial Bank’s Mobile
Banking App was consistently rated as the #1
Financial App in Qatar by the Apple store for
the majority of 2017.
Whilst 2017 was a challenging year,
particularly in terms of the political and
regulatory landscape, Commercial Bank’s
Treasury team, along with their Bank-wide
colleagues continued to deliver a seamless
service to all our customers, introducing and
supporting many new innovative schemes.
In 2017, Commercial Bank succeeded in
becoming fully compliant with the EMIR and
Dodd Frank regulatory requirements for the
central clearing of interest rate derivatives.
Furthermore and in support of this, we
successfully opened our fully operational
Treasury SPV.
Trading continued to provide strong revenue
generation in 2017. As global interest
rates rise, the challenge in 2018 will be to
focus on using all available asset classes
to mitigate any of the risks the Bank will
face in this environment and by doing so,
increase trading’s contributions to the Bank’s
profitability in a prudent manner.
The Treasury Sales unit provides a full
suite of products to the Bank’s customers,
supporting their needs with regards to
managing and hedging their foreign
exchange, interest rate exposures and other
asset classes. Commercial Bank Treasury
and Financial Markets continues to grow
its footprint as a leading market-maker in
the GCC fixed income, treasury securities
and FX markets, and in providing market
access to corporates and institutions. In
2017, Commercial Bank Treasury expanded
its capacity to support client needs by
adding digital execution capabilities and risk
management solutions, both domestically
as well as cross-border, demonstrating the
ability to provide seamless client solutions
across multiple geographies.
The Investments Department is engaged
in managing the Bank’s investments in
capital markets to achieve superior and
stable returns. The Department continued
to provide strong revenue generation in
2017 whilst ensuring a liquidity buffer for
the Bank by focusing on liquid investments.
Parvez Khan
EGM, Treasury & Investments
Treasury and Financial Markets
Commercial Bank’s Treasury Department
manages the overall funding and liquidity
requirements of the Bank. This includes
management of operational and strategic
liquidity requirements, as well as accessing
the debt markets to lock in funding via debt
issuance or via institutional funding. Proactive
management allows the Bank to manage its
funding base in a cost efficient manner while
ensuring the balance sheet is managed in
accordance with the expectations of rating
agencies, regulators, the Board of Directors
and shareholders. Treasury has been
instrumental in maintaining a stable cost of
funding, increasing the duration of the Bank’s
liabilities in a rising interest rate environment
while seeking diversification of funding
channels. Treasury continued to focus on
balance sheet optimisation and liquidity
management, together with maintaining
key liquidity ratios and related business
regulatory ratios well above the minimum
required by the Qatar Central Bank.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 35
There were also significant improvements
made to Operational Risk and Fraud
Management capabilities in line with the
overall digitization strategy of the Bank.
In 2018, Commercial Bank will continue to
employ clear risk management objectives
and well-established strategies through core
risk management processes.
Risk Management Framework
Commercial Bank uses an integrated risk
management framework to identify, assess,
manage and report risks and risk-adjusted
returns on a consistent and reliable basis. This
framework requires each business to manage
the outcome of its risk-taking activities.
The Risk Management Department provides
expertise and oversight for business risk
taking activities. The Department develops
and maintains an aligned and integrated
framework, policies and procedures for
risk management and ensures they are
embedded and used as part of the day-
to-day management of the business. Risk
Management also measures risk exposures
to support risk decisions by business owners
and also to make certain market and credit
risk decisions under approved delegations
of authority. In particular, it undertakes
quantitative and qualitative analysis of credit
exposures originated by the business as
part of its responsibility for credit rating and
decision-making.
Commercial Bank maintains the four
principal categories of risk: credit,
operational, market, funding and liquidity.
Credit Risk
Commercial Bank has clearly defined credit
policies for the approval and management
of credit risk. Formal credit standards apply
to all credit risks decisions, with specific
portfolio standards applying to all major
lending areas. These incorporate obligor
quality, income capacity, repayment sources,
acceptable terms and security, and loan
documentation tests.
The Department’s goal in 2018 will be to
maintain returns momentum in a challenging
geo-political and regulatory environment
with expected tighter monetary policy. The
investment emphasis remains on active
portfolio management to optimise returns
and ensure effective risk management
by flexible asset allocation, hedging, and
duration management.
Commercial Bank Financial
Services
Commercial Bank Financial Services (L.L.C.)
(CBFS), a wholly owned subsidiary of
Commercial Bank, provides customers with
a secure platform for trading on Qatar Stock
Exchange listed stocks, bonds and T–bills.
CBFS is a licensed brokerage company and
is regulated by the Qatar Financial Markets
Authority (QFMA) to act as liquidity provider for
certain securities at the Qatar Stock Exchange.
CBFS provides its customers with the best
investment product options and services
available in Qatar while building on its rich
heritage from Commercial Bank based on
understanding of customer needs.
CBFS has a robust online trading platform and
has introduced a mobile trading application in
order to have an online presence and provide
convenient trading options through secure
mobile channels for its customers.
CBFS has also upgraded its e-trading system
which is used by our retail customers to
trade online. The latest version provides real
time market feeds, a richer user interface
and additional functionalities. Encouraging
customers with an online trading option is in
line with the Bank’s strategy of providing best
digital experience.
CBFS caters to a range of clients with varying
risk appetites and investment needs. Our
large and diversified customer base includes
retail, high net worth individuals and corporate
entities (both domestic and international). Since
inception in 2011, CBFS has made significant
progress and continues to build its position as
one of the leading brokerage houses in Qatar.
Rana A A Salatt
EGM, Chief Risk Officer
Risk Management
Managing financial risk is a fundamental part
of Commercial Bank’s functional activities.
The awareness of risk encompasses every
aspect of our business and it is seen as the
responsibility of each and every member of
the Bank. Our Risk Management practices
are well embedded and are cascaded down
from the Board of Directors through to the
Board-level Committees, Management-level
Committees, Executive Management and
employees.
Accurate, reliable and timely information is
vital to support business decisions regarding
risk matters at all levels at the Bank.
During 2017, Commercial Bank enhanced
its Asset Liability Management capability by
incorporating prepayment and behavioural
models to sensitize expected cash flows.
The Bank also developed the tools and
approach for IFRS 9 and incorporated it into
the day-to-day decision making process.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 36
Management Review
of Operations continued
The Bank assesses the integrity and ability
of debtors or counterparties to meet
their contracted financial obligations for
repayment. Collateral security such as real
estate, charge over income or assets, and
financial securities is generally taken for
business credit, except for Government,
major banks and corporate counterparties
that are externally risk-rated and of strong
financial standing.
Operational Risk
Operational risk is defined as the risk of
economic loss arising from inadequate or
failed internal processes, people, systems,
or from external events. It includes legal,
regulatory, fraud, business continuity and
technology risks.
The Operational Risk Management (ORM)
Department supports the achievement of
Commercial Bank’s financial and business
goals. ORM manages operational risk using
industry standard operational risk tools. The
primary objectives of the Operational Risk
Department are as follows:
• Maintenance of an effective internal
control environment and system of
internal control;
• Demonstration of effective governance,
including a consistent approach to
operational risk management across the
Bank;
• Transparency, escalation and resolution of
risk and control incidents and issues.
Market Risk
Market Risk, the potential loss in value or
earnings arising from changes in market
factors is managed by the Bank’s Market
Risk Department with full oversight by the
Asset and Liability Committee (ALCO), which
provides specific guidelines for market risk
management.
Commercial Bank uses value-at-risk (VaR)
as one of the measures for market risk. VaR
measures potential loss using historically
observed market volatility. Stressed VaR is
used at the Bank to measure the potential for
economic loss from extreme market events.
For assessing interest rate risk, metrics
include earnings-at-risk (EaR), change in yield
(PV01) and economic value of equity (EVE).
The results of these measures are reported
to the ALCO and the Management Risk
Committee on a regular basis.
Liquidity and Funding Management
Commercial Bank follows a balanced
liquidity management strategy through the
combined use of liquid asset holdings and
borrowed liquidity to meet its liquidity needs.
The Bank’s funding policies provide that:
• Liquidity requirements be measured
using a number of approaches including,
sources and uses, structure of funds and
liquidity indicators;
• An appropriate level of assets is retained
in highly liquid form;
• The level of liquid assets complies with
stressed scenario assumptions to provide
for the risk of the Bank’s committed but
undrawn lending obligations;
• Establishment of credit lines.
Board Risk-related Committees
The two Board Committees which have
primary responsibility and oversight for risk
are:
1. The Board Risk Committee (BRC) is
responsible for all aspects of enterprise
wide risk management including, but not
limited to, credit risk, market risk, liquidity
risk and operational risk. The BRC reviews
policy on all risk issues and maintains
oversight of all Bank risks.
2. The Board Executive Committee (BEC) is
responsible for evaluating and granting
credit facilities within authorised limits
as per Qatar Central Bank and Board
guidelines. The BEC also reviews strategy
on recovery of special asset relationships,
reviews and approves all credit proposals
(other than off-the-shelf products)
relating to political figures and persons
in ministerial posts and within the risk
delegation of authority.
In addition, specific risk-focused
management committees (Risk Management,
Asset and Liability and Special Assets
Management) convene, at a minimum, on
a quarterly basis and more frequently on a
needs basis. The Board of Directors or their
sub-committees are regularly updated on
any potential risk that the Bank may face.
Risk Management continues to be very
well positioned to manage risk resulting
from the increasing sophistication, scope
and diversity of the Bank’s business and
operations. Risk Management has dedicated
teams, underlining Commercial Bank’s
commitment to a strong risk governance
and management framework. In 2018, the
Bank will continue to enhance its internal
controls and improve various processes in all
areas of risk management.
The Bank is in compliance with the provisions
of the Basel III framework as per the directive
of the Qatar Central Bank.
In summary, the governance framework,
policies and administrative procedures and
practices relating to risk management in
Commercial Bank align well with global best
practice, the recommendations of the Basel
Committee and the guidelines of the Qatar
Central Bank.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 37
Marketing works closely with the Bank’s
main business lines and support functions
to develop integrated marketing campaigns
targeting different customer segments with
diverse products and services based on
ongoing research, consumer insight and
return on investment analysis. Marketing
also runs the Bank’s sponsorships and
key events, as well as its Corporate Social
Responsibility (CSR) programmes.
Showing national pride
Commercial Bank is proud to be a Qatari
bank and stands united with the people of
Qatar in full support of His Highness The
Emir Sheikh Tamim bin Hamad Al Thani
during the economic blockade. To publicly
express Commercial Bank’s national pride,
an image of the iconic ‘Tamim Al Majd’ mural
was placed outside the Commercial Bank
Plaza building in West Bay. Covering most of
the building’s façade, the image is one of the
largest of its kind on Doha’s skyline.
In a further display of support and solidarity
with His Highness the Emir, a signature board
with the ‘Tamim Al Majd’ mural was installed
inside the Plaza. At a signing ceremony
attended by Commercial Bank’s Chairman,
Board of Directors, Group CEO, Executive
Management and staff, the mural was
collectively signed with patriotic messages of
allegiance, appreciation and Qatari pride.
Supporting Qatar’s domestic economy
and international trade
Commercial Bank is committed to
supporting Qatar’s economic development
and sustainability in line with the Qatar
National Vision 2030. As a leading provider
of banking services and innovative new
products, Commercial Bank supports
the growth and prosperity of new and
established companies and plays a key
role in the realisation of the National Vision
by financing Qatar’s huge infrastructure
projects. The economic blockade has
intensified Qatar’s efforts to strengthen
its economy through enhancing bilateral
trade with countries outside of the GCC, and
Commercial Bank participated in several
events during 2017 to promote Qatar’s
international trading relations.
Commercial Bank Group CEO Joseph
Abraham delivered a speech on potential
partnership opportunities at the ‘Qatar – UK
Business and Investment Forum’ in London.
Staged to connect Qatari businesses
and governmental community with their
counterparts in the UK, the Forum was held
under the patronage of HE Prime Minister
and Minister of Interior Sheikh Abdullah bin
Nasser bin Khalifa Al Thani, and organised by
the Permanent Committee for Organising
Conferences at the Ministry of Foreign Affairs.
Commercial Bank Board Members and staff in show of support for HH the Emir
Hussein M Ali Al-Abdulla
EGM, Chief Marketing Officer
Marketing
Commercial Bank’s Marketing Department is
responsible for the Bank’s reputation, brand
identity and ongoing communications with
the Bank’s existing and potential customer
base through both digital and traditional
media channels.
In line with Commercial Bank’s digital
transformation, the Bank maintains a
dominant presence in Qatar’s digital spaces
and the Bank’s brand exemplifies digital
marketing thought leadership through a
proactive approach to digital media, quality
content offering, and implementation of first
to market technologies and the utilisation of
social media to engage with customers.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 38
Management Review
of Operations continued
Commercial Bank sponsors a summit at ‘Expo Turkey by Qatar’
Group CEO Joseph Abraham delivered a speech at the ‘Qatar – UK
Business and Investment Forum’ in London
Turkey is a strategic market for Qatar and
Commercial Bank, who with its Turkish
subsidiary ABank, were exclusive sponsors
of a summit held during the ‘Expo Turkey
by Qatar’ in the Qatar National Convention
Centre, with Group CEO Joseph Abraham
participating at the Summit’s panel session
on bilateral business and investment
opportunities between Qatar and Turkey. In
November, the Group CEO highlighted the
untapped opportunities for ASEAN exports
to Qatar during his keynote address at the
first ever Association of Southeast Asian
Nations (ASEAN) seminar on trade and
investment held in Qatar.
Corporate Social Responsibility (CSR)
As Qatar’s first private bank, the Bank
regards CSR as integral to its business, and
for over 40 years has been committed to
supporting Qatar’s national development
by serving the wider community through
CSR programmes and also considered
sponsorship of events. Commercial Bank’s
Marketing Department is responsible for
formulating, implementing and promoting
the Bank’s comprehensive range of CSR
programmes providing financial, practical,
humanitarian, educational and skills-based
support to the Qatari community.
As a leading proponent of CSR in Qatar,
Commercial Bank participated at Qatar
University’s CSR Exhibition and Conference,
and its work with the Qatari community was
recognised by an excellence award.
Committed to the Qatari community
Commercial Bank believes that CSR is most
effective and credible when CSR activities are
relevant to an organisation’s expertise and
can legitimately be seen to make a difference
within a chosen field. Our approach to CSR
is to invest heavily in the Qatari community
and engage with all segments of Qatari
society. As Qatar’s leading private sector
bank, we believe it is our responsibility to
take the initiative and give back to the Qatari
community of which we are part, and where
we operate every day.
Commercial Bank strives to be an
outstanding corporate citizen by supporting
the development of the Qatari community as
a whole through a range of socio-economic
initiatives in diverse areas including
humanitarian projects and charitable work
for the disadvantaged; educational, training
and personal development programmes for
Qatari youth; sports and health initiatives;
support for Qatari heritage and culture; and
the Bank’s Qatar National Day programmes
that revive and celebrate Qatar’s cultural
heritage.
During 2017, Commercial Bank’s Marketing
Department successfully implemented
a large number of CSR initiatives with an
impact both outside and within the Bank.
In an internationally acclaimed CSR project,
Commercial Bank partnered with the
Supreme Committee for Delivery & Legacy,
the organisation responsible for delivering
the stadiums for the 2022 FIFA World Cup,
to help workers send money back to their
home countries through the Bank’s digital
platforms at low cost.
With 8,000 Supreme Committee workers
registered as Commercial Bank customers,
QAR 16 million is transferred to India, Nepal,
Bangladesh, Sri Lanka and the Philippines
every month from workers on projects
directly related to the 2022 FIFA World
Cup. Between travel time and queuing,
workers lose an average of two hours
every time they choose to wire money
to their families – invariably on rest days.
Commercial Bank officials worked with the
Supreme Committee to select workers’
accommodations that do not have easy
access to ATMs or exchange houses, and
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 39
Commercial Bank awarded Jeunghun Wang as the first Asian winner of the 2017 Commercial Bank Qatar Masters
along with the QGA president Mr. Hassan Nasser Al Naimi
conducted training sessions for workers
on how to use the Bank’s mobile app to
send money home in a simple, fast and safe
way with attractive exchange rates, without
having to travel to traditional exchange
houses. A dedicated call center was also
set up to accommodate any queries related
to registration or use of the remittance
solution.
Qatari youth
Commercial Bank’s National Development
Programme invests significant resources
towards the skills and training of young
Qataris as part of our commitment to
developing human capital in line with the
National Vision 2030 for the benefit of
current and future generations. In 2017, the
Bank led a number of educational initiatives
for Qatari youth benefiting both staff
members and extending out towards the
wider Qatari community.
Titled “Leading change via digital channels”,
68 kids completed Commercial Bank’s
fourth “Young Bankers” summer internship
programme for Qatari students aged 13 to
17, providing real-life work experience inside
Commercial Bank branches. The rewarding
two-month long programme focused on
the digital evolution taking place within
the banking industry, with the students
assigned the task of encouraging the use
of digital banking channels available to
Commercial Bank customers and explaining
their benefits, all under the guidance and
supervision of Commercial Bank staff.
Commercial Bank partnered with the
Ministry of Education and Higher Education
to create an assessment centre for
secondary school students in a CSR
initiative designed to work with students
in a meaningful way to help them become
tomorrow’s leaders. 100 students were
assessed on their interests, skills and abilities
by undergoing an online test followed
by one-to-one meetings with qualified
professionals to help them make the right
academic decisions for their future careers.
Commercial Bank supports talented young
Qataris through university, and 10 new
Qatari graduates who had been sponsored
throughout their entire university journey
were hired on Qatar National Day. These
young graduate will now begin Commercial
Bank’s Graduate Development Programme,
known as one of Qatar’s most effective
professional training programmes, as
participants experience working life in nearly
all business units, giving them a sound
understanding of how the Bank operates and
how its different operations link together.
Commercial Bank supported Qatar
University’s Entrepreneurship Day as
exclusive sponsor, which acts as a platform
to promote the concept of entrepreneurship
among Qatar’s youth, universally
recognised as a vital element for economic
development and an engine for future
private sector growth and diversification.
Sports and Health
Commercial Bank believes that sport plays
an integral role in today’s society, promoting
active and healthy lifestyles through physical
exercise, dedication, teamwork, competition
and good sportsmanship.
Continued title sponsorship of the
Commercial Bank Qatar Masters reflects the
Bank’s promotion of excellence in sports
and its keen interest in enhancing Qatar’s
sporting reputation by bringing the best
international competitors to Qatar for a golf
tournament that attracts a global audience.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 40
Management Review
of Operations continued
National Sports Day is a prominent
nationwide initiative that holds great
significance for Qatar’s residents.
Participation in sports and physical activity
is an important area of focus for human
development in the Qatar National Vision
2030 through promoting health, well-being
and the development of Qatar’s home-grown
sportsmen and women. In 2017 Commercial
Bank proudly celebrated National Sports Day,
with many staff participating in organised
physical activities including yoga classes for
females and males, a cricket match, and the
Qatar Central Bank (QCB) walking race.
To raise awareness about breast cancer
among the Qatari community during the
International Breast Cancer Awareness
Month of October, Commercial Bank
partnered with Primary Health Care
Corporation (PHCC). Under the partnership,
Commercial Bank displayed awareness
adverts about PHCC’s National Breast and
Bowel Screening Programme on the Bank’s
network of ATMs across Qatar and PHCC
supplied pink ribbons and bracelets for
female Bank staff to further raise awareness
and show support for breast cancer survivors,
patients and their family and friends.
Commercial Bank celebrates National Sports day by organising physical activities and
distributing gifts among the wider Qatari community
Commercial Bank National Day celebrations reflect Qatari heritage and unity
Culture
Commercial Bank is proud of our Qatari
heritage and we feel part of the Qatari
community from within which we were
established over forty years ago. Celebrating,
cherishing and promoting traditional Qatari
culture and values are constant underlying
themes behind all our CSR programmes, and
most clearly expressed during Qatar National
Day and Ramadan.
Commercial Bank chose to celebrate Qatar
National Day with a wide range activities
drawing upon Qatar’s rich cultural heritage
in a special area within Commercial Bank
Plaza and a stunning temporary replica of
Al Zubarah Fort, Qatar’s UNESCO World
Heritage listed site. Qatar’s traditions were
brought to the fore at the Plaza, where staff
enjoyed cultural activities including Al Fajiri
(the art of performed sea songs), a girls’
traditional song and dance performance,
Arda (folkloric sword dance), and classic
Qatari food favourites.
Commercial Bank’s multinational staff
and their families gathered together
during Ramadan for a Suhoor in the time-
honoured Qatari tradition to reinforce social
relationships across the Bank and foster a
sense of community and togetherness.
Charitable activities
Commercial Bank is inspired by, part of,
and wholly committed to Qatar. The Bank is
committed to supporting the full spectrum of
Qatari society, including the disadvantaged
and less fortunate.
For Qatar National Day, the Bank engaged in
a number of community outreach activities
to share the joyful celebrations with the
wider Qatari community, with volunteers
visiting the children’s floor at Al Wakrah
hospital, independent schools, international
schools, and Qatar Society for Rehabilitation
of Special Needs where they distributed
National Day gifts.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 41
Nationalisation
We invest in young Qataris who will be our
future leaders
Commercial Bank sponsors over thirty
university students with financial support and
by offering job opportunities. We support our
sponsored students until graduation, which
for some in the current cohort will be 2022.
Since 2015 we have supported over
29 graduates through our Graduate
Development Programme. In the initial
stages of this Programme, young leaders
undertake job rotations across our business.
In 2017 we focused on placing our graduates
in permanent roles to enable them to
develop specialist, professional skills. In
2018, we will recruit and onboard more
than 21 young Qataris.
Enhanced development for Commercial
Bank Nationals
We believe the best way to learn is to apply
ourselves creatively at work. We expect
around 70% of learning and professional
development to happen in the workplace
and on the job, which is why our new National
Development Programmes focuses on
stretch assignments and learning-by-doing.
In 2017, we identified high-potential Qatari
managers and supported them to take
on new roles, challenging short-term
assignments, and high-profile projects. This
Programme has been very successful and we
look forward to expanding the intake in 2018.
Enhanced development for young leaders
In 2017, we spent time talking to our young
Qatari leaders and their managers. We learned
a lot about young peoples’ development
needs and used this knowledge to refine our
National Development Programmes.
During Ramadan, the Bank chose to
celebrate Garangao by distributing specially
designed Garangao gifts including traditional
sweets and nuts to children at Commercial
Bank mall branches, Hamad Hospital and
Al Wakrah Hospital. Al Wakrah Hospital
honoured Commercial Bank with an award
in recognition of the Bank’s efforts in sharing
and spreading Garangao joy with kids
unfortunately enough to be in the hospital
during Ramadan. Taking place on the 14th day
of the holy month of Ramadan, Garangao is
considered a special custom celebrated in
Qatar and the Gulf, with its roots in the pearl
diving heritage of the region.
Commercial Bank sponsored Qatar Red
Crescent Society’s (QCRS) Ramadan Iftar
(Mawada) Programme. The Programme is
a humanitarian project designed to provide
relief to the needy, show compassion and
achieve social solidarity during Ramadan.
Engaging with poor families, workers, the
sick and the elderly, QCRS issued 750 Iftar
vouchers which families redeemed at pre-
approved restaurants during Ramadan for an
Iftar meal. Separately, the Bank organised and
shared an Iftar meal with the elderly residents
of the Empowerment and Elderly Care Center
(IHSAN) as a gesture of appreciation and
respect for both the older generations and
for Qatari customs during Ramadan.
The Bank supported a number of notable
charities in 2017, including a donation
towards QCRS’ ‘Warm Winter’ campaign. The
donation helped QCRS to distribute winter
aid to the poorest families and refugees,
alleviating the suffering of the vulnerable in
Afghanistan, Yemen, Syria, Syrian refugees in
Lebanon, Jordan, Kurdistan and Palestinian
refugees in Lebanon.
Kimberley Ann Reid
EGM, Head of Organisational Effectiveness and
Strategic Leadership
Human Capital
Investment to reignite Commercial
Bank’s entrepreneurial culture
• We created a ‘People Decisions Forum’
where executives meet once a month to
advance our People Agenda.
• We reinvigorated our performance
management system and put more
focus on people, conversations and
development.
• We set new, challenging performance
standards for our leaders and teams.
• We restructured our Human Capital team
and introduced a business-partnering
model to support executives and
managers to lead, inspire, coach and
develop their teams.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 42
Management Review
of Operations continued
In 2018, we look forward to attracting more
young Qataris who share our entrepreneurial
vision. Through our new National Recruitment
Programme we will purposely seek out young
Qatari nationals who are ambitious, innovative
and hungry to be part of the dynamic new
banking profession of the future.
Learning and development
We invest to make Commercial Bank a
great place for learning. We target our
development resources toward managers
and individuals who are skilled at sharing
knowledge and training others. This helps
us strengthen our culture of creativity and
innovation.
Performance and rewards
The Board of Directors regularly reviews
compensation and benefits to make sure
we pay fairly and competitively, reward
high performers, link incentive payments
to the overall performance of the Bank, as
well as individuals’ personal contributions.
The Board of Directors also focuses on risk
management by considering:
• The mix between salary and incentives.
• The balance between profit, risk and the
time horizons associated with those risks.
We disclose our remuneration policies and
practices in our financial reports.
Human Capital operations
In 2017, we undertook a comprehensive
review of our policies, procedures and
operating model.
We simplified our policies and processes and
implemented ‘SuccessFactors,’ a cloud-
based human resource information system
that increases operational efficiency and
helps to empower our managers.
Innovation has always been at the heart of
Commercial Bank since we introduced the
concept of modern banking to Qatar in 1975.
This commitment to innovation continues
today, with Commercial Bank launching
several ‘first-to-market’ digital innovations
in 2017 including a 60-second online
remittance service to India, Sri Lanka and
The Philippines; contactless Debit Cards; a
remote cheque deposit solution enabling
customers to send cheques digitally for
clearing; and ‘e-Gifts’ that allow customers
to instantly send electronic cash gifts with a
personal greeting to family and friends.
In another digital first, Commercial Bank
completed the first blockchain pilot in
Qatar with our regional alliance banks in
Turkey, Oman and the UAE, in addition to
other banks in India and Egypt. The initial
pilot phase used a blockchain network to
process international transfers, deploying
a cloud-based ledger technology network
to enhance automation between banks
with increased transactional security,
accuracy and speed. The blockchain network
eliminated the need for intermediaries,
enabling near to real time bank-to-bank
transfers at a low cost. Following Qatar
Central Bank approvals, the second
phase of the project will expand to focus
on trade finance and transactions that
include legal and trade documents. Trade
finance transactions will be paperless on
the blockchain network, simplifying the
process of exchanging purchase orders and
invoices by eliminating lengthy international
paper trails and verification through trade
intermediaries.
While digital is of a critical importance to
Commercial Bank and we fully embrace the
global trend towards cashless transactions,
our branch network continues to be the
favoured banking channel for many of our
customers. Branches remain integral to how
Commercial Bank delivers its services in
recognition of some customers’ preferences
Leonie Ruth Lethbridge
EGM, Chief Operating Officer
Operations
Commercial Bank has embarked on a
digital transformation journey in line with
our passion to provide the best client
experience, creativity and innovation. The
future of banking has become increasingly
digital and Commercial Bank are the pioneers
of this change in Qatar by investing heavily
in technology, bringing globally leading
solutions to the market and embedding digital
throughout the back-end of our organisation.
Commercial Bank is facilitating and
experiencing a rapid digitization among
our customer base. Digital banking has
the advantage of speed and convenience,
allowing customers to bank at a time and
place that suits them for the best client
experience. In 2017, Commercial Bank grew
its active digital users by 27,000 (27%), with
the number of digital transactions rising by
5.6 million (57%).
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 43
for personal and face-to-face interactions
with staff and Relationship Managers.
Commercial Bank continues to invest in our
branch network and in 2017 we opened a
new state-of-the-art branch at the popular
Mall of Qatar with full personal banking and
ATM services.
Commercial Bank’s digital transformation
also applies to our internal operations, and
we have embedded digital throughout the
back-end of our organisation for greater
efficiencies and cost reduction. In 2017,
we deployed the first Board of Directors
electronic voting system in Qatar, allowing us
to simplify and accelerate the voting process.
A major new digital initiative was the launch
of ‘CB Smart’ which has the core concept
of creating a digital office through video
conferencing, Wi-Fi, iPads, and using digital
rather than physical paper documents.
Digital documents have the advantages of
saving time, costs and the environment,
and a later phase of CB Smart will see
the introduction of digital signatures to
enhance the client experience through vastly
improved turnaround and execution times
for documents such as loan agreements that
otherwise would need to be physically signed
by multiple people in multiple locations.
Dominate Transaction Banking in Qatar
The future of banking will be determined
by banks who can capture an increasing
share of transaction flows and do so
cost-effectively. Transaction Banking is an
essential part of our strategic future, and a
key element of Commercial Bank’s vision to
be ‘the best bank in Qatar’ is to dominate
Transaction Banking in Qatar.
Relative to the local competition,
Commercial Bank handled a large number of
transactions in 2017:
• Commercial Bank branches and digital
channels jointly handled an estimated 15
million transactions in 2017
• Commercial Bank has the second largest
ATM network and the third largest branch
network in Qatar, together processing
an estimated QAR 68 billion in cash and
cheque transactions in 2017
• Commercial Bank has over 20% market
share of Credit Card spending and 17%
of cards in force with over 1 million cards
issued, including over 60% share of the
Pay Card market
• Commercial Bank is the market leader
in acquiring, with 56% of all point of sale
terminals (excluding Government) in Qatar.
• 600,000 salaries were processed in
Qatar with Commercial Bank
Transaction Banking presents an opportunity
to create diversified, sustainable earnings,
supporting fee income, low cost deposits
and the benefits of economies of scale. To
fully capitalise on this opportunity, the launch
of Commercial Bank Innovation Services
(CBIS) in December 2017 represents a major
step forward towards realising our goal of
dominating Transaction Banking in Qatar.
Digital vs Brach Transactions
SME Mobile Banking Transactions
s
d
n
a
s
u
o
h
T
300
250
200
150
100
50
0
2013 2014 2015
2016 2017
Customer
base
Branch
usage
Digital
usage
18
16
14
12
10
8
6
4
2
0
s
n
o
i
l
l
i
M
6000
5000
4000
3000
2000
1000
0
613
Dec
(’16)
5,159
5,158
4,942
3,756
3,335
2,695
2,849
2,987
1,774
1,234
750
825
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 44
Management Review
of Operations continued
CBIS marks the end of a previous outsourcing
model with a global top 3 business process
outsourcing firm, where operational costs
were proportional to transaction volumes.
Under this old model, costs increased 2.5
times since the relationship was established
in 2011 and were projected to increase by a
factor of 4 by 2020.
CBIS is a scale-agnostic model and a wholly
owned subsidiary of Commercial Bank
operating under the regime of the Qatar
Financial Centre. By bringing operational
services back on-shore through our
own in-house entity, CBIS facilitates the
implementation of new technologies and
new ways of thinking such as robotics,
machine learning, and straight through
processing to revamp our end to end
operating model. By having direct control
over our own processes, Commercial
Bank can now fully exploit these latest
technologies and digitization as a driver of
innovation and future growth.
CBIS is scalable to handle greater volumes
of transactions at lower cost, and as
Commercial Bank grows to process a greater
number of transactions, the incremental
cost of these transactions are kept at virtually
zero through innovation and the benefits of
economies of scale.
Acknowledgement
Commercial Bank’s successful business
performance in 2017 has only been possible
through the dedication and hard work of
our valued employees and the leadership
team. We are also extremely grateful for the
ongoing support and guidance provided by
the Chairman, Vice Chairman and Managing
Director and Members of the Board. Under
their leadership, we have continued to
achieve growth and have sustained our
reputation of being one of Qatar’s oldest and
most successful banks for more than four
decades.
In conclusion, we would like to express our
sincere gratitude to His Highness Sheikh
Tamim Bin Hamad Al Thani, Emir of the
State of Qatar, for his visionary leadership
of Qatar. We would also like to thank His
Excellency the Prime Minister and Minister of
the Interior Sheikh Abdullah Bin Nasser Bin
Khalifa Al Thani, His Excellency the Minister of
Finance, Mr. Ali Shareef Al Emadi, the Qatar
Central Bank and the Ministry of Economy
and Commerce for their continued guidance
and support of the Bank throughout this
past year. The Qatar Central Bank, under the
leadership of His Excellency the Governor
Sheikh Abdullah Bin Saud Al Thani, has
shown prudence with clear and consistent
leadership of the banking industry enabling
Qatar’s financial market to grow despite a
challenging operating environment.
We are very proud of our success over the
years and are optimistic about what the future
will bring for Commercial Bank and for Qatar.
Active Digital Users
Biometric Registration (fingerprint login)
s
d
n
a
s
u
o
h
T
140
120
100
80
60
40
20
0
131
126
90
67
s
d
n
a
s
u
o
h
T
99
88
57
50
66
44
44
29
2013 2014 2015
2016 2017 2020
Active
users
Mobile
users
60
50
40
30
20
10
0
1K
Jan
59K
53K
47K
42K
37K
32K
27K
22K
15K
7K
2K
Feb
Mar
Apr
May
Jun
Jul
Aug
Sept
Oct
Nov
Dec
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 45
Responsibility Statement
To the best of our knowledge, financial
statements prepared in accordance with
International Financial Reporting Standards
give a true and fair view of the assets,
liabilities, financial position and profit of The
Commercial Bank (P.S.Q.C.). We confirm that
the management review, together with the
notes to the financial statements, includes a
fair review of development and performance
of the business and the position of the Group
together with a description of the principal
risks and opportunities associated with the
expected development of the Group.
21 March 2018
For and on behalf of the Board of Directors:
Mr. Hussain Ibrahim Alfardan
Vice Chairman
Mr. Joseph Abraham
Group Chief Executive Officer
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017
46
Achieving growth
With the vision of becoming
the ‘Best Bank in Qatar’ and the
‘Qatari Bank of Choice’, actions
taken under our Five Year
Strategic Plan initiated in 2016
are showing results by increasing
our capital, reshaping our loan
book and improving asset quality
through selective de-risking,
diversification and increasing
our share of government and
public sector business. We
have reduced our costs, grown
our international portfolio and
strengthened collaboration with
our subsidiary and associate
banks to achieve greater returns.
Pictured: The Pearl - Qatar, an artificial island
spanning nearly four million square metres.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017
47
48
Annual Corporate
Governance Report 2017
1. Introduction
The Board of Directors of Commercial
Bank are pleased to present the Annual
Corporate Governance Report 2017 as per
the guidelines and instructions issued by the
Qatar Central Bank (QCB) on 26 July 2015
by virtue of Circular No. 68/2015, the new
Commercial Companies Law (promulgated
by Law No. 11 of 2015), Basel requirements,
Governance Code for Companies and Legal
Entities Listed on the Main Market issued by
Qatar Financial Markets Authority (QFMA)
pursuant to Decision No. 5 of 2016 published
in the Official Gazette Issue No. 6 on 15 May
2017 and all applicable laws and regulations
in Qatar.
In this report, Commercial Bank clearly
reflects our commitment in upholding the
highest ethical standards of Corporate
Governance. We continuously enhance
and improve our governance principles
and framework as regulations change and
regulatory requirements become more
complex. Following the election of the
Bank’s Board of Directors in 4 April 2017,
the Board of Directors welcomed the two
newly elected Board Members; Sheikh
Faisal bin Fahad bin Jassim Al Thani and
H.E. Mr. Saleh Abdulla Mohamed Al Ibrahim
Al Mannai. During 2017, we also effected
required changes to the Board of Directors
and Executive Management Organisational
Structure. Under the revised structure,
Commercial Bank has complied with the
requirement of having one-third of the
Board of Directors as Independent Board
Members and a majority as Non-Executive
Board Members. In addition, the Board also
approved during the Board Meeting held on
10 December 2017 the re-composition of
the Bank’s Board Committees in alignment
with the Corporate Governance Guidelines
issued to banks by the QCB and Governance
Code for Companies & Legal Entities Listed
on the Main Market issued by the QFMA.
These substantial steps were taken to ensure
the Board provides effective oversight
and management of Commercial Bank
in promoting high levels of transparency,
disclosure, fairness and accountability
throughout the year ended 31 December
2017.
In support of Commercial Bank’s Five
Year Strategic Reshape Plan, the Board of
Directors continued to work with the high
calibre Executive Management team towards
our vision to be the best bank in Qatar. Our
continual investment in technology and
people, together with our strong capital
base, provides a solid foundation for further
growth. Commercial Bank has a robust
financial position and enjoys strong credit
ratings of A from Fitch, A2 from Moody’s and
BBB+ from Standard & Poor’s.
During the year 2017, Commercial Bank
was awarded the “Best Investor Relations
award for mid-cap companies” at the
Qatar Stock Exchange’s annual IR awards
ceremony recognising best practice in
Investor Relations, demonstrating the
Bank’s commitment to transparency in
terms of communicating effectively with
our shareholders, analysts and regulators.
In addition, the Bank also won the “Best
Retail Bank in Qatar” and “SME Bank of the
Year in the Middle East” award for 2017 from
The Asian Banker. These awards show that
Commercial Bank is well positioned to take
us towards our goal, and create long-term
value for all our stakeholders.
On behalf of The Board of Directors of
Commercial Bank and the Executive
Management team, we thank all of our
shareholders for their continuing trust and
confidence.
2. The Board of Directors
2.1 Role of the Board and Executive
Management
The Board is entrusted by the shareholders
with the authority to govern the Bank,
oversee its operations and provide effective
governance over the Bank’s key affairs,
including the appointment and the oversight
of the Executive Management (as well as
establishing compensation, performance
evaluation and ensuring succession
planning), setting the Bank’s vision and
mission, approval of policies relating to the
Bank’s long-term transactions, strategies
including risk strategy, and Bank’s objectives,
ensuring the accuracy of its financial
statements and returns (including the
timely reporting and disclosure of financial
information to regulators and shareholders
respectively), evaluation of performance and
assessment of major risks facing the Bank,
and ensuring compliance with related laws
and regulations as well as the Bank’s Articles
of Association (AOA).
In order to provide an organised and
focused means of achieving the Bank’s
goals and to properly address issues in a
timely manner, the Board has set up Board
Committees in accordance with leading
practices and applicable local governance
regulations. In addition, the Board has
assigned the day-to-day management of
the Bank to the Executive Management
subject to clear instructions and within the
bounds of their delegated authority. In line
with QCB Circular No. 68/2015 (5th Principle)
and QFMA Corporate Governance Code,
the Executive Management is responsible
for the implementation of the processes,
activities and board resolutions according
to the strategies and policies approved by
the Board and the Bank’s risk structure. The
Executive Management is also responsible
for preparing the Bank’s Organisational
Chart ensuring the sound distribution and
delegation of authorities as well as the limit
of responsibility and accountability.
Each Board Member exercises the fiduciary
duties of care, loyalty and compliance
with the rules set out in applicable laws
and regulations including QCB Corporate
Governance Guidelines, QFMA Corporate
Governance Code and the Bank’s
governance documents. At all times,
the Board Members are expected to act
on an informed basis, in good faith, with
due diligence and care, and in the best
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 49
transparent procedures in line with the
Bank’s AOA and relevant governance
charters. Members of the Board shall be
elected by the General Assembly for a
period of three years, and a Director may be
re-elected more than once.
New Board Members have been elected to
the Board in 2017 as follows:
1. Sheikh Faisal bin Fahad bin Jassim Al Thani
2. H.E. Mr. Saleh Abdulla Mohamed Al
Ibrahim Al Mannai
At a Board Meeting held following the
Ordinary and Extraordinary General
Assembly Meetings on 4 April 2017, the
following Directors were elected as office
holders on the Board for a period of three
years.
1. Sheikh Abdulla bin Ali bin Jabor Al Thani –
Chairman
2. Mr. Hussain Ibrahim Al Fardan –
Vice Chairman
3. Mr. Omar Hussain Al Fardan –
Managing Director
In the event that a Director is convicted of
an offence of dishonor, breach of trust or
is declared bankrupt or absents himself for
more than three consecutive meetings of
the Board or five non-consecutive meetings
without an excuse that has been accepted by
the Board, the Director’s membership to the
Board shall be deemed terminated. Further
details relating to the election and removal
from office of Directors are provided in
the Bank’s AOA and the Bank’s Corporate
Governance Charter.
BOD Assessment
During 2017, in compliance with international
leading practices and corporate governance
regulations and charter, the Board and Board
Committees have completed their annual
self-assessment for 2017. The Bank’s annual
BOD performance assessment exercise shall
ensure the Board of Directors’ continuous
improvement and commitment in carrying
out its role and responsibilities effectively.
interests of the Bank and all shareholders/
stakeholders in the fulfilment of their
responsibilities and tasks towards the Bank.
The detailed roles and responsibilities of the
Board are defined in the Board Charter. The
Board Charter can be found on the Bank’s
website at www.cbq.qa and is also available
in print to any shareholder upon request.
2.2 Board Composition and Directors’
Qualifications
In accordance with the Bank’s AOA,
Corporate Governance Charter, Commercial
Companies Law (CCL) and other applicable
regulations, the Bank currently has nine
(9) Directors and four were considered
Independent Members in accordance with
the definitions of ‘Independent’ by virtue of
Corporate Governance Guidelines issued
by QCB to Banks and the QFMA Governance
Code for Companies listed on the Main
Market published in the Official Gazette
issue no. (6) Dated 15 May 2017. The Board
has five non-executive and four executive
members according to QCB classification of
board members by virtue of QCB Circular
No. 68/2015 and QFMA Governance
Code (Note: The Representative of Qatar
Insurance Company is Independent).
The positions of the Chairman of the Board
and the Group Chief Executive Officer of
the Bank are not being held by the same
individual.
Members of the Board possess personal
qualities including loyalty, integrity, good
reputation and creditworthiness and hold
the proper educational qualifications,
industry knowledge and expertise in the
field of banking and international markets,
with the technical skills required to fully,
professionally and effectively carry out
assigned roles and to provide leadership
and supervise management in order to
ensure maximisation of shareholder wealth.
The Directors are also committed to provide
the required amount of time and attention
towards the accomplishment of their duties
for the duration of their tenure.
2.3 Secretary of the Board of Directors
The Board has appointed a Board Secretary
who provides administrative support to
the members of the Board, the Board
Committees and the Chairman to facilitate
their execution of all functions relating to
the Board. The Board Secretary may only
be appointed and removed by a Board
resolution.
Under the direction of the Chairman,
the Board Secretary is in charge of
ensuring timely access to information and
coordination among the Board Members
as well as between the Board and other
stakeholders in the Bank including
shareholders, Management, and employees.
The Board Secretary is also responsible
for maintaining and safekeeping Board
documentation and for managing all
communication with QCB, government,
ministries, institutions and other external
entities.
The incumbent Board Secretary possesses
the requisite knowledge and skills required
to fulfil the role. He has extensive experience
in compliance and corporate governance
matters for financial institutions. More
importantly, the Board Secretary also holds
the trust and confidence of the Board in
performing Board-related tasks.
2.4 Electing Directors
The Board Remuneration, Nomination and
Governance Committee is tasked to uphold
transparency in the nomination process
for Board membership. This Committee
is also responsible for recommending
Board Members’ appointments and
re-nomination for election in the General
Assembly, supervising the training of the
Board Members with regard to Corporate
Governance of the Bank as well as
conducting the annual self-assessment
of the Board and Board Committees’
performance.
Nominations and appointments are made
in accordance with formal, rigorous and
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 50
Annual Corporate
Governance Report 2017 continued
2.5 Directors’ Responsibilities
The Chairman is responsible for ensuring
the proper functioning of the Board in an
appropriate and effective manner including
timely receipt by the Board Members of
complete and accurate information.
Directors shall be given appropriate and
timely information to enable them to
maintain full and effective control over
strategic, financial, operational, compliance
and governance issues of the Bank.
Other than resolutions passed at each
Annual General Assembly absolving the
Board from responsibility and the provisions
of the AOA stipulating that disputes against
Directors can only be brought in accordance
with a resolution by the General Assembly,
there are no provisions in effect protecting
the Board and Executive Management from
accountability.
The comprehensive responsibilities of the
Board Chairman are as defined in the Boards’
Job Descriptions and Board of Director’s
Charter which are in line with applicable laws
and regulations.
2.6 Directors’ Independence
During 2017, at least one-third of the
Board of Directors comprise Independent
Directors (4 out of 9) and a majority of the
Board comprise Non-Executive Directors
(5 out of 9). In addition, a majority of
the members of the Board Audit and
Compliance Committee (BACC) were
classified as independent (3 out of 4,
subsequently then became 3 out of 3 under
the revised Board Committee Structure
approved during the Board meeting on 10th
December 2017).
The Bank has fully adopted QCB Corporate
Governance Guidelines definition of
‘Independent Directors’ in assessing
independence of its Board Members.
2.7 Board Meetings
The Board shall hold at least once every
two months i.e. not less than six meetings
annually in line with Qatar Central Bank
Corporate Governance Guidelines to
Financial Institutions, Commercial Bank’s
AOA and the Board of Directors Charter.
The meeting shall not be deemed valid
unless the majority of board members
are in attendance (at least five out of nine
members whether in person or by proxy)
provided that at least four Directors are
present in person. Excuses for not attending
the meeting must be convincing and
recorded by means of minutes kept by
the Board Secretary. Board meetings are
scheduled in the Board Calendar according
to key events and coinciding with financial
period closures of the Bank. Directors are
expected to make every effort to attend,
in person, all scheduled Board meetings
and meetings of the Board Committees on
which they serve. Voting in Board meetings
shall be in accordance with the Bank’s AOA.
Matters considered, and decisions taken,
by the Board shall be recorded by the Board
Secretary in a special register.
During 2017, the Board held a total of six (6)
Board meetings.
2.8 Board Committees
To increase the efficiency of the Board’s
control over the Bank’s various activities
and the risks to which it is exposed in an
independent and professional manner, the
Board has established committees which
are delegated to do specific responsibilities
and authorities to act on behalf of the Board.
In addition, in line with its commitment
to corporate governance principles, the
committees instituted by the Board meet
the minimum committee requirements set
forth by applicable corporate governance
regulations.
The Board has formed four (4) Board
Committees as follows:
1. Board Audit and Compliance Committee;
2. Board Risk Committee;
3. Board Executive Committee;
4. Board Remuneration, Nomination and
Governance Committee.
Board Risk Committee
The Board Risk Committee (BRC) is
responsible for all aspects of enterprise
risk management including, but not
restricted to business, credit, market,
operational, legal and reputational risk. The
BRC reviews policies on all risk matters,
maintain oversight of all Bank risks through
the Management Risk Committee (MRC),
the GCEO, and the CRO and provides risk
management directives through the GCEO
and the CRO.
The Terms of Reference provide that the
Committee is responsible for (i) setting forth
risk policies, criteria and control mechanisms
for all activities involving all types of risk,
(ii) reviewing and ratifying risk tolerance
levels and portfolio limits, including limits
associated with industry sector, geography,
asset quality and others, as approved by
MRC, (iii) providing oversight management
of business continuity, (iv) reviewing and
assessing the performance of the MRC and
the Risk Group in monitoring and controlling
risk to ensure that the strategies and policies
approved by the Board are adhered to
and implemented, and (v) reviewing Basel
Accord implementation.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 51
The Committee is composed of the following members as at 31 December 2017:
Board Member Name
Mr. Mohd Ismail Mandani Al Emadi
H.E. Mr. Abdul Rahman Bin Hamad Al Attiyah
Sheikh Jabor Bin Ali Bin Jabor Al Thani
Any Independent or Non-Executive Member
Status on the Committee
Chairman
Member
Member
Alternate Member
Member Classification
Independent / Non-Executive
Non-Independent / Executive
Non-Independent / Non-Executive
-
The Committee is required to meet at least four (4) times a year. During 2017, the Board Risk Committee held a total of six (6) meetings and
minutes of such meetings are duly documented.
Board Executive Committee
The Board Executive Committee is responsible
for handling matters especially relating to
credit facilities (within authorised limits),
which may arise between full Board Meetings
and require the Board’s review, as per
QCB and Board guidelines. In addition, the
Committee is also responsible for approving
all strategies, plans, budgets/objectives and
policies, procedures and systems as well as
reviewing the performance of the Bank.
The Terms of Reference provide that the
Committee (i) approve credit facilities in
accordance with the mandate and directive
provided by the Bank Board of Director,
(ii) review and approve all policies relating
to the Bank’s organisation and operations
including all necessary authorities required
by Executive Management in the execution
of their responsibilities (except those policies
which are subject to other relevant Board
Committee review as provided in the Board
(DOA), (iii) develop the long-term strategy
of Commercial Bank based on economic
and market conditions and Board’s vision.
Review the Bank’s overall strategy and
The Committee is composed of the following members as at 31 December 2017:
ensure implementation and execution, (iv)
receive reports and analysis of the Bank’s
financial and operating performance, and
to evaluate key performance indicators
against their accompanying strategies and
(v) review and approve Commercial Bank
corporate social responsibility strategy in
light of Commercial Bank’s values, approve
requests for donations and social support,
review and approve all operating and capital
expenditure budgets.
Board Member Name
Sheikh Abdulla Bin Ali Bin Jabor Al Thani
Mr. Hussain Ibrahim Al Fardan
H.E. Mr. Abdul Rahman Bin Hamad Al Attiyah
Mr. Omar Hussain Al Fardan
Any Independent or Non-Executive Member
Status on the Committee
Chairman
Member
Member
Member
Alternate Member
Member Classification
Non-Independent / Executive
Non-Independent / Executive
Non-Independent / Executive
Non-Independent / Executive
-
The Committee is required to meet at least twelve (12) times a year. During 2017, the Board Executive Committee met a total of twenty three
(23) times and minutes of such meetings are duly documented.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 52
Annual Corporate
Governance Report 2017 continued
Board Audit and Compliance Committee
The Board Audit and Compliance Committee
is primarily responsible for overseeing
the quality and integrity of the accounting,
auditing, internal control and financial
reporting practices of the Bank as well as
setting forth compliance and Anti-Money
Laundering and Combating Financing of
Terrorism (AML/CFT) requirements, and
defining criteria and control mechanisms for
all activities involving Bank-wide related risks.
The Terms of Reference provide that the
Committee is responsible for (i) reviewing and
monitoring the adequacy of internal control
systems, including accounting and financial
controls and the Bank’s system to monitor
and manage business risk, (ii) considering
the effectiveness of the Bank’s management
of risks and internal controls over annual
and interim financial reporting, regulatory
and other reporting, (iii) reviewing and
approving the policy, plans, activities, staffing
and organizational structure of CB’s Internal
Audit, Compliance and AML/CFT function, (iv)
reviewing and approving the appointment,
replacement, relocation or dismissal of
Audit/Compliance/AML personnel and
their remuneration, (v) evaluating the job
performance and related remuneration of the
Chief Internal Auditor/Head of Compliance
and AML/CFT, as well as decisions relating
to their appointment/renewal of contract
or termination, (vi) ensuring there are no
unjustified restrictions or limitations on
the functioning of the Bank’s Compliance
and AML/CFT, as well as on Compliance’s/
MLRO access to Bank records, documents,
personnel as and when required in
performance of their functions, (vii) reviewing
the effectiveness of the system for monitoring
compliance with applicable local as well as
international laws, regulations and standards
(e.g. Foreign Account Tax Compliance Act) and
(viii) reviewing the findings of inspections by
any regulatory body.
The Committee is composed of the following members as at 31 December 2017:
Board Member Name
Mr. Ali Saleh Nasser Al Fadala
Sheikh Faisal Fahad bin Jassim Al Thani
H.E. Mr. Saleh Abdulla Al Mannai
Any Independent or Non-Executive Member
Conforming to the transparency and
independence principle, the Internal Audit
and Compliance Departments report
directly to the Board Audit and Compliance
Committee whereby the Heads of both the
Internal Audit and Compliance functions
are responsible to submit reports and
observations to the Committee on a periodic
basis and as needed.
Status on the Committee
Chairman
Member
Member
Alternate Member
Member Classification
Independent / Non-Executive
Independent / Non-Executive
Independent / Non-Executive
-
The Committee is required to meet at
least four (4) times a year. During 2017, the
Board Audit and Compliance Committee
met a total of seven (7) times and minutes
of such meetings are duly documented.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 53
Board Remuneration, Nomination and
Governance Committee
The Remuneration, Nomination and
Governance Committee is responsible
for evaluating the Bank’s compensation
and remuneration framework for the
Board Members, Management and staff,
based on the long-term performance and
objectives of the Bank. The Committee
is also responsible for recommending
Board Members’ appointments and re-
nomination for election by the General
Assembly, supervising the training of the
Board Members with regard to corporate
governance of the Bank as well as
conducting the annual self-assessment
of the Board’s performance. In addition,
the Committee is primarily responsible for
attending to issues relating to governance.
The Terms of Reference provide that the
Committee is responsible for (i) developing
and setting a clear remuneration framework
covering the executive management
remunerations, presenting the Bank’s
remuneration policy to the General Assembly
for approval after being acknowledged
by the Board, (ii) reviewing the GCEOs
performance and Executive Management
members, to be annually evaluated
compared to the institution long term goals
not only the current year’s achievement
and present the evaluation results to the
Board, (iii) identifying and nominating new
Board Member candidates ensuring that
nominations and appointments of Board
Members are made according to formal,
rigorous and transparent procedures, (iv)
ensuring that nominations take into account
the candidates’ sufficient availability to
perform their duties as Board Members,
in addition to their skills, knowledge and
experience as well as professional, technical,
academic qualifications and personality
and nominations based on the ‘Fit and
proper Guidelines for Nomination of Board
Members’, (v) conducting an annual self-
assessment of the performance of the Board
and Board Committees, (vi) reviewing and
assessing on periodic basis any changes to
international and local corporate governance
practices that could have an impact on
how the bank operates and manages its
governance policies and (vii) considering any
governance non-compliance matters and
recommend to the Board actions to resolve
the same as applicable.
The Committee is composed of the following members as at 31 December 2017:
Board Member Name
Sheikh Jabor Bin Ali Bin Jabor Al Thani
Mr. Hussain Ibrahim Al Fardan
Mr. Omar Hussain Al Fardan
Mr. Mohd Ismail Mandani Al Emadi
Any Independent or Non-Executive Member
Status on the Committee
Chairman
Member
Member
Member
Alternate Member
Member Classification
Non-Independent / Non-Executive
Non-Independent / Executive
Non-Independent / Executive
Independent / Non-Executive
-
The Committee is required to meet at least two (2) times a year. During 2017, the Board Remuneration, Nomination and Governance
Committee held a total of nine (9) meetings and minutes of such meetings are duly documented.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 54
Annual Corporate
Governance Report 2017 continued
2.9 Directors’ and Executive
Management Remuneration
Board Members’ remuneration shall be
disclosed in accordance with QCB Circular
No. 18/2014. This remuneration framework
shall be presented to the shareholders in
the General Assembly for approval and shall
be made public. The Board shall regularly
evaluate and measure risks involved in
determining and paying incentives and
compensations and review the policy and
the system accordingly.
In conformity with the Bank’s Remuneration
Policy for the Board, remuneration shall
take into account the responsibilities and
scope of functions of the Board Members
and the Bank’s performance. In addition, the
remuneration may include fixed elements
and matters, which are related to the
performance of the Bank in the long term.
Remuneration of Board Members may take
the form of:
• Fixed salaries;
• Directors’ fees;
•
• A percentage of the Bank’s profits.
In addition, the following elements should
be observed in providing remuneration to
Board Members:
The Board shall receive remuneration
annually of an amount which shall not exceed
in aggregate 5% of the net annual profits of
the Bank determined and after deduction
of transfers to reserves, legal liabilities and
a notional dividend payment equivalent to
5% of `the paid up capital of the Bank to
shareholders.
In-kind benefits; or
The amount of such remuneration shall be
approved annually by the General Assembly,
taking into account the level of profitability of
the Bank.
As reported in the Bank’s Annual Report
2017, total remuneration earned by the
Board in 2017 (including fixed remuneration)
was QAR 18,500 million (subject to approval
during the Bank’s AGM) (2016: QAR 18,500
million).
With respect to Executive Management and
employees, the Bank has a remuneration
framework developed that outlines the
compensation structures for Executive
Management and employees, which are
competitive relative to the market, reward
performance that contributes to the Bank’s
growth and profitability and are consistent
with the Bank’s strategy.
Total remuneration earned by the senior
Executive Management in 2017 was QAR
46,925 million (2016: QAR 55,920 million).
2.10 Independent Advisors
The Board and its Committees may retain
counsel or consultants with respect to any
issue relating to the Bank’s affairs. Costs and
expenses incurred pursuant to appointment
of independent advisors or consultants shall
be borne by the Bank.
For 2017, total costs incurred by the Bank
with respect to retaining counsel and
consultants amounted to QAR 6.5 million.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 55
2.11 Independent and Non-Executive Members of the Board of Directors
As at 31 December 2017, the Board of Directors of the Bank comprised the following members:
Director
Sheikh Abdulla bin Ali bin Jabor Al Thani
Date of First
Appointment
1990
Expiry of Current
Appointment
2019
Mr. Hussain Ibrahim Al Fardan
1975
H.E. Mr. Abdul Rahman Bin Hamad Al Attiyah
2014
Mr. Omar Hussain Al Fardan
Sheikh Jabor bin Ali bin Jabor Al Thani
Sheikh Faisal bin Fahad bin Jassim Al Thani
Mr. Mohd Ismail Mandani Al Emadi
Qatar Insurance Company
(Representative: Mr. Ali Saleh Nasser Al
Fadala - Independent)
H.E. Mr. Saleh Abdulla Mohamed Al Ibrahim
Al Mannai
2002
2002
2017
2014
2015
2019
2019
2019
2019
2019
2019
2019
Position
Chairman
Vice
Chairman
Member
Managing
Director
Member
Member
Member
Member
Status on
the Board
Non-Independent &
Executive
Non-Independent &
Executive
Non-Independent &
Executive
Non-Independent &
Executive
Non- Independent &
Non-Executive
Independent & Non-
Executive
Independent & Non-
Executive
Independent & Non-
Executive
Number &
Percentage of Shares
%*
1.71%
6,904,380 shares
2.26%
9,145,575 shares
0.25%
1,011,813 shares
0.29%
1,160,010 shares
0.45%
1,841,382 shares
0.25%
1,011,813 shares
-
1.21%
4,879,937 shares
2017
2019
Member
Independent & Non-
Executive
0.35%
1,430,400 shares
The status of the Board Members as Non-Executive, Independent or Non-Independent is determined in accordance with the Qatar Central
Bank Guidelines to Banks by virtue of Circular No. 68/2015 and QFMA Governance Code for Companies & Legal Entities Listed on the Main
Market issued on 15 May 2017.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 56
Annual Corporate
Governance Report 2017 continued
• Owner and Chairman of Mawten Trading
• Holds PhD in Project Finance from Leeds,
Sheikh Abdulla bin Ali bin Jabor Al Thani
Chairman
• Graduated from Qatar University with a
BA in Social Science;
• Owner of Vista Trading Company;
• Partner in Dar Al Manar, and Domopan
Qatar;
• Vice Chairman of National Bank of Oman;
• Director of United Arab Bank.
Mr. Hussain Ibrahim Al Fardan
Vice Chairman
• Chairman of Alfardan Group;
• Chairman of QIC International LLC;
• Vice Chairman of Gulf Publishing and
Printing Company;
• Vice Chairman of the Qatar Businessmen
Association;
• Director of Qatar Insurance Company
and Chairman of Investment Committee
(QIC);
• Founding member and Director and
Chairman of the Executive Committee
for Administrative Policy of Investcorp
Bahrain.
H.E. Mr. Abdul Rahman Bin Hamad Al
Attiyah
Board Member
• Graduated from the USA with a BA in
Political Science;
• State Minister;
• Vice President of the Board of Trustees
of the Arab Thought Forum – Amman,
Jordan
• Former Secretary General of the
Cooperation Council for the Arab States
of the Gulf;
• Former Undersecretary of the Foreign
Ministry;
• Former Ambassador of the State of Qatar
to Saudi Arabia, France, Italy, Greece,
Yemen, Switzerland and Djibouti;
• Former permanent representative of
the State of Qatar to the United Nations
and other international organizations
(Geneva, Rome and Paris);
Co.;
(NBO);
• Director of the National Bank of Oman
• Holder of the Orders of Merit from
France, Italy, Yemen, and Sudan as well
as the Award of Excellence from the
Cooperation Council for the Arab States
of the Gulf.
• Holder of the State Award of
Appreciation.
Mr. Omar Hussain Al Fardan
Managing Director
• Graduated from Webster University,
Geneva with a Bachelor’s degree in
Business Administration and a Master’s
degree in Finance;
• President & CEO of Alfardan Group and
its affiliates in Qatar and Oman;
• Board Member of Alfardan Jewellery,
Alfardan Investment and Alfardan Marine
Services in Qatar;
• Vice Chairman of the Board of Directors
and Chairman of the Board Executive
Committee of United Arab Bank in UAE;
• Chairman of the Board of Directors of
Alternatifbank (ABank) in Turkey;
• Advisory Board Member of Qatar
Financial Centre Authority;
• Board Member of Qatar Red Crescent
Society.
Sheikh Jabor bin Ali bin Jabor Al Thani
Board Member
• Owner of Al Maha Contracting Co.;
• Director of Gulf Publishing and Printing
Company;
• Director of Qatar Clay Bricks Company.
Sheikh Faisal bin Fahad bin Jassim Al
Thani
Board Member
• Completed his education under Fullbright
Scholarship from Colorado University of
Boulder;
• Graduated from the Oklahoma, USA as
Petroleum Engineer;
• Chairman of Qatar Petroleum Society;
• Chairman of Doha Petroleum Club;
• Chairman and Partner of Namma Real
UK;
Estate;
• Chairman and Partner of Qatar Import-
Export Company (QNIE);
Joined Qatar Petroleum (QP) in 1987 –
2017;
•
• Previously seconded to several companies
- Shell from 1987 to 1992; Qatar Petroleum
from 1987 to 1997; Arco Petroleum from
1997 to 2001; BP from 2001 to 2003;
Anadarko Petroleum from 2003 to 2007;
Maersk Oil Qatar from 2008 – 2017.
Mr. Mohd Ismail Mandani Al Emadi
Board Member
• Graduated from Holy Names University,
California with a Bsc degree in Business
Administration & Economics;
• Over 30 years of experience in banking;
• Occupying a number of key roles in
Commercial Bank from 1983 to 2006
including Head of Banking, Operations,
Commercial Services and Risk
Management;
• Deputy General Manager of Commercial
Bank from 2004 to 2007;
• Director of National Bank of Oman;
• Director of Alternatifbank (ABank) in
Turkey;
• CEO of Qatar Real Estate Investment Co.
from 2008 to 2011;
• Former Managing Director of Qatar
Cinema & Film Distribution Co. in Qatar;
• Former Director of Qatar Real Estate
Investment Co.;
• Former Director of Mannai Corporation;
• Former Director of Qatar Shipping Co.;
• Former Director of Doha Securities
Market.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 57
3. Executive Management
While the Board has the ultimate
responsibility on the governance of the Bank,
the Executive Management is composed
of a group of the Bank’s senior employees
headed by the GCEO, who is responsible
for the implementation of the processes,
activities and board resolutions according
to the strategies and the policies approved
by the Board and the Bank’s risk structure.
The Executive Management is responsible
for preparing the bank’s organisational
chart ensuring the sound distribution and
delegation of authorities as well as the limit
of responsibility and accountability. The
members of the Executive Management
shall contribute to the implementation and
development of the sound governance
system in collaboration with the Board and
to ensure that operations are carried out in
an effective, safe and sound manner, and
in compliance with applicable internal Bank
policies and procedures and external laws
and regulations. The Board may delegate
authorities to the GCEO to act generally
on behalf of the Bank to accomplish a third
party’s transactions. However, the Board
may impose any restrictions on the position
of the GCEO or any other official in the Bank
such as the financial transactions, which they
are allowed to tackle without the approval
of the Board. Mr. Joseph Abraham served
as the CEO of the Bank on 4th July 2016
and subsequently appointed as GCEO on
16th May 2017. The GCEO is supported
by a specialised expertise and highly
qualified team overseeing the core banking
areas of Wholesale, Retail, Consumer
and International Banking as well as other
support functions, which include areas of
Risk Management, Banking Operations,
Strategic Clients, Legal Affairs, Finance,
Organisational Effectiveness, Internal Audit
and Compliance and AML/CFT.
As at 31 December 2017, Executive
Management of the Bank comprised the
following:
Mr. Joseph Abraham
Group Chief Executive Officer
He does not own any shares in the
Commercial Bank.
• Holds an MBA from the Graduate School
of Business, Stanford University in
California, USA.
Joined Commercial Bank in June 2016 as
Group Chief Executive Officer.
•
• Prior to joining Commercial Bank, served
as CEO of ANZ Indonesia (Australia and
New Zealand Banking Group) based in
Jakarta (2008-2016).
• Worked in Indonesia, Singapore, Hong
Kong, Ghana, UK and India in various
country and regional banking roles with a
successful track record covering general
management, corporate banking,
strategy, product management as well as
acquisitions and integrations.
• Appointed as Vice Chairman of the Board
of Alternatifbank in Turkey (fully owned
subsidiary)
• Board Director of the United Arab Bank,
UAE (40% owned associate).
• Appointed as Chairman of Orient 1, CBQ
Finance and CB Global Limited.
Mr. Rehan Khan
EGM, Chief Financial Officer
He does not own any shares in the
Commercial Bank.
• Graduated from London School of
Economics with a Bachelor in Economics.
• Trained with KPMG in London and
member of the Institute of Chartered
Accountants in England and Wales.
• 22 years banking experience with HSBC
working in London, India, Malaysia and
Saudi Arabia.
Joined Commercial Bank as Chief
Financial Officer in 2013.
•
• Director of Orient 1, CBQ Finance, CB
Global and CB Financial Services.
Qatar Insurance Company
(Representative: Mr. Ali Saleh Nasser Al Fadala)
Board Member
• Completed his training and education in
Egypt, UK and US;
• With over 29 years of experience in
insurance;
• Member of the boards of a number
of insurance entities in the region and
Europe;
• Former CEO of Damaan Islamic Insurance
•
Company (Beema);
Joined QIC group in 1986 and was
appointed Senior Deputy Group
President & CEO in February 2013.
• Chairman of the Board of Governor –
Qatar Academy Al Khor ( member of
Qatar Foundation )
• Director of Alternatifbank (ABank) in
Turkey.
H.E. Mr. Saleh Abdulla Mohamed Al
Ibrahim Al Mannai
Board Member
• Holds a Degree in Business
Administration and a Diploma in
International Economy from Ain Shams
University;
• Started his banking career with
•
Commercial Bank in 1991 to 1993;
Joined Qatar National Bank in 1994 and
holds various positions: teller, Officer
in Charge, Assistance Branch Manager,
Branch Manager, Group Branch Manager
and Corporate Branch Manager.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017
58
Annual Corporate
Governance Report 2017 continued
Mr. Rajbhushan Buddhiraju
EGM, Wholesale Banking
He does not own any shares in the
Commercial Bank.
• Graduated from Indian School of Mines,
India with a Bachelor in Petroleum
Engineering.
•
•
• MBA from Indian Institute of
Management, Calcutta.
Joined Commercial Bank in 2014 as EGM,
Head of Wholesale Banking
• Previously EGM, Retail & SME Banking,
Dubai Islamic Bank, Dubai, U.A.E.
Joined Commercial Bank as Executive
General Manager in Retail and Enterprise
Banking in 2008 till Sept of 2012.
• General Manager & Head of Retail &
Consumer Group, Arab National Bank,
Saudi Arabia in May 2006 and Head of
Retail Assets in Sept. 2002.
• Worked in CitiGroup for 13 years in India,
Singapore, Poland and Hungary (1989-
2002).
• Deputy Chairman of Orient 1 Limited.
Mr. Parvez Khan
EGM, Treasury & Investments
He owns 44,411 shares in the Commercial
Bank
• Graduated from Aligarh Muslim University
•
with BSC in Chemical Engineering.
Joined in 1994 and was responsible for
setting up Investment services business.
• Over 20 years of experience in Treasury
Capital Markets and Investment Banking.
• Holds a Diploma in International Capital
Markets from New York Institute of
Finance.
• Director of Commercial Bank Financial
Services, CBQ Finance Limited and CB
Global.
Ms. Rana Salatt
EGM, Chief Risk Officer
She owns 1,328 shares in the Commercial
Bank.
• Graduated from Qatar University in 1996
with a major in English.
Joined Commercial Bank in 1996 as a
graduate trainee in Retail Banking and
was then promoted to Risk Management
Assistant.
•
• A number of promotions followed:
Manager, Credit Risk Administration in
2003, Head of Credit Administration &
Control in 2005, Head of Client Relations
in 2008, Head of Credit Control in 2009,
Assistant General Manager and Head of
Risk Controls in 2011 and EGM, Chief Risk
Officer in 2013.
• 20 years of banking experience in
Commercial Bank between Retail and
Risk.
• As Chief Risk Officer, her primary role is
to lead and establish a comprehensive
and effective enterprise wide integrated
risk management framework for
the Bank ensuring all risks (including
credit, market, liquidity, operational,
reputational, corporate governance and
regulatory risk) are effectively managed
within the defined risk appetite and
government regulations;
• She also ensure effective identification,
measurement, mitigation and reporting
of all risks, the allocation of adequate
capital against those risks, and the
assurance of an appropriate risk/return
relationship;
• Ms. Salatt ensures that the core values are
embodied in the Board-approved Risk
Charter and Risk policies which outline
the enterprise-wide risk management
activities of the Bank.
Mr. Fahad Badar
EGM, International Banking
He owns 2,896 shares in the Commercial
Bank
• Mr. Fahad Badar’s career at The
Commercial Bank (P.S.Q.C) spans over
18 years. He held a number of key roles
including EGM, Wholesale Banking, EGM
Government Sector and International
Banking. In addition, he occupied other
senior positions in Retail Banking and
Operations.
• Mr. Badar holds a Bachelor’s degree
in Banking & Finance from the Bangor
University and an MBA from Durham
University, UK.
• Director of Alternatifbank (ABank) in
Turkey;
• Director of United Arab Bank.
• Director of National Bank of Oman.
Ms. Leonie Ruth Lethbridge
EGM, Chief Operating Officer
She does not own any shares in the
Commercial Bank.
• Holds a Doctorate Degree in Philosophy
from Swinburne University of Technology,
a Masters in Applied Science (Innovation
and Service Management) from RMIT
University, Graduate Diploma in Adult
Education from University of Melbourne
and Bachelor of Applied Science (Hons)
from University of New South Wales;
Joined Commercial Bank as Chief
Operating Officer in 4 July 2017;
• Prior to joining Commercial Bank, served
•
as CEO at ANZ Royal in Cambodia;
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017
59
• Held various roles (2000 – 2002) Senior
Consultant in Hinton and Associates,
(1997 – 2000) Senior Associate in Arthur
Robinson and Hedderwicks (Now Allens),
(1995 – 1997) Senior Policy Officer in
Native Title Unit – Human Rights and
Equal Opportunities Commission (1994
– 1995) Associate Justice to PRA Gray in
Federal Court of Australia and (1993 –
1994) Articled Clerk – Arthur Robinson
and Hedderwicks.
Mr. Gary Williams
Senior AGM & Chief Internal Auditor
He does not own any shares in the
Commercial Bank.
•
Joined Commercial Bank in 2010 as
Senior AGM and Chief Internal Auditor.
• Previously with Standard Chartered Bank
for 25 years, the last 12 of which were in
Group Internal Audit and Operational Risk
Assurance positions.
• Roles in the Group Internal Audit function
included postings in UK, Singapore, Hong
Kong and South Korea.
• Final role in Standard Chartered Bank,
prior to joining Commercial Bank was to
establish and manage the Operational
Risk Assurance function in 20 countries
across the Africa, Middle East and
Pakistan regions for the Bank.
Ms. Kimberley Ann Reid
EGM, Head of Organisational Effectiveness
and Strategic Leadership
She does not own any shares in the
Commercial Bank.
• Currently Doctoral Candidate in Faculty of
Business of Economics from University of
Melbourne, expected completion by year
2019;
• Holds a Master’s in Public Administration
from Harvard Kennedy School 2011
in Cambridge, USA, Bachelor of Laws
(Hons) and Arts (Hons) from University
of Melbourne 1987 – 1992 and was
admitted to practice as a barrister and
solicitor from Supreme Court of Victoria,
SA, NSW, High Court of Australia;
Joined Commercial Bank in 15 March
2017;
•
• Appointed as EGM, Head of
•
Organisational Effectiveness and
Strategic Leadership on 18 April 2017;
• Prior to joining Commercial Bank, served
as Principal Consultant in Hampton
Reid - Strategy, Policy, Organisational
Effectiveness (May 2014 - 2017);
Integrated Human Capital functions of
two legal firms as Executive Director,
People and Development at King and
Wood Mallesons (January – July 2013);
• Served as Research Associate in Hauser
Centre of Non-Profit Organisations from
Harvard Kennedy School, USA (2011-
2012);
• Held several key positions from
ANZ Banking Group for eight years
across Asia, Pacific, Europe and USA:
(2007 - 2010) General Manager, HR
Communications in Hong Kong and
China, (2004 – 2007) GM, HR for
Operations, Technology and Shared
Services in India, Melbourne and (2002 -
2004) Head of Workplace Relations;
• Held several key positions in Australia
and New Zealand Banking Group for
over 10 years: Regional Chief Operating
Officer, Institutional and International
Banking, Shanghai (2014-2016), Chief
Operating Officer ANZ Indonesia, Jakarta
(2010-2014), Head of Integration and
enablement, ANZ Indonesia, Jakarta
(2008-2010), and Acting Head of Risk,
Asia Pacific Division, ANZ Banking Group,
Melbourne (2007-2008), General
Manager Risk, China Partnerships,
Shanghai (2005-2006), Senior Manager
Risk, and Head of Strategy and Business
risk, Melbourne (2002-2005);
• For 2 years (2002-2000), served as
Principal Consultant, PA Consulting
Group;
• Senior Consultant at SMS Consulting
Group from 1999 – 2000;
• Worked as Head of Organisation
Development and Quality Assurance at
Zibo Morgan Insulators in China for 2
years (1997-1999;
• Held various roles for 12 years (1984
– 1996) including General Manager at
Apparel Fabric Dyehouse Bradmill Textiles
Ltd;
• Previous Board Memberships:
Association of Banks of Cambodia, Board
Director, Chair of Education Committee
(2016-2017); Australia Indonesia Centre,
Board Director (2014-2016); AustCham
Shanghai, Board Director (2015-2016);
Indonesia Australia Business Council, Vice
President and Board Director (2010-
2014); and Financial Services Advisory
Board, Australia APEC Study Centre
(2007-2008).
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 60
Annual Corporate
Governance Report 2017 continued
Mr. Mohamad Mansour
Senior AGM & Chief Compliance Officer
He does not own any shares in the
Commercial Bank.
• Senior AGM – Chief Compliance Officer
at the Commercial Bank since 2005.
Mohamad has more than 16 years’
experience in the compliance & Anti-
Money Laundering field. A founding
member of Lebanon’s Financial
Information Unit – also known as “The
Special Investigation Commission”, where
he led numerous money laundering
and terrorism financing investigations
as senior investigator and research
analyst with regional and international
counterparts, as well as conducted banks’
examinations on anti-money laundering
programs.
• He started his career in the USA in the
field of finance and management before
joining the Central Bank of Lebanon in
1997 as a Senior Officer at the Treasury
Bills Department.
• A Certified Anti Money Laundering
Specialist (CAMS) since 2003, and
Certified Compliance Officer, actively
involved with local and international
regulators on enhancing the AML/CFT
implementation, raising awareness,
and introducing the latest AML&CFT
information technology solutions.
Expert trainer and frequent speaker at
regional and international conferences on
Compliance and AML.
Mr. Amit Sah
EGM, Consumer Banking
He does not own any shares in the
Commercial Bank.
• Holds an MBA from Indian Institute &
Management, Ahmedabad, India and a
Bachelor of Engineering degree from
Indian Institute of Technology, Roorkee,
India.
Joined Commercial Bank in December
2016.
•
•
In his current role, Mr. Amit is responsible
for managing the Retail Banking
(including SME) franchise for Commercial
Bank with focus on defining and
executing a growth strategy for sustained
profitability driven by market leading
value propositions, enhanced customer
experience and improved operational
efficiencies.
• Mr. Amit is a veteran in in the financial
services industry and has benefitted
from his experience of working in
multiple geographies and across multiple
functional units.
• Prior to joining Commercial Bank, he
worked with Citibank for over 28 years
in various roles including Country
Management responsibilities in Thailand
and Russia and regional management for
the EMEA region based out of London.
•
Mr. Maher Wahhab
General Counsel and Company Secretary
He does not own any shares in the
Commercial Bank.
• Holds an MBA, Graduate School of
Business, from Monash University in
Australia (March 2009 – July 2010);
International Business Law (LLM) from
University of Western Sydney, Australia
(2002 – 2004); and Bachelor of Law (LLB)
from University of Jordan, Jordan (1997 –
2001).
Joined Commercial Bank in 24 September
2017 as General Counsel and Company
Secretary.
• Prior to joining Commercial Bank, served
as Head of Legal Department at Arab
Bank PLC, Doha – Qatar.
• Served as Deputy General Counsel (2010
– May 2011) and External Legal Advisor
(December 2008 – October 2010) with
Ras Al Khaimah Investment Authority
“RAKIA”, Ras Al Khaimah-UAE; Legal
Advisor and Company Secretary with
Bahrain Airport Services BSC in Bahrain
(2006 – 2008); and Legal Consultant of
Abu Ghazaleh Legal – Member of Talal Abu
Ghazaleh International (2004 – 2006).
Mr. Hussein Ali Al-Abdulla
EGM, Chief Marketing Officer
He does not own any shares in the
Commercial Bank.
• Holds a Degree in Petroleum Engineering
from Colorado School of Mines in Golden
Colorado, USA;
•
• Master’s in Business Administration and
Management (2007) from University
of Qatar and currently finishing his
Masters in “The Adaptation of Digital
Transformation in the Banking Sector”
from the United Kingdom;
Joined Commercial Bank in 30 July 2017,
appointed as EGM, Chief Marketing Officer;
• Prior to joining Commercial Bank, served
as General Manager-Personal Banking
(2012-2017) in Barwa Bank, Doha Qatar;
• Held various roles for 13 years (1999 –
2012) in HSBC Bank Middleast Ltd, Doha
Qatar.
3.1 Management Committees
The GCEO relies on a number of internal
committees in the day-to-day management
of the Bank. Based on the governance
requirements and broad nature of
operations, seven (7) Committees were
formed. Decisions are formalised if the
required quorum is achieved, including the
Chairman or his deputy. All decisions shall be
unanimous.
A summary of their main activities is
documented in the Risk Charter as
discussed below:
Executive Committee (EXCO)
EXCO is chaired by the GCEO, Mr. Joseph
Abraham and meets on a regular basis or
as required by the business. Its principal
function is to develop the annual business
plan and budget for the Bank, and to monitor
performance against these.
During 2017, the Executive Committee met
a total of six (6) times and minutes of such
meetings are duly documented.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 61
The Committee reviews the delegated
authorities related to credit and
recommends amendments to the BOD
where appropriate. It also escalates its
decisions relating to credit facilities, which
exceed its authority, to the BEC.
The Chief Credit Officer, Mr. Paul Gossiaux
serves as Chairman of the committee.
Meetings are held as and when required.
During 2017, the MCC met a total of twenty
eight (28) times and minutes of such
meetings are duly documented.
Investment Committee (ICO)
The Investment Committee is the decision
making committee for the Bank’s investment
activities, with a view to optimise returns,
ensuring that the investment book provides
a liquidity buffer for the Bank and mitigate
market risk attached to the nature of
targeted investment. The Committee also
assumes the responsibility to review and
approve the range of investment products
across the Bank. It also monitors and reviews
the performance of all the investment
portfolio activities.
EGM, Treasury & Investments, Mr. Parvez
Khan serves as Chairman of the Committee.
Review and approval of the Committee is
obtained by circulation to all members.
During 2017, the Investment Committee met
a total of four (4) times and minutes of such
meetings are duly documented.
Management Risk Committee (MRC)
The MRC is the highest management level
authority on all risk-related issues facing the
Bank including actions on all special assets,
and reports on all risk policies and portfolio
issues to the Board Risk Committee. It
monitors and controls levels of credit, retail
and operational risk to ensure that the risk
strategies and policies approved by the
Board are adhered to and implemented.
The MRC also monitors the management
of business continuity: a) to ensure that
strategies, plans, policies are in place; b)
to ensure that management of business
continuity is audited by an external audit
firm annually and reports presented to
Board Risk Committee; and c) to ensure that
internal audit schedule an evaluation of the
efficiency of the testing programs and report
to the Board Audit Committee.
The Chief Risk Officer, Mrs. Rana Salatt serves
as Chairman of the MRC, which meets at
least four times a year, and more frequently
if necessary.
During 2017, the MRC met a total of ten (10)
times and minutes of such meetings are duly
documented.
Asset and Liability Committee (ALCO)
ALCO is a decision making body for
developing policies relating to asset and
liability risk management with the objective
of maximising shareholder value, enhancing
profitability and protecting the Bank from
facing adverse consequences arising from
changes in extreme market condition and
compliance with regulatory guidelines.
Its key functions are to formulate policies
on market risk, liquidity risk and interest
rate risk, and to ensure that such risks are
effectively identified, controlled, monitored
and managed. Under the overall risk
management framework, ALCO is a key
component of risk management within the
Bank.
The Chief Financial Officer, Mr. Rehan
Ahmed Khan serves as Chairman of ALCO.
Meetings of ALCO are held more frequently
if necessary, particularly in the case of a
volatile operating environment.
During 2017, the Asset and Liability
Committee met a total of eleven (11) times
and minutes of such meetings are duly
documented.
Special Assets Management (SAM)
Committee
Special Assets are those assets of the Bank
which require extensive monitoring and
control in order to minimise risk, prevent
losses, maximise recoveries and restore
profits through rehabilitation, restructuring,
workout, collection or legal actions. The
SAM Committee supervises these activities,
reviews actions proposed to be taken on all
accounts within the Special Asset portfolio.
The Committee is responsible for ensuring
that recovery action on all Special Assets
is pursued rigorously and effectively and
that the applicable regulatory requirements
for provisions on SAM accounts are
implemented with due regard to
Management Risk Policy.
Senior AGM, Head of Special Assets, Mr.
Yakan Abdel-Majeed serves as the Chairman
of the Committee. Meetings are held at least
four times a year, or more frequently as
deemed appropriate by the Chairman.
During 2017, the Special Assets Management
Committee met a total of six (6) times
and minutes of such meetings are duly
documented.
Management Credit Committee (MCC)
The MCC is the third highest level authority
on all counterparty Credit Risk Exposure,
after the Board of Directors and Board
Executive Committee.
The MCC reviews, recommends and
implements approved credit policies
and procedures relating to the Bank.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 62
Annual Corporate
Governance Report 2017 continued
Crisis Management Committee (CMC)
Management of a crisis requires prevention,
planning, testing, evaluation and
maintenance to mitigate and minimize the
consequences. A crisis can impact people
and property. Effects might include fatalities,
injuries, property destruction and/or put
Commercial Bank’s reputation or products in
jeopardy.
The Committee has formed an official
Crisis Management Team to provide a
management response in times of crisis
and has develop and communicate a Crisis
Management Plan (CMP), to ensure formal
drills and training have been conducted
bank-wide.
In the event of a crisis, Commercial Bank
will need to communicate promptly to
internal and external stakeholders in order
to minimize any potential adverse impact
on people, property and Commercial bank’s
reputation by ensuring speedy and efficient
handling of the crisis.
The Group Chief Executive Officer, Mr.
Joseph Abraham serves as the Chairman of
the Committee. Meetings are held as and
when required.
During 2017, the Crisis Management
Committee met a total of two (2) time
and minutes of such meeting is duly
documented.
3.2 Senior Management Remuneration
Total remuneration earned by the Senior
Management in 2017 was QAR 46,925
million.
4. Ownership Structure
In accordance with Article 7 of the Bank’s
AOA, no person (whether natural or juridical)
shall at any time own more than 5% of the
total shares in the Bank by any means other
than inheritance, with the exception of (i)
Qatar Investment Authority, Qatar Holding
LLC or any of their associated companies
and (ii) a custodian or depository bank
holding shares in respect of an offering of
Global Depositary Receipts.
On 31 December 2017, 85.99% of the total
number of shares in the Bank were held
by Qatari nationals (whether individuals
or entities) and 14.01% of such shares by
foreign investors. On 31 December 2017, in
percentage terms, the largest non-individual
shareholdings in the Bank were as follows:
Qatar Holding LLC
Pension Fund of General
Retirement & Social
Insurance Authority (GRSIA)
Al Watani Funds 8
Al Watani Funds 3
16.67%
2.13%
2.60%
1.95%
5. Compliance, Internal Audit
and Risk Management
5.1 Compliance Culture
The Bank promotes a robust compliance
culture across the organization and requires
everyone, from the Board down to staff, to
consistently comply with applicable laws,
regulations and standards.
5.2 Compliance Set-up
The Bank has incorporated the regulatory
requirements into the Bank’s policies,
procedures and systems. The Bank has
comprehensive compliance and AML/CFT
policies describing the compliance and
AML/CFT functions at Commercial Bank, and
this has been assessed and evaluated by
internal and external bodies.
The Compliance and AML/CFT business
unit does, on a pro-active basis, identify,
document and assess the compliance risks
associated with the Bank’s business activities,
including but not limited to the development
of new products and business practices,
and the proposed establishment of new
types of business or customer relationships,
or material changes in the nature of such
relationships. Compliance risks include risk
of legal or regulatory sanctions, material
financial loss, or loss to reputation as a result
of failure to comply with applicable laws,
regulations and standards.
Compliance and AML/CFT business unit
was also presented and involved in all the
following tasks:
1. Provided compliance advice and
guidance on all daily inquiries raised by
the Bank’s Management/staff in a timely
manner;
2. Represented compliance in all
Operational Risk Approval Process
(ORAPs) and MRC meetings;
3. Addressed all the Bank’s business units’
inquiries with QCB;
4. Addressed all inquiries raised by QCB on
behalf of business units;
5. Facilitated and responded to all QCB
examiners’ requests for the 2017 annual
QCB regulatory review on all the Bank’s
business units; and
6. Regulatory reporting: investigated and
responded to all inquiries raised by the
FIU, QCB, and other regulatory inquiries;
7. Monitored the bank’s rations vs. QCB
mandated ratios.
8. Followed-up the closure of the
compliance observations.
9. Track the implementation progress of
QCB circulars.
10. Designed and revised customers’ data
classification as per QCB requirements.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 63
- Assist the Bank in maintaining
effective controls by evaluating their
effectiveness and efficiency and by
promoting continuous improvement;
and
- Assess and make appropriate
recommendations for improving
governance process;
• Performing independent assessments
of the quality of the Bank’s various credit
portfolios. A credit review team within
Internal Audit function undertakes this
role;
• Providing consulting services to the
Bank’s Executive Management and
businesses such as special reviews of
new projects, systems/applications,
outsourced facilities, and policies and
procedures. In this role, Internal Audit will
maintain its independence and objectivity
and will not assume responsibility for the
management, design or implementation
of new processes, products, systems or
applications; and
• Performing unscheduled/ad hoc tasks
such as fraud investigations and other
assignments at the request of the Board
Audit and Compliance Committee,
the regulator or the Bank’s senior
Management, as and when necessary.
The Internal Audit function regularly
makes recommendations to the Bank’s
management on areas where controls could
be improved or where better adherence
is required. Despite the existence of such
recommendations, there have been no
instances of major control failures that have
or could have had an impact on the Bank’s
overall financial performance. In addition,
results of the aforementioned assessment
showed that the Bank’s internal controls, risk
management and governance processes
were adequate and operating effectively.
There were no material risks, weakness or
instances of non-compliance which were
beyond the Bank’s risk tolerance level.
11. Coordinate the data cleansing initiative
across all business units.
5.3 Compliance Milestones
The Compliance and AML/CFT business
unit monitors and tests compliance by
performing compliance reviews to identify
regulatory breaches and non-compliance
issues. The results of the compliance
reviews are reported to the Board Audit
and Compliance Committee, the GCEO, the
concerned Executive Management and the
unit/department heads on a regular basis.
The reports summarise deficiencies and/
or breaches and recommend measures to
address them, in addition to the corrective
measures already taken and those which
shall be taken in accordance with agreed
target dates.
5.4 Compliance Awareness
As a result of the Bank’s commitments
to the implementation of the regulatory
requirements and to keep the Bank’s staff
up to the standard, the Bank has provided
training and awareness to the Bank’s staff on
governance, QCB regulations, AML/CFT –
sanctions and FATCA regulations on frequent
basis.
During 2017, the Compliance and AML/
CFT business unit carried out 17 compliance
reviews which identified compliance and
controls deficiencies all of which were
appropriately addressed by the Bank’s
Management. None of the compliance
issues identified in the department’s
compliance reviews had any material
financial impact on the Bank.
5.5 Internal Audit
The Internal Audit Department is an
independent function that intends to
enhance/augment Commercial Bank’s
overall control environment. Its mandate
and authority are defined in its Internal Audit
Charter which has been approved by the
Board Audit and Compliance Committee and
ratified by the Board.
To maintain its independence, the Internal
Audit Department reports to the Board,
through the Board Audit and Compliance
Committee. The remuneration of the
Department is determined by the Board
Audit and Compliance Committee. The
Chief Internal Auditor is nominated by the
Board Audit and Compliance Committee
and submits periodic reports directly to the
Committee and the senior Management.
The Department is tasked to provide an
independent assurance to the Board and
its senior management as to the adequacy
of the Bank’s control environment and the
effectiveness of the operation of these
controls with respect to the management/
mitigation of the key risks to which the Bank
is exposed. The Department’s risk-based
internal audit plan focuses on the following:
• Adequacy, effectiveness and efficiency of
the Bank’s internal control structure;
• Reliability and integrity of financial and
operational information;
• Effectiveness and efficiency of
operations;
• Safeguarding and utilisation of assets;
and
• Compliance with laws, regulations and
contracts.
In addition, the Department is also tasked
with the following key responsibilities:
• Performing a scheduled audit of
branches/departments/divisions,
products, processes, systems,
procedures and controls in conformity
with the annual audit plan agreed with
and approved by the Board Audit and
Compliance Committee. This includes:
-
Independent risk assessments of risk
and control elements applicable to
the area under review;
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017
64
Annual Corporate
Governance Report 2017 continued
In line with the 2017 Internal Audit Plan, the
Department issued and submitted a total of
32 Internal Audit Reports and Investigation
Reports to the Board Audit and Compliance
Committee. These reports in total covered
116 units within the Bank’s inventory of
“auditable units”, with certain units, including
the majority of the Bank’s branches, being
covered in more than one audit assignment.
All key recommendations with respect to
these reports are presented and discussed
during the Board Audit and Compliance
Committee meetings, with 7 meetings of
this Committee being held during 2017.
The Bank’s management proactively and
timely responds to all recommendations
made within Internal Audit reports, such that
there was no requirement for the Bank’s
Board Audit and Compliance Committee to
become involved in ensuring the resolution
of any such matters. However, there is a
governance framework in place to enable
the escalation of issues to the Board Audit
and Compliance Committee in need.
Additionally, the Internal Audit function
undertook 3 ad hoc assignments which, in
certain instances, did not result in a formal
report being issued to the Board Audit and
Compliance Committee.
As of the end of December 2017, the
Department is composed of 15 auditors.
5.6 Risk Management
The Risk Management function at
Commercial Bank continues to be well
positioned to manage the risk associated
with the Bank’s business.
The Risk Management process addresses all
risks, including credit, market, operational,
liquidity, reputational and strategic
risk. It ensures effective identification,
measurement, mitigation and reporting of
all risks, the allocation of adequate capital
against those risks, and the assurance of
an appropriate risk/return relationship.
These core values are embodied in the
Board-approved Risk Charter/Risk Appetite
Statement and risk policies which outline
the enterprise-wide risk management
activities of the Bank and detail high level
organisation, authorities and processes
relating to all aspects of risk management.
The Bank follows the “three lines of defense”
model for enterprise risk management,
whereby responsibility and accountability
for risk management within each line are
well embedded and practiced, cascading
from the Board of Directors, Board-
level Committees, Management-level
Committees, Executive Management and
employees.
Within Commercial Bank, risk management
is based on the Bank’s strategy and its risk
appetite both set by the Board of Directors.
The strategy and resultant risk policies
and procedures are implemented through
specialist risk management functions
reporting to the Chief Risk Officer. Risk
management is provided the requisite level
of independence and works closely with
other business units in the Bank, to support
their activities.
The following represent the key objectives of
the risk management framework:
•
Implement and advance market best
practice in risk management;
• Ensure adherence/compliance of
all policies and procedures listed for
management at the individual and
portfolio levels;
Institute prudent risk control mechanisms
across the Bank;
•
• Ensure compliance with local legal and
regulatory guidelines; and
• Maintain primary relationship with the
local regulators with respect to risk-
related issues.
Risk has over 30 dedicated staff; which
underlines Commercial Bank’s commitment
to a strong risk governance and
management framework. During 2017, the
Bank continued to enhance its controls and
processes in all areas of risk management
by incorporating various components of the
ICAAP into its periodic reporting, effectively
addressing matters pertaining to information
security under the broader digitization
strategy and providing updates with regards
to meeting the strategic risk objectives of
the Bank.
Commercial Bank’s Board is involved in risk
decisions through:
• The Board Risk Committee is responsible
for all aspects of enterprise-wide risk
management including, but not limited
to credit risk, market risk, liquidity risk
and operational risk. The BRC reviews
the policy on all risk issues and, maintains
oversight of all the risks the bank may be
exposed to.
• The Board Executive Committee (BEC) is
responsible for evaluating and granting
credit facilities within authorized limits as
per QCB and Board guidelines as well as
for reviewing the strategy on recovery
of special asset relationships whenever
required, reviewing and approving all
credit proposals (other than off-the-shelf
products) relating to political figures
and persons in ministerial posts, within
the risk delegation of authority, and
approving credit facilities with a tenor
above 12 years.
In addition, specific risk-focused
management committees (risk, asset and
liability and special assets management)
convene on a quarterly basis, at a minimum.
The Board of Directors or their sub-
committees are regularly updated on all
major risks that the Bank faces.
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 65
•
• Develop initiatives to recruit and retain
quality Qatari nationals and to meet the
targets set by the State of Qatar;
• Follow a consistent and competitive
compensation and benefits structure
throughout the Bank;
Implement a fair promotion mechanism
which recognises and rewards excellent
employee performance;
Improve employee performance, correct
deficiencies, build on strengths and
improve organisational effectiveness
through a formal performance appraisal
system;
•
• Handle complaints to mitigate grievances
and to secure the rights of the Bank and
its employees; and
• Promote knowledge sharing and learning
across the Bank and facilitate knowledge
growth
6.4 Penalties or Fines Imposed on the
Bank by Regulatory Authorities
There was no penalties imposed on the Bank
in 2017 by QCB.
6.5 Material Issues Regarding the Bank’s
Employees and Stakeholders
There are no material issues regarding the
Bank’s employees and stakeholders to be
disclosed in this report.
In summary, the governance framework,
policies and administrative procedures
and practices relating to risk management
in Commercial Bank align well with global
leading practice, the recommendations
of Basel Committee, and the guidelines of
Qatar Central Bank.
6. The Bank’s Policies
The Bank currently has a total of fifty
(50) policy manuals/charters, five (5)
of which are specifically focused on and
involved in corporate governance and risk
management.
6.1 Corporate Governance Charter
The Bank recognizes that an effective
corporate governance framework is the focal
component in the achievement of the Bank’s
corporate objectives and maximization
of shareholders’ value. The Bank has
established corporate governance practices
and protocols in compliance with its AOA and
relevant regulatory requirements and in line
with relevant corporate governance leading
practices.
The Corporate Governance Charter
captures the detailed guidelines of the
Bank’s governance framework in line with the
transparency and disclosure requirements
as per Qatar Central Bank (QCB) Corporate
Governance Guidelines for Banks and
Financial Institutions and QFMA Corporate
Governance Code for Companies Listed in
the Stock Exchange.
6.2 Anti-Fraud Policy
The Anti-Fraud Policy facilitates
development of controls that aid in
the detection and prevention of fraud
perpetrated against the bank.
The Bank promotes an anti-fraud risk culture
by adopting the following principles: (i)
Commitment to the principles of integrity,
accountability, and to an environment of
sound governance which includes robust
internal controls; (ii) Commitment to a
culture that safeguards public funds and
property in order to protect shareholder
interest; (iii) Zero tolerance approach to
fraudulent and/or unethical conduct and
holding all employees accountable for
their actions; and (iv) Consistent handling
of all cases regardless of positions held,
connections to authorities, nationality or
length of service.
6.3 Human Capital
The Bank’s Human Capital Department
provides fair and equitable policies geared
towards attracting, retaining and motivating
employees, which is a key element in the
efficient operation of its business. Such
policies also capture sound personnel
administration practice and maintenance
of competitive remuneration and welfare
packages to employees.
Commercial Bank continues to invest heavily
in Human Capital in line with Qatar National
Vision 2030 by developing our employee
talent and helping make Commercial Bank
one of the best places to work in Qatar.
In terms of Human Capital management, the
Bank is committed to:
• Recruit and retain highly qualified and
competent candidates through a cost-
effective recruitment process;
• Comply with all legal obligations and its
own internal regulations relating to hiring,
personnel administration and termination
of employment;
• Provide fair, equitable and transparent
treatment of all employees;
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 66
Annual Corporate
Governance Report 2017 continued
comply with in the conduct of their day-to-
day business activities. In addition to the
Bank-wide Code of Ethics, the standards of
conduct expected from the Board are also
covered in the Board Charter.
The Code extends to the Bank’s subsidiaries
and outsourced staff and covers the
following specific topics:
• Compliance with laws and regulations;
• Board and employee conduct;
• Restrictions on acceptance of gifts or
commissions;
• Avoidance of conflict of interest;
• Quality service and operational efficiency;
• Protection and proper use of company
• Prohibition on insider trading;
• Media relations and publicity;
• Whistle-blowing;
• Relations between employees and the
assets;
Bank;
• Use of proprietary and insider
information and stakeholder information;
• Employee information and privacy; and
• Respect for human rights and prohibition
of discrimination within the workplace.
Abdulla Bin Ali Bin Jabor Al Thani
Chairman
6.6 Corporate Social Responsibility
The Bank, as a responsible corporate
citizen, recognises its social responsibility
to integrate business values and operations
to meet the expectations and needs of its
stakeholders.
The Bank is committed to promoting
sustainable development, protecting and
conserving human life, health, natural
resources and the environment and
adding value to the communities in which it
operates. In so doing, the Bank recognizes
the importance of both financial and non-
financial commitment and contribution.
Commercial Bank strives to be an
outstanding corporate citizen by supporting
the development of the Qatari community as
a whole through a range of socio-economic
initiatives in diverse areas including
humanitarian projects and charitable work
for the disadvantaged; educational, training
and personal development programmes
for Qatari youth; sports and health
initiatives; support for Qatari heritage and
culture; and the Bank’s Qatar National Day
programmes that revive and celebrate
Qatar’s cultural heritage. During 2017,
Commercial Bank’s Marketing Department
successfully implemented a large number of
CSR initiatives with an impact both outside
and within the Bank. A fully comprehensive
description of the Bank’s extensive CSR
programme is contained in Commercial
Bank’s Annual Report 2017.
6.7 Code of Ethics
The Bank-wide Code of Ethics serves as a
guide to the everyday professional conduct
of its employees. The Code covers all
applicable laws and regulations and the
highest standards of business ethics that
Bank employees should be aware of and
THE COMMERCIAL BANK (P.S.Q.C.) I ANNUAL REPORT 2017 the commercial bank (P.S.Q.c.) i annual report 2017
the commercial bank (P.S.Q.c.) i annual report 2017
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Consolidated Financial
Statements
31 December 2017
Independent auditors’ report
Consolidated Statement of Financial position
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Changes in equity
Consolidated Statement of Cash Flows
notes to the Consolidated Financial Statements
Supplementary Information – parent
68
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76
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the commercial bank (P.S.Q.c.) i annual report 2017
68
Independent Auditor’s Report
to the ShareholderS oF the CommerCIal Bank (p.S.Q.C.)
Report on the Audit of the Consolidated Financial Statements
opinion
We have audited the accompanying consolidated financial statements of the Commercial Bank (p.S.Q.C.) (the ‘Bank’) and its subsidiaries
(together the ‘Group’), which comprise the consolidated statement of financial position as at 31 december 2017, the consolidated statements
of income, comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising significant accounting
policies and other explanatory information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position
of the Group as at 31 december 2017, and its consolidated financial performance and its consolidated cash flows for the year then ended
in accordance with International Financial reporting Standards (‘IFrS’) and the applicable provisions of Qatar Central Bank regulations (‘QCB
regulations’).
Basis for opinion
We conducted our audit in accordance with International Standards on auditing (ISa). our responsibilities under those standards are further
described in the auditor’s responsibilities for the audit of the Consolidated Financial Statements section of our report. We are independent
of the Group in accordance with the International ethics Standards Board for accountants’ Code of ethics for professional accountants (IeSBa
Code) together with the ethical requirements that are relevant to our audit of the Bank’s consolidated financial statements in the State of Qatar,
and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IeSBa Code. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
key audit matters
key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial
statements of the current year. these matters were addressed in the context of our audit of the consolidated financial statements as a whole,
and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Impairment of loans and advances - refer to notes 3(c)(v),
4(b)(i), 4(b)(v), 5(a)(i) and 10(c) in the consolidated financial
statements
We focused on this area because:
• Loans and advances are QAR 89,121 million representing 64.37%
of the Group’s total assets as at 31 december 2017, hence a
material portion of the consolidated statement of financial
position. the net impairment charge on loans and advances
during the year was QAR 1,697 million.
• The Group makes complex and subjective judgments over both
timing of recognition of impairment and the estimation of the
amount of such impairment.
How the matter was addressed in our audit
our audit procedures in this area included, among others:
• Our team used their local knowledge to assess the trends in their
local credit environment and considered the likely impact on the
Group’s loans and advances portfolio to focus their testing on key
risk areas.
• For the corporate portfolio:
- we tested the key controls over the credit grading and
monitoring process;
- we tested the governance controls over the impairment
processes, including the continuous re-assessment by the
Group that impairment policies remain appropriate for the
risks within the Group’s loans and advances portfolio;
- we performed detailed credit assessments of a sample of
performing and non-performing loans and advances in line
with QCB regulations;
- as part of our credit assessments for these selected loans
and advances, we critically challenged the reasonableness of
the forecast of recoverable cash flows, realization of collateral
and other possible sources of repayment. We tested the
consistency of key assumptions and compared them to
progress against business plans and our own understanding
of the relevant industries and business environments. We also
agreed them where possible to externally derived evidence.
the commercial bank (P.S.Q.c.) i annual report 2017
69
How the matter was addressed in our audit (continued)
• For the retail portfolio, the impairment process is based on
historical payment performance of each segment within the
portfolio, adjusted for current market and economic conditions.
We tested the accuracy of key variables relevant for the retail
loans portfolio (e.g. year-end balances, repayment history,
past-due status) and we assessed the appropriateness of the
impairment calculation methodology. We evaluated whether the
output is consistent with historical payment performance, and
we challenged the appropriateness of the Group’s adjustments
to reflect current market and economic conditions.
• For the collective impairment calculation, our work included
testing controls over the appropriateness of the methodology
and models used to calculate the charge, the process of
determining key assumptions and the identification of loans to
be included within the calculation.
• We assessed the adequacy of the Group’s disclosure in relation
to impairment of loans and advances by reference to the
requirements of the relevant accounting standards and QCB
regulations.
How the matter was addressed in our audit
our audit procedures in this area included, among others:
• Testing controls over the process of valuation of investment
securities.
• Agreeing the valuation of the quoted equity and debt securities
to externally quoted prices.
• For unquoted debt and equity securities, assessing the
appropriateness of the valuation methodology and challenging
the key underlying assumptions, such as pricing inputs and
discount factors.
• For debt securities, perform tests to determine whether there is
objective evidence of impairment due to credit-related factors.
• Testing, for a selection of pricing inputs used, that they were
externally sourced and were correctly input into the pricing
models.
• We assessed the adequacy of the Group’s disclosure in relation
to the valuation of investment securities by reference to the
requirements of the relevant accounting standards and QCB
regulations.
key audit matters (continued)
Valuation of investment securities - refer to notes 3(c)(v), 5(a)
(ii), 5(b)(i) and 11 in the consolidated financial statements
We focused on this area because:
•
Investment securities represent QAR 19,629 million or 14.18% of
the Group’s total assets as at 31 december 2017, hence a material
portion of the consolidated statement of financial position.
• Of
•
the
total
1,959 million
investment securities, QAR
comprise unquoted debt and equity securities at fair value,
the measurement of which requires use of estimates and
judgements.
IFRS and QCB regulations require assessment at each reporting
date to determine whether there is objective evidence that an
investment is impaired. In case of equity instruments classified
as ‘available for Sale’ (aFS), objective evidence would include a
significant or prolonged decline in the fair value of an investment
below cost, determination of which requires management
judgment.
the commercial bank (P.S.Q.c.) i annual report 2017
70
Independent Auditor’s
Report continued
key audit matters (continued)
Impairment assessment of goodwill - refer notes 3(i)(i), 5(a)
(ii) and 14 in the consolidated financial statements
We focused on this area because:
• As at 31 December 2017, the Group’s consolidated financial
statements include recognised goodwill of Qar 201 million,
net of impairment, which is a material amount for the purposes
of our audit, and which arose from the Bank’s acquisition of its
turkish subsidiary in 2013.
• An assessment is required annually to establish whether this
goodwill should continue to be recognized, or if any impairment
is required. the impairment assessment relies on determining
the recoverable amount of the investment in the subsidiary
using valuation techniques such as discounted cash flows.
the estimation of future cash flows and the rate at which they
are discounted is inherently uncertain and requires the use of
estimates and judgments.
How the matter was addressed in our audit
our audit procedures in this area included, among others:
• Testing of the Group’s budgeting procedures upon which the
forecasts are based.
• We involved our own valuation specialists to assist us in:
- evaluating the appropriateness of the methodology used by
- evaluating key
the Group to assess impairment of goodwill;
in cash flow
inputs and assumptions
projections used by the Group in comparison to externally
derived data as well as our own assessments of investee
specific circumstances and experience in the related industry,
in particular its derivation of discount rates, terminal growth
rates and comparing progress against stated business plans.
• We assessed the adequacy of the Group’s disclosure in relation
to key inputs and assumptions for goodwill impairment by
reference to the requirements of the relevant accounting
standards.
other Information
the Board of directors is responsible for the other information. the other information comprises the information included in the Bank’s annual
report (the “annual report”), but does not include the Bank’s consolidated financial statements and our auditor’s report thereon. prior to the
date of this auditor’s report, we obtained the report of the Board of directors which forms part of the annual report, and the remaining sections
of the annual report are expected to be made available to us after that date.
our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above, and,
in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed on the other information that we have obtained prior to the date of this auditor’s report, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
responsibilities of the Board of directors for the Consolidated Financial Statements
the Board of directors is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with
IFrS and QCB regulations, and for such internal control as the Board of directors determines is necessary to enable the preparation of the
consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Board of directors is responsible for assessing the Group’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of
directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
the commercial bank (P.S.Q.c.) i annual report 2017
71
auditor’s responsibilities for the audit of the Consolidated Financial Statements
our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. reasonable assurance is a high level
of assurance, but is not a guarantee that an audit conducted in accordance with ISas will always detect a material misstatement when it exists.
misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial statements.
as part of an audit in accordance with ISa, we exercise professional judgement and maintain professional skepticism throughout the audit. We
also:
•
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and
perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. the risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
the Board of directors.
• Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. however, future events or conditions may cause the Group
to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the
consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to
express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.
We communicate with the Board of directors regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the Board of directors with a statement that we have complied with relevant ethical requirements regarding independence,
and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where
applicable, related safeguards.
From the matters communicated with the Board of directors, we determine those matters that were of most significance in the audit of the
consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the
public interest benefits of such communication.
the commercial bank (P.S.Q.c.) i annual report 2017
72
Independent Auditor’s
Report continued
Report on Other Legal and Regulatory Requirements
We have obtained all the information and explanations we considered necessary for the purposes of our audit. the Bank has maintained proper
accounting records and its consolidated financial statements are in agreement therewith. We have read the report of the Board of directors to
determine whether the financial information contained therein is in agreement with the books and records of the Bank. We are not aware of any
violations of the applicable provisions of the Qatar Central Bank law no. 13 of 2012 and of the Qatar Commercial Companies law no. 11 of 2015
or the terms of the articles of association and any amendments thereto, having occurred during the year which might have had a material effect
on the Bank’s consolidated financial position or performance as at and for the year ended 31 december 2017.
Gopal Balasubramaniam
KPMG
Audit Registration No. 251
Licensed by QFMA: External Auditor’s License No. 120153
29 January 2018
Doha, State of Qatar
Consolidated Statement
of Financial Position
As at 31 December
ASSETS
Cash and balances with central banks
Due from banks
Loans and advances to customers
Investment securities
Investment in associates and a joint arrangement
asset held for sale
Property and equipment
Intangible assets
Other assets
TOTAL ASSETS
LIABILITIES
due to banks
Customer deposits
Debt securities
Other borrowings
Other liabilities
TOTAL LIABILITIES
EQUITY
Share capital
Legal reserve
General reserve
Risk reserve
Fair value reserve
Treasury shares
Foreign currency translation reserve
Other reserves
Revaluation reserve
Retained earnings
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE BANK
non-controlling interests
Instruments eligible for additional capital
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
the commercial bank (P.S.Q.c.) i annual report 2017
73
notes
Figures in thousand Qatar riyals
2016
2017
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
22
22
22
22
22
22
22
22
22
7,373,918
10,499,348
89,121,935
19,629,246
2,088,158
2,287,100
2,590,987
430,178
4,428,182
138,449,052
13,515,872
77,633,333
11,604,890
9,303,365
5,370,073
117,427,533
4,047,254
9,742,066
26,500
1,890,408
(44,500)
(179,507)
(1,383,926)
1,064,189
1,264,794
594,226
17,021,504
15
4,000,000
21,021,519
138,449,052
6,420,566
19,302,001
77,797,597
15,377,783
4,300,647
-
2,649,235
483,364
4,049,093
130,380,286
11,634,313
70,926,401
11,717,260
10,777,242
6,023,798
111,079,014
3,266,292
8,828,240
26,500
1,802,308
(219,815)
-
(1,259,807)
997,767
1,264,794
594,980
15,301,259
13
4,000,000
19,301,272
130,380,286
The consolidated financial statements were approved by the Board of Directors on 29 January 2018 and were signed on its behalf by:
Sheikh Abdullah Bin Ali Bin Jabor Al Thani
Chairman
Mr. Hussain Ibrahim Alfardan
Vice Chairman
Mr. Joseph Abraham
Group Chief executive officer
the attached notes 1 to 41 form an integral part of these consolidated financial statements
the commercial bank (P.S.Q.c.) i annual report 2017
74
Consolidated Income
Statement
For the year ended 31 December
Interest income
Interest expense
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net foreign exchange gain
Income from investment securities
Other income
Net operating income
Staff costs
Depreciation
amortization and impairment of intangible assets
Impairment loss on investment securities
Net impairment loss on loans and advances to customers
Other expenses
Profit before share of results of associates and a joint arrangement
Share of results of associates and a joint arrangement
Profit before tax
Income tax expense
Profit for the year
Attributable to:
equity holders of the Bank
Non-controlling interests
Profit for the year
notes
Figures in thousand Qatar riyals
2016
2017
25
26
27
28
29
30
31
32
14
15
10(c)
33
12
5,138,921
(2,620,621)
2,518,300
1,029,333
(308,985)
720,348
162,641
48,690
79,296
3,529,275
(713,472)
(152,392)
(55,610)
(46,484)
(1,696,819)
(403,593)
460,905
147,876
608,781
(5,131)
603,650
603,648
2
603,650
4,562,589
(2,221,841)
2,340,748
1,041,156
(304,513)
736,643
245,314
163,019
92,119
3,577,843
(872,272)
(137,050)
(104,618)
(76,613)
(1,267,801)
(571,602)
547,887
(46,350)
501,537
(158)
501,379
500,750
629
501,379
Earnings per share
Basic/diluted earnings per share (Qar per share)
34
0.90
0.78
the attached notes 1 to 41 form an integral part of these consolidated financial statements
the commercial bank (P.S.Q.c.) i annual report 2017
75
Consolidated Statement of
Comprehensive Income
For the year ended 31 December
Profit for the year
notes
Figures in thousand Qatar riyals
2016
2017
603,650
501,379
Other comprehensive income for the year:
Items that are, or may be subsequently reclassified to profit or loss:
Foreign currency translation differences for foreign operation
Share of other comprehensive income of investment in associates and a joint arrangement
net movement in fair value of available-for-sale investments
Items that are, or may not be subsequently reclassified to profit or loss:
Revaluation on land and buildings
Other comprehensive income for the year
23
23
23
23
Total comprehensive income for the year
Attributable to:
equity holders of the Bank
Non-controlling interests
Total comprehensive income for the year
(124,119)
8,190
167,125
-
51,196
(262,104)
11,612
(173,843)
1,264,794
840,459
654,846
1,341,838
654,844
2
654,846
1,341,209
629
1,341,838
the attached notes 1 to 41 form an integral part of these consolidated financial statements
the commercial bank (P.S.Q.c.) i annual report 2017
76
Consolidated Statement
of Changes in Equity
For the year ended 31 December
Notes
Share
capital
Legal
reserve
General
reserve
Risk reserve
Fair value
reserve
Foreign
currency
translation
reserve
Treasury
shares
Other
reserves
Revaluation
reserve
Retained equity holders
earnings
of the Bank
Total equity
attributable to
Figures in thousand Qatar riyals
Non-
controlling
interests
Instruments
eligible for
additional
capital
Total
equity
Balance as at 1 January 2017
3,266,292
8,828,240
26,500
1,802,308
(219,815)
-
(1,259,807)
997,767
1,264,794
594,980
15,301,259
13 4,000,000
19,301,272
Total comprehensive income for the year
profit for the year
Other comprehensive income
Total comprehensive income for the year
transfer to legal reserve
transfer to risk reserve
net movement in other reserves and
fair value reserve
Instruments eligible for additional capital
dividend for Instruments eligible for
additional capital
Social and sports fund
put option on non-controlling interest
Transactions with equityholders of the
Bank recognised directly in equity
Contributions by and distributions to
equity holders of the Bank:
Increase in share capital
Increase in legal reserve
dividends for the year 2016
Bonus issue
Treasury shares
Total contributions by and distributions
to equity holders of the Bank
net movement in non-controlling interests
Balance as at 31 December 2017
-
-
-
-
-
-
-
-
-
-
-
-
-
2,062
-
-
-
-
-
-
588,235
-
-
192,727
-
-
911,764
-
-
-
22
22
22
22
22
24
22
22
22
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
175,315
175,315
(124,119)
(124,119)
-
88,100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
780,962
-
4,047,254
911,764
-
9,742,066
-
-
26,500
-
-
1,890,408
-
-
(44,500)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(179,507)
(179,507)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
66,422
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
603,648
51,196
654,844
603,648
-
603,648
(2,062)
(88,100)
(66,422)
(240,000)
(15,091)
(240,000)
(15,091)
588,235
911,764
(179,507)
(192,727)
(192,727)
1,320,492
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2
-
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
603,650
51,196
654,846
-
-
-
-
-
-
-
-
(240,000)
(15,091)
588,235
911,764
(179,507)
1,320,492
(179,507)
(1,383,926)
1,064,189
1,264,794
594,226
17,021,504
15 4,000,000
21,021,519
the attached notes 1 to 41 form an integral part of these consolidated financial statements
the commercial bank (P.S.Q.c.) i annual report 2017
77
Balance as at 1 January 2017
3,266,292
8,828,240
26,500
1,802,308
(219,815)
-
(1,259,807)
997,767
1,264,794
594,980
15,301,259
13 4,000,000
19,301,272
Foreign
currency
translation
reserve
Treasury
shares
Other
reserves
Revaluation
reserve
Total equity
attributable to
Retained equity holders
of the Bank
earnings
Non-
controlling
interests
Figures in thousand Qatar riyals
Instruments
eligible for
additional
capital
Total
equity
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(179,507)
-
(124,119)
(124,119)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
66,422
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
603,648
-
603,648
603,648
51,196
654,844
(2,062)
(88,100)
(66,422)
-
-
-
-
-
(240,000)
(15,091)
-
(240,000)
(15,091)
-
-
-
-
(192,727)
-
588,235
911,764
-
-
(179,507)
2
-
2
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
603,650
51,196
654,846
-
-
-
-
(240,000)
(15,091)
-
588,235
911,764
-
-
(179,507)
4,047,254
9,742,066
26,500
1,890,408
(44,500)
(179,507)
-
(179,507)
-
-
(1,383,926)
-
-
1,064,189
-
-
1,264,794
(192,727)
-
594,226
1,320,492
-
17,021,504
-
-
-
-
15 4,000,000
1,320,492
-
21,021,519
For the year ended 31 December
Notes
Share
capital
Legal
reserve
General
reserve
Risk reserve
Fair value
reserve
Total comprehensive income for the year
profit for the year
Other comprehensive income
Total comprehensive income for the year
transfer to legal reserve
transfer to risk reserve
net movement in other reserves and
fair value reserve
Instruments eligible for additional capital
dividend for Instruments eligible for
additional capital
Social and sports fund
put option on non-controlling interest
Transactions with equityholders of the
Bank recognised directly in equity
Contributions by and distributions to
equity holders of the Bank:
Increase in share capital
Increase in legal reserve
dividends for the year 2016
Bonus issue
Treasury shares
Total contributions by and distributions
to equity holders of the Bank
net movement in non-controlling interests
Balance as at 31 December 2017
22
22
22
22
22
24
22
22
22
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,062
88,100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
175,315
175,315
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
588,235
192,727
911,764
780,962
911,764
the attached notes 1 to 41 form an integral part of these consolidated financial statements
the commercial bank (P.S.Q.c.) i annual report 2017
78
Consolidated Statement of
Changes in Equity continued
For the year ended 31 December
Notes
Share
capital
Legal
reserve
General
reserve
Risk reserve
Fair value
reserve
Treasury
shares
Other
reserves
Other
equity
Revaluation
reserve
Retained equity holders
earnings
of the Bank
Balance as at 1 January 2016
3,266,292
8,820,294
26,500
1,787,308
(70,305)
total comprehensive income for the year
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transfer to legal reserve
transfer to risk reserve
net movement in other reserves
and fair value reserve
Instruments eligible for
additional capital
dividend for Instruments eligible
for additional capital
Social and sports fund
put option on non-controlling interest
transactions with equity holders of
the Bank recognised directly in equity
Contributions by and distributions
to equity holders of the Bank:
Increase in share capital of abank
Dividends for the year 2015
Bonus issue
total contributions by and distributions
to equity holders of the Bank
Net movement in non-controlling interest
Balance as at 31 December 2016
22
22
22
22
22
24
22
22
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,946
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(162,231)
(162,231)
-
15,000
-
-
-
-
-
-
-
-
-
-
12,721
-
-
-
-
-
-
-
-
-
3,266,292
-
-
8,828,240
-
-
26,500
-
-
1,802,308
-
-
(219,815)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
the attached notes 1 to 41 form an integral part of these consolidated financial statements.
Total equity
attributable to
Figures in thousand Qatar riyals
Non-
controlling
interests
Instruments
eligible for
additional
capital
Total
equity
Foreign
currency
translation
reserve
(196,634)
(196,634)
-
-
-
-
-
-
-
-
-
-
-
-
(804,995)
1,139,887
(651,052)
1,239,526
14,753,455
545,225
2,000,000
17,298,680
(142,120)
122,265
(7,134)
651,052
(220,000)
(12,534)
(220,000)
(12,534)
651,052
1,264,794
1,264,794
500,750
905,929
1,406,679
629
(65,470)
(64,841)
500,750
-
500,750
(7,946)
(15,000)
-
-
-
-
-
-
-
-
-
(979,888)
(979,888)
47,305
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,000,000
2,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
501,379
840,459
1,341,838
-
-
(7,134)
(220,000)
(12,534)
651,052
47,305
(979,888)
-
(932,583)
(818,047)
19,301,272
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(258,178)
(1,259,807)
997,767
1,264,794
(979,888)
(32,193)
594,980
(979,888)
(290,371)
15,301,259
47,305
(527,676)
13
4,000,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
the commercial bank (P.S.Q.c.) i annual report 2017
79
For the year ended 31 December
Notes
Share
capital
Legal
reserve
General
reserve
Risk reserve
Fair value
reserve
Treasury
shares
Foreign
currency
translation
reserve
Other
reserves
Other
equity
Revaluation
reserve
Total equity
attributable to
Retained equity holders
of the Bank
earnings
Non-
controlling
interests
Figures in thousand Qatar riyals
Instruments
eligible for
additional
capital
Total
equity
Balance as at 1 January 2016
3,266,292
8,820,294
26,500
1,787,308
(70,305)
(804,995)
1,139,887
(651,052)
-
1,239,526
14,753,455
545,225
2,000,000
17,298,680
500,750
-
500,750
(7,946)
(15,000)
500,750
905,929
1,406,679
629
(65,470)
(64,841)
-
-
-
(196,634)
(196,634)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(142,120)
-
-
-
-
-
-
-
-
(258,178)
(1,259,807)
-
-
997,767
-
-
-
-
-
-
-
-
-
651,052
-
-
-
-
-
-
-
1,264,794
1,264,794
-
-
-
-
-
-
-
-
-
-
-
-
1,264,794
122,265
(7,134)
-
-
(220,000)
(12,534)
-
(220,000)
(12,534)
651,052
-
(979,888)
-
(979,888)
(32,193)
594,980
-
(979,888)
-
(979,888)
(290,371)
15,301,259
-
-
-
-
-
-
-
47,305
-
-
-
-
-
-
-
-
501,379
840,459
1,341,838
-
-
(7,134)
2,000,000
2,000,000
-
-
-
-
-
-
(220,000)
(12,534)
651,052
47,305
(979,888)
-
(932,583)
(818,047)
19,301,272
47,305
(527,676)
13
-
-
4,000,000
total comprehensive income for the year
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transfer to legal reserve
transfer to risk reserve
net movement in other reserves
and fair value reserve
Instruments eligible for
additional capital
dividend for Instruments eligible
for additional capital
Social and sports fund
put option on non-controlling interest
transactions with equity holders of
the Bank recognised directly in equity
Contributions by and distributions
to equity holders of the Bank:
Increase in share capital of abank
Dividends for the year 2015
Bonus issue
total contributions by and distributions
to equity holders of the Bank
Net movement in non-controlling interest
Balance as at 31 December 2016
22
22
22
22
22
24
22
22
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
7,946
15,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(162,231)
(162,231)
12,721
-
-
-
-
-
-
-
-
-
-
-
-
3,266,292
8,828,240
26,500
1,802,308
(219,815)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
the attached notes 1 to 41 form an integral part of these consolidated financial statements.
the commercial bank (P.S.Q.c.) i annual report 2017
80
Consolidated Statement
of Cash Flows
For the year ended 31 December
Cash flows from operating activities
profit before tax
adjustments for:
Net impairment loss on loans and advances to customers
Impairment loss on investment securities
Depreciation
Amortization of intangible assets and transaction costs
loss on investment securities at fair value through profit or loss
Net gain on disposal of available-for-sale securities
Gain on disposal of property and equipment and other assets
Share of results of associates and joint arrangement
operating profit before working capital changes
Working capital changes
Change in due from banks
Change in loans and advances to customers
Change in other assets
Change in due to banks
Change in customer deposits
Change in other liabilities
Contribution to social and sports fund
Net cash from / (used in) operating activities
Cash flows from investing activities
acquisition of investment securities
Dividend received from associates and a joint arrangement
proceeds from sale/maturity of investment securities
Acquisition of property and equipment and intangible assets
proceeds from the sale of property and equipment and other assets
Net cash (used in) / from investing activities
Cash flows from financing activities
Proceeds from issue of debt securities
Repayment of debt securities
Repayment of other borrowings
Proceeds from other borrowings
Proceeds from rights issue
proceeds from issue of instrument eligible for additional capital
Purchase of treasury shares
Dividends paid
Net cash (used in) / from financing activities
Net increase / (decrease) in cash and cash equivalents
Effect of exchange rate fluctuations
Cash and cash equivalents as at 1 January
Cash and cash equivalents as at the end of the year
Net cash flows from interest and dividend:
Interest paid
Interest received
Dividend received
the attached notes 1 to 41 form an integral part of these consolidated financial statements.
notes
Figures in thousand Qatar riyals
2016
2017
608,781
501,537
1,696,819
46,484
152,392
126,930
2,635
(39,339)
(4,042)
(147,876)
2,442,784
3,521,993
(13,984,587)
(444,075)
2,194,421
7,381,483
(823,358)
(12,534)
276,127
(8,561,768)
81,454
4,253,761
(113,350)
6,201
(4,333,702)
3,845,587
(3,968,148)
(5,414,984)
4,161,023
1,499,999
-
(179,507)
-
(56,030)
(4,113,605)
119,174
14,315,866
10,321,435
14
30
30
12
12
14&15
19
19
20
20
36
1,267,801
76,613
137,050
174,188
6,383
(152,433)
(810)
46,350
2,056,679
(1,385,806)
(4,938,019)
(907,538)
(572,134)
2,822,005
2,512,556
(35,841)
(448,098)
(10,654,156)
79,389
10,564,071
(199,781)
4,436
(206,041)
4,143,999
(178,298)
(5,355,178)
4,158,709
-
2,000,000
-
(979,888)
3,789,344
3,135,205
241,423
10,939,238
14,315,866
2,613,395
4,948,811
11,986
2,001,392
4,432,359
16,969
the commercial bank (P.S.Q.c.) i annual report 2017
81
Notes to the Consolidated
Financial Statements
As at and for the year ended 31 December 2017
1. REPORTING ENTITY
The Commercial Bank (P.S.Q.C.) (“the Bank”) is an entity domiciled in the State of Qatar and was in corporated in 1974 as a public share
holding company under Emiri Decree No.73 of 1974. The commercial registration number of the Bank is 150. The address of the Bank’s
registered office is po Box 3232, doha, State of Qatar. the consolidated financial statements of the Bank for the year ended 31 december
2017 comprise the Bank and its subsidiaries (together referred to as “the Group”). the Group is primarily engaged in conventional banking,
brokerage services and the credit card business and operates through its head office, subsidiaries and branches.
the principal subsidiaries of the Group are as follows:
Name
alternatifbank a.S. (“aBank”)
Commercial Bank Financial
Services (l.l.C.)
Global Card Services l.l.C.
Country of
incorporation
turkey
Capital
TRY 980,000,000
Activity
Banking services
Qatar
Qar 100,000,000
Brokerage services
Sultanate of oman
omr
500,000
Credit card business
debt issuance for
the Bank
CBQ Finance limited
Bermuda
uS$
1,000
2. BASIS OF PREPARATION
Percentage of ownership
2017
100%
100%
100%
100%
2016
100%
100%
100%
100%
(a) Statement of compliance
the consolidated financial statements have been prepared in accordance with International Financial reporting Standards (“IFrS”) issued
by the International accounting Standards Board (“IaSB”) and the applicable provisions of the Qatar Central Bank (“QCB”) regulations.
the Group presents its consolidated statement of financial position broadly in the order of liquidity. an analysis regarding recovery or
settlement of assets/liabilities within twelve months after the end of the reporting date (“current”) and more than twelve months after the
reporting date (“non-current”) is presented in note 4(c) (iii).
(b) Basis of measurement
the consolidated financial statements have been prepared on the historical cost basis except for the following assets and liabilities that are
measured at fair value:
•
•
•
•
•
investment securities designated at fair value through income statement;
derivatives;
available-for-sale investments;
land and buildings; and
The carrying values of recognised assets and liabilities that are hedged items in quantifying fair value hedges, and otherwise carried
at amortised cost, are adjusted to record changes in fair value attributable to the risks that are being hedged.
(c) Functional and presentation currency
these consolidated financial statements are presented in Qatari riyals (“Qar”), which is the Bank’s functional and presentation currency.
except as otherwise indicated, financial information presented in Qar has been rounded to the nearest thousand.
(d) Use of estimates and judgments
the preparation of the consolidated financial statements in conformity with IFrS and QCB regulations requires management to make
judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,
income and expenses. actual results may differ from these estimates.
estimates and underlying assumptions are reviewed on an ongoing basis. revisions to accounting estimates are recognised in the period
in which the estimate is revised and in any future periods affected.
Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most
significant effect on the amounts recognised in the consolidated financial statements are described in note 5.
the commercial bank (P.S.Q.c.) i annual report 2017
82
Notes to the Consolidated
Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES
except for the changes explained in note 3(y), the accounting policies set out below have been applied consistently to all periods presented
in these consolidated financial statements, and have been applied consistently by the Group entities.
(a) Basis of consolidation
(i) Business combination
the Group applies the acquisition method to account for business combinations. the consideration transferred for the acquisition of a
subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquire and the equity interests
issued by the Group. the consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration
arrangement. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially
at their fair values at the acquisition date.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity interest in the
acquire is re-measured to fair value at the acquisition date; any gains or losses arising from such re-measurement are recognised in profit
or loss.
any contingent consideration to be transferred by the Group is recognised at fair value at the acquisition date. Subsequent changes to the
fair value of the contingent consideration that is deemed to be an asset or liability is recognised in accordance with IAS 39 either in profit
or loss or as a change to other comprehensive income. Contingent consideration that is classified as equity is not re-measured, and its
subsequent settlement is accounted for within equity.
the excess of the consideration transferred the amount of any non-controlling interest in the acquired and the acquisition-date fair value
of any previous equity interest in the acquired over the fair value of the identifiable net assets acquired is recorded as goodwill. If the total
of consideration transferred, non-controlling interest recognised and previously held interest measured is less than the fair value of the net
assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the income statement.
transaction costs are expensed as incurred, except if they are related to the issue of debt or equity securities.
(ii) Non-controlling interests (NCI)
In accordance with IFrS 3r, for each business combination, the acquirer can measure, at the acquisition date, components of nCI in the
acquired business that represent ownership interests and entitle its holders to a proportionate share of the entity’s net assets in the event
of liquidation at either:
(a)
(b)
fair value on the acquisition date; or
the present ownership instruments’ proportionate share in the recognised amounts of the acquiree’s identifiable net assets.
nCI is measured only on initial recognition. the Group measures the nCI at fair value, including its share of goodwill.
(iii) Subsidiaries
Subsidiaries are entities controlled by the Group. the Group ‘controls’ an investee if it is exposed to, or has rights to, variable returns from
its involvement with the investee and has the ability to affect those returns through its power over the investee. the financial statements of
subsidiaries are included in the consolidated financial statements from the date on which control commences until the date when control
ceases.
the accounting policies of subsidiaries are consistent with the accounting policies adopted by the Group.
(iv) Transactions eliminated on consolidation
Intra-group balances, and income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated
financial statements.
the commercial bank (P.S.Q.c.) i annual report 2017
83
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(a) Basis of consolidation (continued)
(v) Associates and joint arrangements
associates and joint arrangements are entities over which the Group has significant influence but not control, generally accompanying a
shareholding of between 20% and 50% of the voting rights.
Investments in associates and joint arrangements are accounted for by the equity method of accounting and are initially recognised at cost
(including transaction costs directly related to acquisition of investment in associates and joint arrangement). the Group’s investment in
associates and joint arrangements includes goodwill (net of any accumulated impairment loss) identified on acquisition.
the Group’s share of its associates’ and joint arrangement’s post-acquisition profits or losses is recognised in the consolidated income
statement; its share of post-acquisition reserve movements is recognised in reserves. the cumulative post-acquisition movements are
adjusted against the carrying amount of the investment. When the Group’s share of losses in an associates and joint arrangements equals
or exceeds its interest in the associates and joint arrangements, including any other unsecured receivables, the Group does not recognise
further losses, unless it has incurred obligations or made payments on behalf of the associates and joint arrangement.
Intergroup gains on transactions between the Group and its associates and joint arrangement are eliminated to the extent of the Group’s
interest in the associates and joint arrangements. Intergroup losses are also eliminated unless the transaction provides evidence of an
impairment of the asset transferred.
assoicates financial statements are being prepared using similar accounting policies and period end as the parent.
(vi) Funds management
the Group manages and administers assets held in unit trusts and other investment vehicles on behalf of investors. the financial statements
of these entities are not included in these consolidated financial statements except when the Group controls the entity. Information about
the Group’s funds management is set out in note 37.
(b) Foreign currency
(i) Foreign currency transactions and balances
Foreign currency transactions that require settlement in a foreign currency are translated into the respective functional currencies of the
operations at the spot exchange rates at the date of the transactions.
monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the
spot exchange rate at that date. non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are
retranslated into the functional currency at the spot exchange rate at the date that the fair value was determined. non-monetary assets
and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the
transaction.
the gains and losses on revaluation of foreign currency non-monetary available-for-sale investments are recognised in the consolidated
statement of changes in equity.
Foreign currency differences resulting from the settlement of foreign currency transactions and arising on translation at period end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.
the commercial bank (P.S.Q.c.) i annual report 2017
84
Notes to the Consolidated
Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Foreign currency (continued)
(ii) Foreign operations
the results and financial position of all the Group’s entities that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
-
-
-
assets and liabilities for each statement of financial position presented are translated at the closing rate at the reporting date;
Income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are
translated at the dates of the transactions); and
all resulting exchange differences are recognised in other comprehensive income.
exchange differences arising from the above process are reported in equity and nCI as ‘foreign currency translation reserve”.
When the Group has any foreign operation that is disposed of, or partially disposed of, such exchange differences are recognised in the
consolidated income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign
entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable
future, foreign exchange gains and losses arising from such a monetary item are considered to form part of the net investment in the
foreign operation and are recognised in other comprehensive income, and presented in the foreign exchange translation reserve in equity.
(c) Financial assets and financial liabilities
(i) Recognition and initial measurement
the Group initially recognises loans and advances to customers, due from / to banks, customer deposits, debt securities and other
borrowings on the date at which they are originated. all other financial assets and liabilities are initially recognised on the trade date at
which the Group becomes a party to the contractual provisions of the instrument.
a financial asset or financial liability is measured initially at fair value plus, for an item not at fair value through profit or loss, transaction costs
that are directly attributable to its acquisition or issue.
(ii) Classification
Financial assets
at inception a financial asset is classified in one of the following categories:
•
•
•
•
loans and receivables (LaR);
held to maturity (HTM);
available-for-sale (AFS); and
at fair value through profit or loss (FVTPL), either as: held for trading; or FVTPL on initial designation.
Financial liabilities
the Group has classified and measured its financial liabilities at amortized cost
the commercial bank (P.S.Q.c.) i annual report 2017
85
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Financial assets and financial liabilities (continued)
(iii) Derecognition
the Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers
the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred or in
which the Group neither transfers nor retains substantially all the risks and rewards of ownership and it does not retain control of the financial
asset. any interest in transferred financial assets that qualify for derecognition that is created or retained by the Group is recognised as a
separate asset or liability. on derecognition of a financial asset, the difference between the carrying amount of the asset (or the carrying
amount allocated to the portion of the asset transferred), and consideration received (including any new asset obtained less any new
liability assumed) is recognised in profit or loss.
the Group enters into transactions whereby it transfers assets recognised, but retains either all or substantially all of the risks and rewards
of the transferred assets or a portion of them. If all or substantially all risks and rewards are retained, then the transferred assets are not
derecognised. transfers of assets with retention of all or substantially all risks and rewards include, for example, securities lending and
repurchase transactions.
the Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.
(iv) Offsetting
Financial assets and liabilities are offset and the net amount presented in the consolidated statement of financial position when, and only
when, the Group has a legal right to set off the recognised amounts and it intends either to settle on a net basis or to realise the asset and
settle the liability simultaneously.
Income and expenses are presented on a net basis only when permitted under IFrS, or for gains and losses arising from a group of similar
transactions such as in the Group’s trading activity.
(v) Measurement principles
-
-
Amortized cost measurement
the amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition,
minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between
the initial amount recognised and the maturity amount, minus any reduction for impairment loss. the calculation of effective interest
rate includes all fees paid or received that are an integral part of the effective interest rate (eIr).
Fair value measurement
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access
at that date. the fair value of a liability reflects its non-performance risk.
When available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. a
market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing
information on an ongoing basis.
If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable
inputs and minimise the use of unobservable inputs. the chosen valuation technique incorporates all of the factors that market
participants would take into account in pricing a transaction.
the commercial bank (P.S.Q.c.) i annual report 2017
86
Notes to the Consolidated
Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Financial assets and financial liabilities (continued)
(v) Measurement principles (continued)
-
Fair value measurement (continued)
the best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price – i.e. the fair value of
the consideration given or received. If the Group determines that the fair value at initial recognition differs from the transaction price
and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation
technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to
defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognized
in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by
observable market data or the transaction is closed out.
If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a
bid price and liabilities and short positions at an ask price.
portfolios of financial assets and financial liabilities that are exposed to market risk and credit risk that are managed by the Group on
the basis of the net exposure to either market or credit risk are measured on the basis of a price that would be received to sell a net
long position (or paid to transfer a net short position) for a particular risk exposure. those portfolio-level adjustments are allocated to
the individual assets and liabilities on the basis of the relative risk adjustment of each of the individual instruments in the portfolio.
the fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on which the
amount could be required to be paid.
the Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the
change has occurred.
-
Identification and measurement of impairment
at each reporting date the Group assesses whether there is objective evidence that financial assets not carried at fair value through
profit or loss are impaired. a financial asset or a group of financial assets is impaired when objective evidence demonstrates that a
loss event has occurred after the initial recognition of the asset(s), and that the loss event has an impact on the future cash flows of the
asset(s) that can be estimated reliably.
objective evidence that financial assets (including equity securities) are impaired can include significant financial difficulty of the
borrower or issuer, default or delinquency by a borrower, restructuring of a loan or advance by the Group on terms that the Group
would not otherwise consider, indications that a borrower or issuer will enter bankruptcy, the disappearance of an active market for
a security, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers or
issuers in the group, or economic conditions that correlate with defaults in the group.
the Group considers evidence of impairment loss for loans and advances to customers and held-to-maturity investment securities at
both a specific asset and collective level. all individually significant loans and advances to customers and held-to-maturity investment
securities are assessed for specific impairment. all individually significant loans and advances to customers and held-to-maturity
investment securities found not to be specifically impaired are then collectively assessed for any impairment that has been incurred
but not yet identified. loans and advances to customers and held-to-maturity investment securities that are not individually significant
are collectively assessed for impairment by grouping together loans and advances to customers and held-to-maturity investment
securities with similar risk characteristics.
Impairment losses on assets carried at amortised cost are measured as the difference between the carrying amount of the financial
asset and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. Impairment losses
are recognised in profit or loss and reflected in an allowance account against loans and advances to customers.
the commercial bank (P.S.Q.c.) i annual report 2017
87
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) Financial assets and financial liabilities (continued)
(v) Measurement principles (continued)
-
Identification and measurement of impairment (continued)
For the purposes of a collective evaluation of impairment, financial assets are grouped on the basis of similar credit risk characteristics.
those characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the debtors’
ability to pay all amounts due according to the contractual terms of the assets being evaluated.
Future cash flows in a group of financial assets that are collectively evaluated for impairment are estimated on the basis of the
contractual cash flows of the assets in the Group and historical loss experience for assets with credit risk characteristics similar to
those in the Group. historical loss experience is adjusted on the basis of current observable data to reflect the effects of current
conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the
historical period that do not currently exist.
For listed investments, a decline in the market value from cost by 20% or more, or a decline in the market value from cost for a
continuous period of 9 months or more, are considered to be indicators of impairment.
Impairment losses on available-for-sale investment securities are recognised by transferring the cumulative loss that has been
recognised in other comprehensive income to profit or loss as a reclassification adjustment. the cumulative loss that is reclassified
from other comprehensive income to profit or loss is the difference between the acquisition cost, net of any principal repayment
and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in impairment
provisions attributable to time value are reflected as a component of interest income.
In subsequent periods, the appreciation of fair value of previously impaired available-for-sale equity investment securities is recorded
in fair value reserve.
(d) Cash and cash equivalents
Cash and cash equivalents include notes and coins on hand, unrestricted balances held with central banks and highly liquid financial assets
with original maturities of three months or less from the acquisition date that are subject to an insignificant risk of changes in their fair value,
and are used by the Group in the management of its short-term commitments. Cash and cash equivalents include amounts due from
banks and with an original maturity of 90 days or less.
(e) Loans and advances to customers
loans and advances to customers are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market and that the Group does not intend to sell immediately or in the near term.
loans and advances to customers, cash and balances with central banks and due from banks are classified as ‘loans and receivables’.
loans and advances to customers are initially measured at the transaction price which is the fair value plus incremental direct transaction
costs, and subsequently measured at their amortised cost using the effective interest method.
the commercial bank (P.S.Q.c.) i annual report 2017
88
Notes to the Consolidated
Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(f)
Investment securities
Subsequent to initial recognition investment securities are accounted for depending on their classification as either ‘held to maturity’, ‘fair
value through profit or loss’, or ‘available-for-sale’.
(i) Held-to-maturity financial assets
held-to-maturity investments are non-derivative assets with fixed or determinable payments and fixed maturity that the Group has the
positive intent and ability to hold to maturity, and which were not designated as at fair value through profit or loss or as available-for-sale.
held-to-maturity investments are carried at amortised cost using the effective interest method.
(ii) Held for trading financial assets
a financial asset is classified as held-for-trading if it is:
•
•
•
acquired or incurred principally for the purpose of selling or repurchasing it in the near term;
on initial recognition, part of a portfolio of identified financial instruments that are managed together and for which there is evidence
of a recent actual pattern of short-term profit taking; or
a derivative, except for a derivative that is a designated and effective hedging instrument
(iii) Financial assets designated as at fair value through profit or loss
In addition to financial assets held for trading, financial assets are classified in the FVtpl category on initial recognition, to designate such
instruments as a FVtpl using the fair value option in one of the following circumstances:
When doing so results in more relevant information because either:
•
•
it eliminates or significantly reduces a measurement or recognition inconsistency that would result from measuring assets or liabilities
or recognising gains or losses on them on different bases (an “accounting mismatch”); or
a group of financial assets or liabilities (or both) is managed and its performance is evaluated on a fair value basis in accordance with
the entity’s document risk management or investment strategy and information is provided by key management personnel on this
basis.
the Group has classified its investments as held for trading where such investments are managed for short term profit taking or designated
certain investments as fair value through profit or loss. Fair value changes on these investments are recognised immediately in profit or
loss.
(iv) Available-for-sale financial investments
available-for-sale investments are non-derivative investments that are designated as available-for-sale or are not classified as another
category of financial assets. unquoted equity securities are carried at cost less impairment, and all other available-for-sale investments
are carried at fair value.
Interest income is recognised in profit or loss using the effective interest method. dividend income is recognised in profit or loss when the
Group becomes entitled to the dividend. Foreign exchange gains or losses on available-for-sale debt security investments are recognised
in profit or loss.
other fair value changes are recognised in other comprehensive income until the investment is sold or impaired, whereupon the cumulative
gains and losses previously recognised in other comprehensive income are transferred to profit or loss.
the commercial bank (P.S.Q.c.) i annual report 2017
89
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(g) Derivatives
(i) Derivatives held for risk management purposes and hedge accounting
derivatives held for risk management purposes include all derivative assets and liabilities that are not classified as trading assets or
liabilities. derivatives held for risk management purposes are measured at fair value. the Group designates certain derivatives held for
risk management as well as certain non-derivative financial instruments as hedging instruments in qualifying hedging relationships. on
initial designation of the hedge, the Group formally documents the relationship between the hedging derivative instrument(s) and hedged
item(s), including the risk management objective and strategy in undertaking the hedge, together with the method that will be used to
assess the effectiveness of the hedging relationship. the Group makes an assessment, both at the inception of the hedge relationship
as well as on an ongoing basis, as to whether the hedging instrument(s) is (are) expected to be highly effective in offsetting the changes
in the fair value or cash flows of the respective hedged item(s) during the period for which the hedge is designated, and whether the
actual results of each hedge are within a range of 80-125 percent. the Group makes an assessment for a cash flow hedge of a forecast
transaction, as to whether the forecast transaction is highly probable to occur and presents an exposure to variations in cash flows that
could ultimately affect profit or loss. these hedging relationships are discussed below.
Fair value hedges
When a derivative is designated as the hedging instrument in a hedge of the change in fair value of a recognised asset or liability or a firm
commitment that could affect profit or loss, changes in the fair value of the derivative are recognised immediately in profit or loss together
with changes in the fair value of the hedged item that are attributable to the hedged risk. If the hedging derivative expires or is sold,
terminated, or exercised, or the hedge no longer meets the criteria for fair value hedge accounting, or the hedge designation is revoked,
then hedge accounting is discontinued prospectively. any adjustment up to that point to a hedged item, for which the effective interest
method is used, is amortised to profit or loss as part of the recalculated effective interest rate of the item over its remaining life.
Cash value hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk
associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion
of changes in the fair value of the derivative is recognized in other comprehensive income in the hedging reserve. the amount recognised
in other comprehensive income is reclassified to profit or loss as a reclassification adjustment in the same period as the hedged cash
flows affect profit or loss, and in the same line item in the statement of comprehensive income. any ineffective portion of changes in the
fair value of the derivative is recognised immediately in profit or loss. If the hedging derivative expires or is sold, terminated, or exercised,
or the hedge no longer meets the criteria for cash flow hedge accounting, or the hedge designation is revoked, then hedge accounting is
discontinued prospectively. In a discontinued hedge of a forecast transaction the cumulative amount recognised in other comprehensive
income from the period when the hedge was effective is reclassified from equity to profit or loss as a reclassification adjustment when the
forecast transaction occurs and affects profit or loss. If the forecast transaction is no longer expected to occur, then the balance in other
comprehensive income is reclassified immediately to profit or loss as a reclassification adjustment.
the effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other
comprehensive income. the gain or loss relating to the ineffective portion is recognised immediately in the consolidated income statement
within ‘other gains/ (losses) – net’.
amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss (for example,
when the forecast sale that is hedged takes place).
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain
or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the
consolidated income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported
in equity is immediately transferred to the consolidated income statement within ‘other gains/ (losses) – net’.
(ii) Derivatives held for trading purposes
the Group’s derivative trading instruments includes, forward foreign exchange contracts and interest rate swaps. the Group sells these
derivatives to customers in order to enable them to transfer, modify or reduce current and future risks. these derivative instruments are
fair valued as at the end of reporting date and the corresponding fair value changes is taken to the profit or loss.
the commercial bank (P.S.Q.c.) i annual report 2017
90
Notes to the Consolidated
Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(h) Property and equipment
(i) Recognition and measurement
Items of property and equipment are initially measured at cost and subsequently at cost less accumulated depreciation and accumulated
impairment losses, if any, except for land and building which are subsequently measured at fair value.
revaluations of freehold land and buildings are carried out by an independent valuer. net surpluses arising on revaluation are credited to
a revaluation reserve, except that a revaluation increase is recognised as income to the extent that it reverses a revaluation decrease of
the same asset previously recognised as an expense. a decrease as a result of a revaluation is recognised as an expense, except that it is
charged directly against any related revaluation surplus to the extent that the decrease does not exceed the amount held in the revaluation
surplus in respect of that same asset. on disposal the related revaluation surplus is credited to retained earnings.
Cost includes expenditures that are directly attributable to the acquisition of the asset. the cost of self-constructed assets includes the cost
of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the
costs of dismantling and removing the items and restoring the site on which they are located and capitalised borrowing costs.
purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
When parts of an item of property or equipment have different useful lives, they are accounted for as separate items (major components)
of property and equipment.
the gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the
carrying amount of the item of property and equipment, and is recognised in other income/other expenses in profit or loss.
(ii) Subsequent costs
the cost of replacing a component of an item of property or equipment is recognised in the carrying amount of the item if it is probable that
the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. the carrying amount
of the replaced part is derecognised. the costs of the day-to-day servicing of property and equipment are recognised in profit or loss as
incurred.
(iii) Depreciation
the depreciable amount is the cost of property and equipment, or other amount substituted for cost, less its residual value.
depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property and
equipment since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset
and is based on cost of the asset less its estimated residual value. land and Capital work in progress are not depreciated.
the estimated useful lives for the current and comparative years are as follows:
Buildings
leasehold improvements
Furniture and equipment
motor vehicles
20 years
6 - 10 years
3 - 8 years
5 years
(i)
Impairment of goodwill and intangible assets
(i) Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the Group’s interest
in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquiree and the fair value of the non-controlling
interest in the acquiree.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential
impairment. the carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and the fair value
less costs of disposal. any impairment is recognised immediately as an expense and is not subsequently reversed.
the commercial bank (P.S.Q.c.) i annual report 2017
91
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(i)
Impairment of goodwill and intangible assets (continued)
(ii) Intangible assets
the cost of intangible assets acquired in a business combination is their fair value at the date of acquisition. Following initial recognition,
intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses.
Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in
profit or loss in the period in which the expenditure is incurred.
the useful lives of intangible assets are assessed as either finite or indefinite.
Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication
that the intangible asset may be impaired. the amortisation period and the amortisation method for an intangible asset with a finite useful
life are reviewed at least at the end of each reporting period. Changes in the expected useful life or the expected pattern of consumption
of future economic benefits embodied in the asset are considered to modify the amortisation period or method, as appropriate, and are
treated as changes in accounting estimates. the amortisation expense on intangible assets with finite lives is recognised in the statement
of profit or loss as the expense category that is consistent with the function of the intangible assets.
Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually, either individually or at the
cash-generating unit level. the assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to
be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis. Gains or losses arising from de-
recognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset
and are recognised in the statement of profit or loss when the asset is derecognised.
(j)
Impairment of non-financial assets
assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. an impairment loss is
recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. the recoverable amount is the higher
of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating units). non-financial assets other than goodwill that suffered
impairment are reviewed for possible reversal of the impairment at each reporting date.
(k) Provisions
a provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability.
(l) Financial guarantees
Financial guarantees are contracts that require the Group to make specified payments to reimburse the holder for a loss it incurs because
a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. Financial guarantee liabilities are
recognised initially at their fair value, and this initial fair value is amortised over the life of the financial guarantee. the financial guarantee
liability is subsequently carried at the higher of this amortised amount and the present value of any expected payment when a payment
under the guarantee has become probable. Financial guarantees are included within other liabilities.
(m) Employee benefits
Defined contribution plans
the Bank provides for its contribution to the State administered retirement fund for Qatari employees in accordance with the retirement
law, and the resulting charge is included in staff cost in the consolidated income statement. the Bank has no further payment obligations
once the contributions have been paid. the contributions are recognised when they are due.
the commercial bank (P.S.Q.c.) i annual report 2017
92
Notes to the Consolidated
Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(m) Employee benefits (continued)
Defined benefit plan
the Bank makes provision for end of service benefits payable to its expatriate employees on the basis of the employees’ length of service
in accordance with the employment policy of the Bank and the applicable provisions of the labour law. this provision is included in other
provisions as part of other liabilities in the consolidated statement of financial position. the expected costs of these benefits are accrued
over the period of employment.
aBank, under turkish labour law, is required to pay termination benefits to each employee who has completed at least one year of service
and whose employment is terminated without due cause, is called up for military service, dies or who retires. there are certain transitional
provisions relating to length of service prior to retirement. the amount payable consists of one month’s salary subject to a maximum
threshold per employee for each year of service. there are no agreements for pension commitments other than the legal requirement as
explained above. the liability is not funded, as there is no funding requirement.
Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. a
liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present
legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated
reliably.
(n) Share capital and reserves
(i) Share issue costs
Incremental costs directly attributable to the issue of an equity instrument are deducted from the initial measurement of the equity
instruments.
(ii) Dividends on ordinary shares
dividends on ordinary shares are recognised in equity in the period in which they are approved by the Bank’s equity holders.
(o) Interest income and expense
Interest income and expense for all interest-bearing financial instruments, except for those classified as held for trading, are recognized
within ‘interest income’ and ‘interest expense’ using the effective interest method.
the ‘effective interest rate’ is the rate that exactly discounts the estimated future cash payments and receipts through the expected life
of the financial asset or financial liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or financial
liability. When calculating the effective interest rate, the Group estimates future cash flows considering all contractual terms of the financial
instrument, but not future credit losses.
the calculation of the effective interest rate includes transaction costs and fees and points paid or received that are an integral part of the
effective interest rate. transaction costs include incremental costs that are directly attributable to the acquisition or issue of a financial asset
or financial liability.
once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is
recognized using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
(p) Fee and commission income and expense
Fees and commission income and expense that are integral to the effective interest rate on a financial asset or liability are included in the
measurement of the effective interest rate.
other fees and commission income, including account servicing fees, investment management fees, sales commission, placement fees
and syndication fees, are recognised as the related services are performed. When a loan commitment is not expected to result in the
draw-down of a loan, the related loan commitment fees are recognised on a straight-line basis over the commitment period. other fees
and commission expense relate mainly to transaction and service fees, which are expensed as the services are received.
the commercial bank (P.S.Q.c.) i annual report 2017
93
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(q) Income from investment securities
Gains or losses on the disposal of investment securities are recognised in profit or loss as the difference between fair value of the
consideration received and carrying amount of the investment securities.
unrealised gains or losses on fair value changes from remeasurement of investment securities classified as held for trading or designated
as fair value through profit or loss are recognised in profit or loss.
(r) Dividend income
dividend income is recognised when the right to receive dividend income is established.
(s)
Income tax expenses
taxes are calculated based on tax laws and regulations in other countries in which the Group operates. tax is recognized based on an
evaluation of the expected tax charge/credit. the Group operations inside Qatar are exempted from income tax.
(t) Earnings per share
the Bank presents basic and diluted earnings per share (epS) data for its ordinary shares. Basic epS is calculated by dividing the profit or
loss attributable to ordinary equity holders of the Bank by the weighted average number of ordinary shares outstanding during the period.
diluted epS is determined by adjusting the profit or loss attributable to ordinary equity holders and the weighted average number of
ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
(u) Segment reporting
operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker.
the chief operating decision maker is the person or group that allocates resources to and assesses the performance of the operating
segments of an entity. the Group has determined the Chief executive officer of the Bank as its chief operating decision maker.
all transactions between operating segments are conducted on an arm’s length basis directly associated with each segment are included
in determining operating segment performance.
(v) Fiduciary activities
the Group acts as fund manager and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals,
corporate and other institutions. these assets and income arising thereon are excluded from these consolidated financial statements, as
they are not assets of the Group.
(w) Repossessed collateral
repossessed collaterals in settlement of customers’ debts are stated under “other assets” at carrying value of debts or fair value if lower.
according to QCB instructions, the Group should dispose of any land and properties acquired in settlement of debts within a period not
exceeding three years from the date of acquisition although this period can be extended with the approval of QCB.
(x) Comparatives
except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed with comparative
information.
(y) New standards, amendments and interpretations
New standards, amendments and interpretations effective from 1 January 2017
The following standards, amendments and interpretations, which became effective as of 1 January 2017, are relevant to the Group:
a) Disclosure Initiative (Amendments to IAS 7).
the amendments require disclosures that enable users of consolidated financial statements to evaluate changes in liabilities arising
from financing activities, including both changes arising from cash flow and non-cash changes.
The amendments are effective for annual periods beginning on or after 1 January 2017 on prospective basis.
the new disclosure requirements have been included in these consolidated financial statements in note 40, where the Group has
presented reconciliation between the opening and closing balances for liabilities with changes arising from financing activities.
the commercial bank (P.S.Q.c.) i annual report 2017
94
Notes to the Consolidated
Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(y) New standards, amendments and interpretations (continued)
New standards, amendments and interpretations effective from 1 January 2017 (continued)
b)
Recognition of Deferred Tax Assets for Unrealized Losses (Amendments to IAS 12).
the amendments clarify the accounting for deferred tax assets for unrealized losses on debt instruments measured at fair value.
the amendments clarify that the existence of a deductible temporary difference depends solely on a comparison of the carrying
amount of an asset and its tax base at the end of the reporting period, and is not affected by possible future changes in the carrying
amount or expected manner of recovery of the asset. therefore, assuming that the tax base remains at the original cost of the debt
instrument, there is a temporary difference.
the adoption of this standard had no significant impact on the consolidated financial statements.
c) Annual Improvements to IFRSs 2014–2016 Cycle – various standards.
the annual improvements to IFrSs to 2014-2016 cycles include certain amendments to various IFrSs, earlier application is permitted
(along with the special transitional requirement in each case), in which case the related consequential amendments to other IFrSs
would also apply.
the following are the key amendments in brief:
•
•
•
IFRS 1 First-time Adoption of IFRS – outdated exemptions for first-time adopters of IFrS are removed. effective for annual
periods beginning on or after 1 January 2018.
IFRS 12 Disclosure of Interests in Other Entities – the disclosure requirements for interests in other entities also apply to
interests that are classified as held for sale or distribution. effective retrospectively for annual periods beginning on or after 1
January 2017.
IAS 28 Investments in Associates and Joint Ventures – a venture capital organisation, or other qualifying entity, may elect
to measure its investments in an associate or joint venture at fair value through profit or loss. this election can be made on an
investment-by-investment basis.
a non-investment entity investor may elect to retain the fair value accounting applied by an investment entity associate or investment
entity joint venture to its subsidiaries. this election can be made separately for each investment entity associate or joint venture.
Effective retrospectively for annual periods beginning on or after 1 January 2018; early application is permitted.
the adoption of these amendments had no significant impact on the consolidated financial statements.
New standards, amendments and interpretations issued but not yet effective
A number of new standards and amendments to standards are effective for annual periods beginning after 1 January 2017 and earlier
application is permitted; however; the Group has not early applied the following new or amended standards in preparing these consolidated
financial statements.
the following standards are expected to have a material impact on the Group’s consolidated financial statements in the period of initial
application.
a)
IFRS 9 Financial Instruments
The Group will adopt IFRS 9 on 1 January 2018 and will not restate the comparative information in accordance with applicable Qatar
Central Bank (QCB) guidelines. IFRS 9 will replace IAS 39 Financial Instruments: Recognition and Measurement and introduces new
requirements for the classification and measurement of financial assets and financial liabilities, a new model based on expected credit
losses for recognizing loan loss provisions and provides for simplified hedge accounting by aligning hedge accounting more closely
with an entity’s risk management methodology.
the commercial bank (P.S.Q.c.) i annual report 2017
95
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(y) New standards, amendments and interpretations (continued)
New standards, amendments and interpretations issued but not yet effective (continued)
a)
IFRS 9 Financial Instruments (continued)
The Group has assessed the estimated impact that the initial application of IFRS 9 will have on its consolidated financial statements as
below.
Figures in thousand Qatar riyals
Fair value reserve
Retained earnings
Closing balance under IAS 39 (31 December 2017)
Estimated risk reserve transfer on 1 January 2018
594,226
1,493,635
(44,500)
-
Impact on reclassification and remeasurements (i) :
Investment securities (equity) from available-for-sale to those measured at fair
value through other comprehensive income (i.a)
Investment securities (debt) from available-for-sale to those measured at fair
value through other comprehensive income (i.b)
Investment securities (equity) from available-for-sale to those measured at fair
value through profit and loss (i.c)
Investment securities (debt) from available-for-sale to those measured at fair
value through profit and loss (i.d)
Investment securities (funds) from available-for-sale to those measured at fair
value through profit and loss (i.c)
Investment securities (debt) from available-for-sale to those measured at
amortised cost (i.e)
Impact on recognition of Expected Credit Losses (ii):
expected credit losses for due from banks
expected credit losses for debt securities at amortized cost
expected credit losses for debt securities at fair value through other
comprehensive income
expected credit losses for loan and advances
expected credit losses for off balance sheet exposures subject to credit risk.
21,727
44,134
16,075
20,745
12,688
-
115,369
(130,948)
-
(12,446)
(1,271,542)
(78,699)
(1,493,635)
(21,727)
(44,134)
(16,075)
(20,745)
(12,688)
32,980
(82,389)
-
-
-
-
-
-
Estimated adjusted opening balance under IFRS 9 on date of initial
application of 1 January 2018
709,595
(126,889)
The above assessment is preliminary because not all transition work has been finalised. The actual impact of adopting IFRS 9 on 1
January 2018 may change because:
•
•
•
•
•
IFRS 9 will require the Group to revise its accounting processes and internal controls and these changes are not yet complete;
although parallel runs were carried out in the second half of 2017, the new systems and associated controls in place have not
been operational for a more extended period;
the Group has not finalized the testing and assessment of controls over its new IT systems and changes to its governance
framework;
the Group is refining and finalizing its models for ECL calculations; and
the new accounting policies, assumptions, judgements and estimation techniques employed are subject to re-assessment and
changes upon instructions of the regulatory authority.
the commercial bank (P.S.Q.c.) i annual report 2017
96
Notes to the Consolidated
Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(y) New standards, amendments and interpretations (continued)
New standards, amendments and interpretations issued but not yet effective (continued)
a)
IFRS 9 Financial Instruments (continued)
i) Classification and measurement
IFRS 9 contains a new classification and measurement approach for financial assets that reflects the business model in which financial
assets are managed and the underlying cash flow characteristics. IFRS 9 contains three principal classification categories for financial
assets: (a) measured at amortised Cost (aC), Fair Value through other Comprehensive Income (FVoCI) and Fair Value through profit
or Loss (FVPL). Under IFRS 9, derivatives embedded in contracts where the host is a financial asset are never bifurcated. Instead, the
hybrid financial instrument as a whole is assessed for classification.
Based on the Group’s assessment, the new IFRS 9 classification requirements is expected to have a material impact on its accounting
for loans, investments in debt securities and investments in equity securities..
(i.a) at 31 december 2017, the Group had equity investments classified as available-for-sale with a carrying value of Qar 118 million
that are held for long-term strategic purposes. Under IFRS 9, the Group has designated these investments as measured at
FVoCI. due to this reclassification, an increase of Qar 21.7 million is estimated in the retained earnings along with a corresponding
decrease in fair value reserve due to reclassification of impairment on equity investments measured at fair value through
comprehensive income.
(i.b) at 31 december 2017, the Group had debt investments classified as available-for-sale with a carrying value of Qar 3,116 million.
Under IFRS 9, the Group has designated these investments as measured at FVOCI. Due to this reclassification, an increase of QAR
44.1 million is estimated in the retained earnings along with a corresponding decrease in fair value reserve due to reclassification
of impairment on debt investments measured at fair value through comprehensive income.
(i.c) at 31 december 2017, the Group had investments in funds and equity instruments classified as available-for-sale with carrying
values of QAR 225 million. Under IFRS 9, the Group has designated these investments as measured at FVTPL based on business
model. due to this reclassification, an increase of Qar 28.8 million is estimated in the retained earnings and equivalent decrease
is estimated in fair value reserve.
(i.d) at 31 december 2017, the Group had investments in debt instruments classified as available-for-sale with carrying values of Qar
682 million. Under IFRS 9, the Group has designated these investments as measured at FVTPL based on business model. Due
to this reclassification, an increase of Qar 20.7 million is estimated in the retained earnings and equivalent decrease is estimated
in fair value reserve.
(i.e) at 31 december 2017, the Group had debt investments classified as available-for-sale with carrying value of Qar 12,850 million.
Under IFRS 9, the Group has designated these investments as measured at amortized cost based on business model. Due to this
reclassification, an increase of Qar 33 million is estimated in fair value reserve.
(ii) Expected credit losses
IFRS 9 replaces the ‘incurred loss’ model in IAS 39 with a forward-looking ‘expected credit loss’ (ECL) model. The new impairment
model will apply to financial assets measured at amortised cost or FVoCI, except for investments in equity instruments. a number of
significant judgements are also required in applying the accounting requirements for measuring eCl, such as:
•
•
•
•
Determining criteria for significant increase in credit risk (SICR);
Choosing appropriate models and assumptions for the measurement of ECL.
Establishing the number and relative weightings of forward-looking scenarios for each type of product/market and the
associated eCl; and
Establishing groups of similar financial assets for the purposes of measuring ECL.
the commercial bank (P.S.Q.c.) i annual report 2017
97
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(y) New standards, amendments and interpretations (continued)
New standards, amendments and interpretations issued but not yet effective (continued)
a)
IFRS 9 Financial Instruments (continued)
(iii) Financial liabilities
Most of the requirements in IAS 39 for classification and measurement of financial liabilities were carried forward unchanged to IFRS
9. The key change is that an entity will be required to present the effects of changes in own credit risk of financial liabilities designated
at fair value through profit or loss in other comprehensive income.
no significant changes are expected for financial liabilities, other than changes in the fair value of financial liabilities designated at
FVtpl that are attributable to changes in the instrument’s credit risk, which will be presented in other comprehensive income.
(iv) Hedge accounting
IFRS 9’s hedge accounting requirements are designed to align the accounting more closely to the risk management framework;
permit a greater variety of hedging instruments; and remove or simplify some of the rule-based requirements in IAS 39. The elements
of hedge accounting: fair value, cash flow and net investment hedges are retained.
When initially applying IFRS 9, the Group has the option to continue to apply the hedge accounting requirements of IAS 39 instead
of the requirements in IFRS 9. However, the Group determined that all existing hedge relationships that are currently designated in
effective hedging relationships would continue to qualify for hedge accounting under IFRS 9. The new hedge accounting requirements
under IFRS 9 will not have a material impact on hedge accounting applied by the Group.
(v) Disclosure
IFRS 9 also introduces expanded disclosure requirements and changes in presentation. These are expected to change the nature and
extent of the Group’s disclosures about its financial instruments particularly in the year of the adoption of IFRS 9.
b)
IFRS 15 Revenue from Contracts with Customers
The Group will implement this new revenue recognition standard with effect from 1 January 2018. IFRS 15 provides a principles-based
approach for revenue recognition, and introduces the concept of recognising revenue for performance obligations as they are
satisfied. the Group has assessed the impact of IFrS 15 and expects that the standard will have no material effect when applied, on
the consolidated financial statements of the Group.
c) Classification and Measurement of Shared-based Payment Transactions (Amendments to IFRS 2)
Currently, there is ambiguity over how an entity should account for certain types of share-based payment arrangements. the IaSB has
responded by publishing amendments to IFrS 2 Share-based payment.
the amendments cover three accounting areas:
• measurement of cash-settled share-based payments;
•
•
classification of share-based payments settled net of tax withholdings; and
accounting for a modification of a share-based payment from cash-settled to equity-settled.
the new requirements could affect the classification and/or measurement of these arrangements – and potentially the timing and
amount of expense recognised for new and outstanding awards. there is currently no guidance in IFrS 2 on how to measure the fair
value of the liability incurred in a cash-settled share-based payment.
the amendments clarify that a cash-settled share-based payment is measured using the same approach as for equity-settled share-
based payments – i.e. the modified grant date method. therefore, in measuring the liability:
• market and non-vesting conditions are taken into account in measuring its fair value; and
•
the number of awards to receive cash is adjusted to reflect the best estimate of those expected to vest as a result of satisfying
service and any non-market performance conditions.
the commercial bank (P.S.Q.c.) i annual report 2017
98
Notes to the Consolidated
Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(y) New standards, amendments and interpretations (continued)
New standards, amendments and interpretations issued but not yet effective (continued)
c) Classification and Measurement of Shared-based Payment Transactions (Amendments to IFRS 2) (continued)
the amendments can be applied prospectively so that prior periods do not have to be restated. retrospective, or early, application
is permitted if companies have the required information. the amendments are effective for annual periods commencing on or after
1 January 2018.
the Group does not expect to have a significant impact on its consolidated financial statements.
d)
IFRS 16 Leases
IFrS 16 introduces a single, on-balance lease sheet accounting model for lessees. a lessee recognises a right-of-use asset
representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. there are
optional exemptions for short-term leases and leases of low value items. lessor accounting remains similar to the current standard-
i.e. lessors continue to classify leases as finance or operating leases.
IFrS 16 replaces existing leases guidance including IaS 17 leases, IFrIC 4 determining whether an arrangement contains a lease,
SIC-15 operating leases-Incentives and SIC-27 evaluating the Substance of transactions Involving the legal Form of a lease.
The standard is effective for annual periods beginning on or after 1 January 2019. Early adoption is permitted for entities that apply
IFrS 15 revenue from Contracts with Customers at or before the date of initial application of IFrS 16.
the Group is in the process of assessing the potential impact on its consolidated financial statements. the Group has not yet decided
whether it will use the optional exemptions.
e) Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28)
the IaSB has made limited scope amendments to IFrS 10 Consolidated financial statements and IaS 28 Investments in associates
and joint ventures.the amendments clarify the accounting treatment for sales or contribution of assets between an investor and
its associates or joint ventures. they confirm that the accounting treatment depends on whether the non-monetary assets sold
or contributed to an associate or jointventure constitute a ‘business’ (as defined in IFrS 3 Business Combinations).Where the non-
monetary assets constitute a business, the investor will recognise the full gain or loss on the sale or contribution of assets. If the assets
do not meet the definition of a business, the gain or loss is recognised by the investor only to the extent of the other investor’s interest
in the associate or joint venture.
the effective date for these changes has now been postponed until the completion of a broader review
– which the IaSB hopes will result in the simplification of accounting for such transactions and of other aspects of accounting for
associates and joint ventures. however, early adoption continues to be permitted.
the Group does not expect to have a significant impact on its consolidated financial statements.
4. FINANCIAL RISK MANAGEMENT
(a) Introduction and overview
the Group’s business involves taking risks in a targeted manner and managing them professionally. the core functions of the Group’s risk
management are to identify all key risks for the Group, measure these risks, manage the risk positions and determine capital allocations.
the Group regularly reviews its risk management policies and systems to reflect changes in markets, products and best market practice.
the Group’s aim is to achieve an appropriate balance between risk and return and minimise potential adverse effects on the Group’s
financial performance. the Group defines risk as the possibility of losses or profits foregone, which may be caused by internal or external
factors.
the commercial bank (P.S.Q.c.) i annual report 2017
99
4. FINANCIAL RISK MANAGEMENT (continued)
(a) Introduction and overview (continued)
Financial instruments
Financial instruments comprise the Group’s financial assets and liabilities. Financial assets include cash and balances with Central banks,
due from banks, loans and advances, investment securities, derivative financial assets and certain other assets and financial liabilities
include customer deposits, borrowings under repurchase agreements and interbank takings, debt issued and other borrowed funds,
derivative financial liabilities and certain other liabilities. Financial instruments also include rights and commitments included in off- balance
sheet items.
note 3(c) describes the accounting policies followed by the Group in respect of recognition and measurement of the key financial
instruments and their related income and expense.
Risk Management
the Group derives its revenue from assuming and managing customer risk for profit. through a robust governance structure, risk and
return are evaluated to produce sustainable revenue, to reduce earnings volatility and increase shareholder value. the most important
types of risk are credit risk, liquidity risk, market risk and operational risk. Credit risk reflects the possible inability of a customer to meet
his/her repayment or delivery obligations. market risk, which includes foreign currency, interest rate risks and other price risks, is the
risk of fluctuation in asset and commodity values caused by changes in market prices and yields. liquidity risk results in the inability to
accommodate liability maturities and withdrawals, fund asset growth or otherwise meet contractual obligations at reasonable market
rates. operational risk is the potential for loss resulting from events involving people, processes, technology, legal issues, external events
or execution or regulatory issues.
Risk and other committees
the governance structure of the Group is headed by the Board of directors. the Board of directors evaluates risk by engaging with the
Group Chief executive officer and Chief risk officer alongwith the following Board and management Committees:
1)
Board risk Committee is responsible for all aspects of enterprise risk management including but not restricted to credit risk, market
risk, and operational risk. this committee sets the policy on all risk issues and maintains oversight of all Group risks through the
management risk Committee.
2) Board audit Committee is responsible for setting the policy on all audit issues and maintains oversight of all Bank audit issues through
the Chief Internal auditor. In addition, the committee is also be responsible for Compliance & anti-money laundering.
3) Board executive Committee is responsible for evaluating and granting credit facilities and approval of the Group’s investment activities
within authorized limits per Qatar Central Bank and Board of directors’ guidelines. In addition, this committee is also responsible for all
policies and strategies of the business and compliance of corporate Governance.
4) management Credit Committee is the third highest-level authority on all regular and performing Counterparty Credit risk exposures,
after the Board of directors and Board executive Committee. the Special assets management Committee is the mCC equivalient for
watch list and non performing assets to minimize risks, prevent losses, maximize recoveries and restore profits through rehabilitation,
restructuring, workout, collection or legal actions. Both Committees exercise the powers as conferred upon them by the delegation
of authority (“doa”) as approved by the Board.
5) management risk Committee is the highest management authority on all risk related issues in the Group and its subsidiaries and
affiliates in which it has strategic investments. this committee provides recommendations on all risk policy and portfolio issues to the
Board risk Committee.
6) asset and liability Committee (alCo) is a management committee which is a decision making body relating to asset and liability
management. (i.e. balance sheet structure, funding, pricing, hedging, setting limits etc.) under the overall risk management
framework, alCo is a key component of risk management within the Bank.
7)
Investment Committee (IC) is the decision making committee for Cb’s investment activities, with a view to optimize returns, ensuring
that the investment book provides a liquidity buffer for the bank and mitigate market risk attached to the nature of targeted investment
8) Crisis management Committee (CmC) is the authority for management of a crisis entailing, prevention, planning, testing, evaluation
and maintenance to mitigate and minimize the consequences.
the commercial bank (P.S.Q.c.) i annual report 2017
100
Notes to the Consolidated
Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk
Credit risk is the risk that counterparty will cause a financial loss for the Group by failing to discharge an obligation. Credit risk is the most
important risk for the Group’s business; management therefore carefully manages its exposure to credit risk. Credit risk is attributed to
both on-balance sheet financial instruments such as loans, overdrafts, debt securities and other bills, investments, and acceptances and
credit equivalent amounts related to off-balance sheet financial instruments. the Group’s approach to credit risk management preserves
the independence and integrity of risk assessment, while being integrated into the business management processes. policies and
procedures, which are communicated throughout the organisation, guide the day-to-day management of credit exposure and remain an
integral part of the business culture. the goal of credit risk management is to evaluate and manage credit risk in order to further enhance
this strong credit culture.
(i) Credit risk measurement
1.
Loans and advances
the Group’s aim is to maintain a sound asset portfolio by enhancing its loan mix. this is being achieved through a strategy of reducing
exposure to non-core client relationships while increasing the size of the consumer portfolio comprising of consumer loans, vehicle
loans, credit cards and residential mortgages, which have historically recorded very low loss rates. In measuring credit risk of loan and
advances to customers and to banks at a counterparty level, the Group reflects three components (i) the ‘probability of default’ by the
client or counterparty on its contractual obligations; (ii) current exposures to the counterparty and its likely future development, from
which the Group derive the ‘exposure at default’; and (iii) the likely recovery ratio on the defaulted obligations (the ‘loss given default’).
(i)
the Group assesses the probability of default of individual counterparties using internal rating tools tailored to the various
categories of counterparty. they combine statistical analysis along with the business relationship officers and credit risk
officers assessment and are validated, where appropriate, by comparison with externally available data. Clients of the Group
are segmented based on a 10 point rating scale (22 notches including modifiers) for the corporate book and product based
application scores for the retail products. the Group’s rating scale reflects the range of default probabilities defined for each
rating class. this means that, in principle, exposures migrate between classes as the assessment of their probability of default
changes. the rating tools are kept under review and upgraded as necessary.
the ratings of the major rating agency are mapped to Group’s rating grades based on the long-term average default rates for each
external grade. the Group uses the external ratings where available to benchmark internal credit risk assessment. observed
defaults per rating category vary year on year, especially over an economic cycle.
(ii) exposure at default is based on the amounts the Group expects to be owed at the time of default. For example, for a loan this is
the face value. For a commitment, the Group includes any amount already drawn plus the further amount that may have been
drawn by the time of default, should it occur.
(iii) loss given default or loss severity represents the Group’s expectation of the extent of loss on a claim should default occur. It is
expressed as percentage loss per unit of exposure and typically varies by type of counterparty, type and seniority of claim and
availability of collateral or other credit mitigation.
2. Debt securities and other bills
For debt securities and other bills, external ratings such as Standard & poor’s and moody’s ratings or their equivalents are used by
treasury for managing the credit risk exposures. the investments in those securities and bills are viewed as a way to gain a better
credit quality mapping and maintain a readily available source to meet the funding requirement at the same time.
the commercial bank (P.S.Q.c.) i annual report 2017
101
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(ii) Risk limit control and mitigation policies
Portfolio diversification
portfolio diversification is an overriding principle, therefore, the credit policies are structured to ensure that the Group is not over exposed
to a given client, industry sector or geographic area. to avoid excessive losses if any single counter-party is unable to fulfil its payment
obligations, large exposure limits have been established per credit policy following the local regulations. limits are also in place to manage
exposures to a particular country or sector. these risks are monitored on an ongoing basis and subject to an annual or more frequent
review, when considered necessary.
Collateral
In order to proactively respond to credit deterioration, the Group employs a range of policies and practices to mitigate credit risk.
the most traditional of these is the taking of security for funds advanced, which is common practice. the Group implements guidelines on
the acceptability of specific classes of collateral or credit risk mitigation. the principal collateral types for loans and advances are:
• Mortgages over residential properties;
•
•
Charges over business assets such as premises, inventory and accounts receivable;
Charges over financial instruments such as debt securities and equities.
longer-term finance and lending to corporate entities are generally secured; revolving individual credit facilities are generally unsecured.
In addition, in order to minimise the credit loss the Group will seek additional collateral from the counterparty as soon as impairment
indicators are noticed for the relevant individual loans and advances.
Collateral held as security for financial assets other than loans and advances is determined by the nature of the instrument. debt securities,
treasury and other eligible bills are generally unsecured, with the exception of asset-backed securities and similar instruments, which are
secured by portfolios of financial instruments.
Credit-related commitments
the primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters
of credit carry the same credit risk as loans. documentary and commercial letters of credit – which are written undertakings by the Group
on behalf of a customer authorising a third party to draw drafts on the Group up to a stipulated amount under specific terms and conditions
– are collateralised by the underlying shipments of goods to which they relate and therefore carry less risk than a direct loan.
Commitments to extend credit represent unused portions of authorisations to extend credit in the form of loans, guarantees or letters
of credit. With respect to credit risk on commitments to extend credit, the Group is potentially exposed to loss in an amount equal to
the total unused commitments. however, the likely amount of loss is less than the total unused commitments, as most commitments to
extend credit are contingent upon customers maintaining specific credit standards. the Group monitors the term to maturity of credit
commitments because longer-term commitments generally have a greater degree of credit risk than shorter-term commitments.
Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as at the reporting date.
With gross-settled derivatives, the Group is also exposed to a settlement risk, being the risk that the Group honours its obligation but the
counterparty fails to deliver the counter-value.
the commercial bank (P.S.Q.c.) i annual report 2017
102
Notes to the Consolidated
Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(iii) Maximum exposure to credit risk before collateral held or other credit enhancements
Credit risk exposures relating to assets recorded on the consolidated statement of
financial position are as follows:
Balances with central banks
Due from banks
Loans and advances to customers
Investment securities - debt
Other assets
Total as at 31 December
Other credit risk exposures are as follows:
Guarantees
letters of credit
Unutilised credit facilities
Total as at 31 December
Figures in thousand Qatar riyals
2016
2017
6,647,279
10,499,348
89,121,935
19,250,397
1,957,777
127,476,736
5,818,300
19,302,001
77,797,597
14,602,510
1,636,566
119,156,974
20,823,314
2,700,146
5,948,621
29,472,081
156,948,817
21,644,329
2,505,758
6,175,191
30,325,278
149,482,252
the above table represents a worse-case scenario of credit risk exposure to the Group, without taking account of any collateral held or
other credit enhancements attached.
(iv) Concentration of risks of financial assets with credit risk exposure
Geographical sectors
the following table breaks down the Group’s credit exposure at their carrying amounts (without taking into account any collateral held or
other credit support), as categorized by geographical region. For this table, the Group has allocated exposures to regions based on the
country of domicile of its counterparties.
2017
Balances with central banks
Due from banks
Loans and advances to customers
Investment securities - debt
Other assets
2016
Balances with central banks
Due from banks
Loans and advances to customers
Investment securities - debt
Other assets
Qatar
4,547,098
3,288,722
71,388,727
15,208,688
964,455
95,397,690
Qatar
3,899,003
4,900,428
61,512,153
10,238,126
903,899
81,453,609
Other
GCC
Other
Middle East
Rest of
the world
Total
Figures in thousand Qatar riyals
-
972,305
1,214,430
783,439
26,052
2,996,226
2,100,181
2,204,001
14,154,022
2,492,389
664,289
21,614,882
-
4,034,320
2,364,756
765,881
302,981
7,467,938
6,647,279
10,499,348
89,121,935
19,250,397
1,957,777
127,476,736
Figures in thousand Qatar riyals
other
GCC
other
middle east
rest of
the world
-
2,750,226
1,673,141
1,080,802
20,222
5,524,391
1,919,297
3,950,186
12,658,833
2,455,551
576,600
21,560,467
-
7,701,161
1,953,470
828,031
135,845
10,618,507
total
5,818,300
19,302,001
77,797,597
14,602,510
1,636,566
119,156,974
the commercial bank (P.S.Q.c.) i annual report 2017
103
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(iv) Concentration of risks of financial assets with credit risk exposure (continued)
Geographical sectors (continued)
2017
Guarantees
Letters of credit
Unutilised credit facilities
2016
Guarantees
Letter of credit
Unutilised credit facilities
Qatar
11,407,787
2,269,333
4,424,384
18,101,504
Qatar
10,415,853
2,011,652
4,549,890
16,977,395
Other
GCC
Other
Middle East
Rest of
the world
Total
Figures in thousand Qatar riyals
1,399,027
32,779
910,146
2,341,952
329,753
-
-
329,753
7,686,747
398,034
614,091
8,698,872
20,823,314
2,700,146
5,948,621
29,472,081
Figures in thousand Qatar riyals
other
GCC
other
middle east
rest of
the world
total
1,743,445
217,519
910,050
2,871,014
2,719,602
274,832
715,251
3,709,685
6,765,429
1,755
-
6,767,184
21,644,329
2,505,758
6,175,191
30,325,278
Industry sectors
the following table breaks down the Group’s credit exposure at carrying amounts before taking into account collateral held or other credit
enhancements, as categorized by the industry sectors of the Group’s counterparties.
Funded
Government
Government agencies
Industry
Commercial
Services
Contracting
Real estate
Consumers
Other sectors
Total funded
Un-funded
Government institutions & semi government agencies
Services
Commercial and others
Total un-funded
Total
Figures in thousand Qatar riyals
Gross exposure
2016
Gross exposure
2017
31,719,283
4,829,599
8,194,017
7,639,784
34,374,970
3,938,925
26,203,202
7,909,046
2,667,910
127,476,736
23,458,970
2,818,667
5,254,690
12,492,054
36,184,327
7,818,390
19,415,500
9,618,027
2,096,349
119,156,974
802,862
12,546,526
16,122,693
29,472,081
156,948,817
1,107,810
13,753,866
15,463,602
30,325,278
149,482,252
total maximum exposure net of tangible collateral is Qar 52 billion (2016: Qar 55 billion). the types of collateral obtained include cash,
mortgages over real estate properties and pledges of shares.
the commercial bank (P.S.Q.c.) i annual report 2017
104
Notes to the Consolidated
Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(iv) Concentration of risks of financial assets with credit risk exposure (continued)
Credit risk exposure
the table below presents an analysis of financial assets by rating grade equivalent to the rating of the international rating agencies.
Equivalent grades
AAA to AA-
A+ to A-
BBB+ to BBB-
BB+ to B-
Unrated/ equivalent internal grading
Figures in thousand Qatar riyals
2016
2017
39,222,737
19,920,384
58,559,412
19,579,366
19,666,918
156,948,817
30,253,465
21,849,898
63,739,879
16,139,694
17,499,316
149,482,252
the majority of the unrated exposures represent credit facilities granted to customers by the Group’s subsidiary aBank.
(v) Credit quality
the following table sets out the credit quality of the Group’s credit exposure at carrying amounts before taking into account collateral held
or other credit enhancements.
loans and advances
to customers
2017
2016
due from banks
2017
2016
Figures in thousand Qatar riyals
Investment securities - debt
2017
2016
Neither past due nor impaired:
A: Low risk
B: Standard/satisfactory risk
Past due but not impaired :
A: Low risk
B: Standard/satisfactory risk
Impaired:
C: Substandard
d: doubtful
E: Bad debts
less: impairment allowance-
specific & collective
33,319,519
49,041,208
82,360,727
25,050,781
48,435,405
73,486,186
7,173,646
3,325,702
10,499,348
13,555,754
5,746,247
19,302,001
17,819,114
1,431,283
19,250,397
13,173,854
1,428,656
14,602,510
583,129
5,178,257
5,761,386
669,952
641,342
3,962,891
5,274,185
893,552
2,561,056
3,454,608
295,097
548,844
3,218,926
4,062,867
(4,274,363)
999,822
(3,206,064)
856,803
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
67,055
67,055
(67,055)
-
-
-
-
-
-
102,280
102,280
(102,280)
-
Carrying amount – net
89,121,935
77,797,597
10,499,348
19,302,001
19,250,397
14,602,510
the commercial bank (P.S.Q.c.) i annual report 2017
105
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(v) Credit quality (continued)
Investment securities - debt
Available-for-sale
Investment securities designated at fair value through income statement
less: impairment allowance (note 11 c)
Carrying amount – net
note: none of the other assets are past due or impaired as at 31 december 2017.
Figures in thousand Qatar riyals
2016
2017
19,128,772
188,680
(67,055)
19,250,397
14,281,720
423,070
(102,280)
14,602,510
Impaired loans and advances to customers and investment in debt securities
Individually impaired loans and advances to customers and investment in debt securities are those instruments for which the Group
determines that there is objective evidence of impairment and it does not expect to collect all principal and interest due according to the
contractual terms of the loan/investment security agreement(s).
Investment in debt securities carried at fair value through profit or losses are not assessed for impairment but are subject to the same
internal grading system, where applicable.
Loans and advances to customers past due but not impaired
past due but not impaired loans and advances to customers are those for which contractual interest or principal payments are past due,
but the Group believes that impairment is not appropriate on the basis of the level of security/collateral available and/or the stage of
collection of amounts owed to the Group.
Loans and advances to customers less than 90 days as at 31 December past due are not considered impaired, unless other information is
available to indicate the contrary. Gross amount of loans and advances by class to customers that were past due but not impaired were as
follows:
up to 30 days
31 to 60 days
Above 60 days
Gross
Figures in thousand Qatar riyals
2016
2017
2,002,563
306,033
3,452,790
5,761,386
1,665,032
1,211,196
578,380
3,454,608
Rescheduled loans and advances to customers
rescheduled activities include extended payment arrangements, approved external management plans, modification and deferral of
payments. restructuring policies and practices are based on indicators or criteria that, in the judgement of local management, indicate
that payment will most likely continue. these policies are kept under continuous review. Following restructuring, a previously overdue
customer account is reset to a normal status and managed together with other similar accounts as non impaired. the carrying value of
renegotiated loans and advances as at 31 december 2017 was Qar 2,310 million (2016: Qar 3,177 million).
the commercial bank (P.S.Q.c.) i annual report 2017
106
Notes to the Consolidated
Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(vi) Collateral
the determination of eligible collateral and the value of collateral are based on QCB regulations and are assessed by reference to market
price or indices of similar assets.
the Group has collateral in the form of blocked deposits, pledge of shares or legal mortgage against the past dues loans and advances to
customers.
the aggregate collateral is Qar 1,423 million (2016: Qar 768 million) for past due loans and advances to customers up to 30 days, Qar
228 million (2016: Qar 447 million) for past due from 31 to 60 days and Qar 646 million (2016: Qar 258 million) for past due above 60
days.
(vii) Repossessed collateral
during the year, the Group acquired ownership of land and building by taking possession of collateral held as security for an amount of
Qar nil million (2016: Qar nil million).
repossessed properties proceeds are used to reduce the outstanding indebtedness and are sold as soon as practicable. repossessed
property is classified in the consolidated statement of financial position within other assets.
(viii) Write-off policy
the Group writes off a loan or an investment in debt security balance, and any related allowances for impairment losses, when Group
Credit determines that the loan or security is uncollectible. QCB approval is required for such write off when the amount to be written off
exceeds Qatar riyal hundred thousand.
this determination is made after considering information such as the occurrence of significant changes in the borrower’s/issuer’s
financial position such that the borrower/issuer can no longer pay the obligation, or that proceeds from collateral will not be sufficient to
pay back the entire exposure. For smaller balance standardized loans, write-off decisions generally are based on a product-specific past
due status. the amount written off during the year was Qar 738 million (2016: Qar 513 million).
(c) Liquidity risk
liquidity risk is the risk that the Group is unable to meet its obligations when they fall due as a result of e.g. customer deposits being
withdrawn, cash requirements from contractual commitments, or other cash outflows, such as debt maturities or margin calls for
derivatives etc. Such outflows would deplete available cash resources for client lending, trading activities and investments. In extreme
circumstances, lack of liquidity could result in reductions in the consolidated statement of financial position and sales of assets, or
potentially an inability to fulfil lending commitments. the risk that the Group will be unable to do so is inherent in all banking operations
and can be affected by a range of institution-specific and market-wide events including, but not limited to, credit events, merger and
acquisition activity, systemic shocks and natural disasters.
(i) Management of liquidity risk
the management of liquidity risk is governed by the Group’s liquidity policy. the primary objective of liquidity risk management; over
which alCo has oversight, is to provide a planning mechanism for unanticipated changes in the demand or needs for liquidity created
by customer behaviour or abnormal market conditions. alCo emphasises the maximisation and preservation of customer deposits and
other funding sources. alCo also monitors deposit rates, levels, trends and significant changes. deposit marketing plans are regularly
reviewed for consistency with the liquidity policy requirements. alCo has in place a contingency plan, which is periodically reviewed. the
Group’s ability to raise wholesale and/or long term funding at competitive costs is directly impacted by the Bank’s credit ratings, which are
as follows:
moody’s:
Fitch :
Standard & poor’s: long term BBB+, Short term a-2, financial strength bbb- and outlook negative
long term a2, Short term p1, financial strength Baa3 and outlook negative.
long term a, Short term F1, financial strength bbb- and outlook negative.
the commercial bank (P.S.Q.c.) i annual report 2017
107
4. FINANCIAL RISK MANAGEMENT (continued)
(c) Liquidity risk (continued)
(ii) Exposure to liquidity risk
the key measure used by the Group for managing liquidity risk is the ratio of net liquid assets to deposits from customers. For this purpose
net liquid assets are considered as including cash and cash equivalents and investment grade debt securities for which there is an active
and liquid market less any deposits from banks, debt securities, other borrowings and commitments maturing within the next month.
a similar, but not identical, calculation is used to measure the Group’s compliance with the liquidity limit established by the Group’s lead
regulator, QCB under the heading ‘Liquidity adequacy ratio’ (LAR). The minimum ratio limit set by QCB is 100%.
Following table sets out the lar position of the Group during the year as follows:
at 31 december
average for the year
maximum for the year
minimum for the year
2017
100.41
108.27
114.88
93.72
2016
117.84
111.99
117.84
104.91
(iii) Maturity analysis
the following table sets out the maturity profile of the Group’s assets and liabilities. the contractual/expected maturities of assets and
liabilities have been determined on the basis of the remaining period at 31 december to the contractual maturity date and do not take
account of the effective maturities as indicated by the Group’s deposit retention history and the availability of liquid funds. management
monitors the maturity profile to ensure that adequate liquidity is maintained.
Carrying
amount
Demand /
within
1 month
1-3 months
3 months
– 1 year
Subtotal
1 year
More than
5 years
1-5 years
No
Maturity
Figures in thousand Qatar riyals
2017
Cash and balances with
central banks
Due from banks
loans and advances to
customers
Investment securities
Investment in associates
and a joint arrangement
asset held for sale
Others assets
Total
Due to banks
Customer deposits
Debt securities
Other borrowings
Other liabilities
Total
7,373,918
10,499,348
3,792,896
7,457,612
-
947,049
-
1,985,487
3,792,896
10,390,148
-
109,200
-
-
3,581,022
-
89,121,935
19,629,246
9,205,960
22,903
2,509,831
1,278,827
9,340,865
1,649,125
21,056,656
2,950,855
23,559,354
7,700,892
44,505,925
8,598,650
-
378,849
2,088,158
2,287,100
7,449,347
138,449,052
13,515,872
77,633,333
11,604,890
9,303,365
5,370,073
-
-
1,095,720
21,575,091
7,601,509
45,510,147
103,120
411,793
2,540,501
117,427,533 56,167,070
-
-
-
-
-
218,788
-
-
1,510,783
-
-
196,275
4,931,982
3,082,910
15,293,079
-
553,656
567,012
2,088,158
-
2,287,100
-
3,751,401
2,187,163
13,194,265 39,701,338 33,556,609 53,104,575 12,086,530
-
1,468,206
-
3,787,336
-
8,510,390
-
2,274,039
-
332,621
-
16,372,592
11,794,283
1,109,864
73,845,997
13,042,771
1,837,343
1,734,223
7,029,326
6,063,877
5,037,452
1,929,939
19,496,657 23,880,674 99,544,401
253,383
-
1,257,157
-
-
1,510,540
Difference
21,021,519 (34,591,979) (14,564,675) (10,686,409) (59,843,063)
17,184,017 51,594,035 12,086,530
the commercial bank (P.S.Q.c.) i annual report 2017
108
Notes to the Consolidated
Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(c) Liquidity risk (continued)
(iii) Maturity analysis (continued)
Carrying
amount
demand /
within
1 month
1-3 months
3 months
– 1 year
Subtotal
1 year
1-5 years
more than
5 years
no
maturity
Figures in thousand Qatar riyals
6,420,566
19,302,001
3,056,011
11,029,421
-
2,159,366
-
5,053,976
3,056,011
18,242,763
-
1,059,238
-
-
3,364,555
-
77,797,597
15,377,783
5,270,134
686,825
1,624,183
7
10,087,589
479,911
16,981,906
1,166,743
21,268,061
7,075,612
39,547,630
6,360,155
-
775,273
4,300,647
7,181,692
130,380,286
11,634,313
70,926,401
11,717,260
10,777,242
6,023,798
111,079,014
-
885,572
20,927,963
9,787,406
33,883,217
66,296
1,642,921
1,882,235
47,262,075
-
166,033
3,949,589
582,615
17,510,243
84,430
238,344
496,543
18,912,175
-
172,376
15,793,852
312,690
17,674,314
1,817,814
3,116,298
3,313,951
26,235,067
-
1,223,981
40,671,404
10,682,711
69,067,774
1,968,540
4,997,563
5,692,729
92,409,317
-
2,241,717
31,644,628
698,219
1,858,627
8,493,910
5,180,925
331,069
16,562,750
-
-
45,907,785
253,383
-
1,254,810
598,754
-
2,106,947
4,300,647
3,715,994
12,156,469
-
-
-
-
-
-
2016
Cash and balances with
central bank
Due from banks
loans and advances
to customers
Investment securities
Investment in associates and
a joint arrangement
Others assets
Total
Due to banks
Customer deposits
Debt securities
Other borrowings
Other liabilities
Total
Difference
19,301,272
(26,334,112)
(14,962,586)
(10,441,215)
(51,737,913)
15,081,878 43,800,838
12,156,469
(iv) Maturity analysis (financial liabilities and derivatives)
the table below summarises the maturity profile of the Group’s financial liabilities at 31 december based on contractual undiscounted
repayment obligations.
2017
Non-derivative
financial liabilities
Due to banks
Customer deposits
Debt securities
Other borrowings
Other liabilities
Total liabilities
Gross
Carrying undiscounted
cash flows
amount
Figures in thousand Qatar riyals
Less than
1 month
1-3
months
3 months –
1 year
1-5 years
More than
5 years
13,515,872
77,633,333
11,604,890
9,303,365
5,014,459
7,781,117
13,983,948
46,286,513
78,968,189
109,489
12,735,145
413,938
9,804,820
2,184,887
5,014,459
117,071,919 120,506,561 56,775,944
3,126,136
15,555,963
-
568,652
567,012
1,284,691
13,272,299
1,779,319
6,344,175
1,929,939
19,817,763 24,610,423
1,487,665
3,853,414
9,435,119
2,478,055
332,621
17,586,874
304,340
-
1,411,218
-
-
1,715,558
the commercial bank (P.S.Q.c.) i annual report 2017
109
4. FINANCIAL RISK MANAGEMENT (continued)
(c) Liquidity risk (continued)
(iv) Maturity analysis (financial liabilities and derivatives) (continued)
derivative financial instruments:
Generally, forward foreign exchange contracts are settled on a gross basis and interest rate swaps are settled on a net basis.
2017
Derivatives Held for Trading:
Forward foreign exchange contracts
Outflow
Inflow
Interest rate swaps:
Outflow
Inflow
Derivatives Held as Fair Value Hedges:
Interest rate swaps:
Outflow
Inflow
Derivatives Held as Cash Value Hedges:
Forward foreign exchange contracts:
outflow
Inflow
Interest rate swaps:
outflow
Inflow
Total Outflows
Total inflows
2016
non-derivative
financial liabilities
Due to banks
Customer deposits
Debt securities
Other borrowings
Other liabilities
Total liabilities
Total
Up to 1 Year
Figures in thousand Qatar riyals
More than
5 years
1 - 5 years
(18,009,204)
17,896,328
(14,957,505)
14,792,197
(3,013,671)
3,008,141
(103,935)
114,072
(20,749)
22,739
(63,115)
68,980
(38,028)
95,990
(20,071)
22,353
(358,276)
189,245
(20,805)
11,385
(81,971)
44,081
(255,500)
133,779
-
-
-
-
-
-
-
-
-
-
(18,471,415)
18,199,645
-
-
(14,999,059)
14,826,321
-
-
(3,158,757)
3,121,202
-
-
(313,599)
252,122
Gross
Carrying undiscounted
cash flows
amount
Figures in thousand Qatar riyals
less than
1 month
1-3
months
3 months –
1 year
1-5 years
more than
5 years
11,634,313
70,926,401
11,717,260
10,777,242
5,866,882
110,922,098
11,917,658
72,029,617
13,122,798
11,279,965
5,866,882
114,216,920
9,852,902
34,357,924
69,652
1,775,642
1,725,319
47,781,439
693,313
17,818,002
88,590
272,448
496,543
19,368,896
352,114
17,966,764
1,834,877
3,249,691
3,313,951
26,717,397
712,379
1,886,927
9,860,180
5,358,742
331,069
18,149,297
306,950
-
1,269,499
623,442
-
2,199,891
the commercial bank (P.S.Q.c.) i annual report 2017
110
Notes to the Consolidated
Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(c) Liquidity risk (continued)
(iv) Maturity analysis (financial liabilities and derivatives) (continued)
derivative financial instruments:
Generally, forward foreign exchange contracts are settled on a gross basis and interest rate swaps are settled on a net basis.
2016
derivatives held for trading:
Forward foreign exchange contracts:
Outflow
Inflow
Interest rate swaps:
Outflow
Inflow
derivatives held as Fair Value hedges:
Interest rate swaps:
Outflow
Inflow
derivatives held as Cash Value hedges:
Forward foreign exchange contracts:
outflow
Inflow
Interest rate swaps:
outflow
Inflow
Total Outflows
Total inflows
(v) Off-balance sheet items
2017
Loan commitments
Guarantees and other financial facilities
Capital commitments
Total
2016
Loan commitments
Guarantees and other financial facilities
Capital commitments
Total
total
up to 1 Year
Figures in thousand Qatar riyals
more than
5 years
1 - 5 years
(18,011,043)
18,688,823
(14,743,330)
15,363,924
(2,795,430)
2,794,691
(134,277)
142,040
(22,869)
24,129
(74,673)
78,612
(472,283)
530,208
(36,735)
39,299
(343,695)
163,274
(18,725)
8,657
(73,416)
35,069
(251,554)
119,548
-
-
-
-
-
-
-
-
(18,489,015)
18,994,137
-
-
(14,784,924)
15,396,710
-
-
(2,943,519)
2,908,372
-
-
-
-
(760,572)
689,05
Figures in thousand Qatar riyals
Below
1 Year
Above
1 Year
Total
1,148,931
12,400,537
178,472
13,727,940
4,799,690
11,122,923
-
15,922,613
5,948,621
23,523,460
178,472
29,650,553
Figures in thousand Qatar riyals
Below
1 Year
1,302,401
11,133,268
168,074
12,603,743
above
1 Year
4,872,790
13,016,819
-
17,889,609
total
6,175,191
24,150,087
168,074
30,493,352
the commercial bank (P.S.Q.c.) i annual report 2017
111
4. FINANCIAL RISK MANAGEMENT (continued)
(d) Market risks
the Group takes exposure to market risks, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market prices. market risks arise from open positions in interest rate, currency and equity products, all of which are
exposed to general and specific market movements and changes in the level of volatility of market rates or prices such as interest rates,
credit spreads, foreign exchange rates and equity prices. the Group separates exposures to market risk into either trading or non-trading
portfolios and by product type.
the market risks arising from trading and non-trading activities are concentrated in Group treasury and monitored by two teams separately.
regular reports are submitted to the Board of directors and heads of each business unit.
trading portfolios include those positions arising from market-making transactions where the Group acts as principal with clients or with
the market.
non-trading portfolios primarily arise from the interest rate management of the entity’s retail and commercial banking assets and liabilities.
non-trading portfolios also consist of foreign exchange and equity risks arising from the Group’s held-to-maturity and available-for-sale
investments.
(i) Management of market risks
overall authority for market risk is vested in alCo. Group market risk is responsible for the development of detailed risk management
policies (subject to review and approval by alCo) and for the day-to-day review of their implementation.
the Group’s proprietary investments are managed according to the Group’s internal investment policy, which has been approved by
the Board of directors and drafted in accordance with the Qatar Central Bank guidelines. the Group’s trading activities are conducted
by treasury and Investments division. these activities are subject to business line guidelines and policies. the Group employs several
techniques to measure and control activities including sensitivity analysis, position limits and risk based limits. the maximum limit of the
Group’s total proprietary investments (i.e. total of fair value through profit and loss, held to maturity and available for sale investment
excluding Qatar Government issued or guaranteed investment or debt security portfolios) is restricted to 70% of the Group’s capital
and reserves (Tier 1 capital). However the individual limit for the held for trading investment portfolio is 10% of capital and reserves (Tier
1 capital) with a maximum permissible loss to carry for local securities at any given time. Investment policy is reviewed by the Board of
directors annually and day to day limits are independently monitored by the market risk management department.
Investment proposals are approved at the Investment Committee and decisions driven by the investment strategy, which is developed by
the business line under alCo oversight and approved by the Board.
(ii) Exposure to interest rate risk – non-trading portfolio
the principal risk to which non-trading portfolios are exposed is the risk of loss from fluctuations in the future cash flows or fair values of
financial instruments because of a change in market interest rates. Interest rate risk is managed principally through monitoring interest rate
gaps and by having pre-approved limits for repricing bands. alCo is the monitoring body for compliance with these limits and is assisted
by Group treasury in its day-to-day monitoring activities.
the Group takes on exposure to the effects of fluctuations in the prevailing levels of market interest rates on both its fair value and cash flow
risks. Interest margins may increase as a result of such changes but may reduce losses in the event that unexpected movements arise. the
Board sets limits on the level of mismatch of interest rate repricing that may be undertaken, which is monitored daily by Group treasury.
the asset and liability management (“alm”) process, managed through alCo, is used to manage interest rate risk associated with non-
trading financial instruments. Interest rate risk represents the most significant market risk exposure to the Group’s non-trading financial
instruments.
the Group’s goal is to manage interest rate sensitivity so that movements in interest rates do not adversely affect net interest income.
Interest rate risk is measured as the potential volatility to the net interest rate income caused by changes in market interest rates. the
Group typically manages the interest rate risk of its non-trading financial instruments by segmenting these assets and liabilities into two
broad portfolios: non–discretionary and discretionary. the non-discretionary portfolio consists of the Group’s customer driven loans
and deposit positions and securities required to support regulatory requirements. to manage the resulting interest rate sensitivity of the
Group’s non-discretionary portfolio, the Group uses a discretionary portfolio of securities, long dated deposits, inter-bank takings and
placements, and when warranted, derivatives. Strategically positioning the discretionary portfolio, the Group largely manages the interest
rate sensitivity in the non-discretionary portfolio.
the commercial bank (P.S.Q.c.) i annual report 2017
112
Notes to the Consolidated
Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolio (continued)
the following table summarises the interest sensitivity position at year end, by reference to the re-pricing period or maturity of the Group’s
assets and liabilities.
a summary of the Group’s interest rate gap position on non-trading balances are as follows:
Repricing in:
Figures in thousand Qatar riyals
2017
Cash and balances with
central banks
Due from banks
Loans and advances to customers
Investment securities
Investment in associates and
a joint arrangement
asset held for sale
property and equipment and
all other assets
Due to banks
Customer deposits
Debt securities
Other borrowings
Other liabilities
Equity
Interest rate sensitivity gap
Cumulative Interest rate
sensitivity gap
Carrying
amount
Less than
3 months 3-12 months
1-5 years
More than Non-interest
sensitive
5 years
7,373,918
10,499,348
89,121,935
19,629,246
2,088,158
2,287,100
3,701,691
8,513,861
44,082,741
1,158,654
-
1,985,487
37,244,372
4,182,396
-
-
5,048,210
6,282,285
-
-
589,675
7,627,058
3,672,227
-
2,156,937
378,853
-
-
-
-
-
-
-
-
2,088,158
2,287,100
7,449,347
139,909
138,449,052 57,596,856
108,858
43,521,113
204,344
11,534,839
17,242
8,233,975
6,978,994
17,562,269
(13,515,872)
(77,633,333)
(11,604,890)
(9,303,365)
(5,370,073)
(21,021,519)
-
(12,601,973)
(3,787,409)
(49,353,702)
(10,121,348)
-
(626,199)
(1,828,448)
(113,293)
(149,931)
(4,000,000)
-
(138,449,052) (63,934,054) (21,062,300) (18,648,249)
(7,113,410)
(913,899)
(13,042,772)
(226,386)
(6,848,718)
(30,525)
-
(6,337,198)
22,458,813
-
-
-
(1,257,156)
-
(297)
-
-
(11,449,450)
-
-
(5,076,027)
(17,021,519)
(1,257,453) (33,546,996)
6,976,522 (15,984,727)
-
(6,337,198)
16,121,615 9,008,205
15,984,727
-
Effective
interest
rate %
-
2.35%
5.27%
3.38%
-
-
-
-
2.73%
2.67%
4.42%
1.37%
-
-
-
-
-
the commercial bank (P.S.Q.c.) i annual report 2017
113
Figures in thousand Qatar riyals
4. FINANCIAL RISK MANAGEMENT (continued)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolio (continued)
repricing in:
2016
Cash and balances with
central bank
Due from banks
Loans and advances to customers
Investment securities
Investment in associates and
a joint arrangement
property and equipment
and other assets
Carrying
amount
less than
3 months
3-12 months
1-5 years
more than
5 years
non-interest
sensitive
2,951,037
6,420,566
14,248,027
19,302,001
77,797,597 38,485,866
1,139,538
15,377,783
-
5,053,974
31,478,636
2,357,752
-
-
3,598,151
6,266,172
-
-
871,898
4,839,048
3,469,529
-
3,363,046
775,273
4,300,647
-
-
-
-
4,300,647
7,181,692
130,380,286
307,297
116,384
57,131,765 39,006,746
84,874
9,949,197
20,936
5,731,882
6,652,201
18,560,696
Due to Bank
Customer deposits
Debt securities
Other borrowings
Other liabilities
Equity
Interest rate sensitivity gap
Cumulative Interest rate
sensitivity gap
(11,634,313)
(70,926,401)
(11,717,260)
(10,777,242)
(6,023,798)
(19,301,272)
(130,380,286)
-
(11,634,313)
(40,422,651)
-
(1,917,089)
(242,624)
-
-
(17,509,056)
(1,968,540)
(8,501,225)
(29,386)
-
(54,216,677) (28,008,207)
10,998,539
2,915,088
-
(1,834,579)
(8,493,910)
(358,928)
(66,940)
(2,000,000)
(12,754,357)
(2,805,160)
-
-
(1,254,810)
-
(19,866)
(2,000,000)
(3,274,676)
2,457,206
-
(11,160,115)
-
-
(5,664,982)
(15,301,272)
(32,126,369)
(13,565,673)
-
2,915,088
13,913,627
11,108,467
13,565,673
-
effective
interest
rate %
-
1.69%
5.00%
3.82%
-
-
1.58%
2.48%
4.55%
1.62%
-
-
-
-
-
the commercial bank (P.S.Q.c.) i annual report 2017
114
Notes to the Consolidated
Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(d) Market risks (continued)
(ii) Exposure to interest rate risk – non-trading portfolio (continued)
Sensitivity analysis
the management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Group’s financial
assets and liabilities to various standard and non-standard interest rate scenarios. Standard scenarios that are considered on a monthly
basis include a 50 basis point (bp) parallel fall or rise in all yield curves worldwide and a 50 bp rise or fall in the greater than 12-month portion
of all yield curves. an analysis of the Group’s sensitivity to an increase or decrease in market interest rates, assuming no a symmetrical
movement in yield curves and a constant financial position, is as follows:
Sensitivity of net interest income
2017
at 31 december
average for the year
2016
at 31 december
average for the year
Sensitivity to reported Fair value reserve in equity of interest rate movements
2017
at 31 december
average for the year
2016
at 31 december
Average for the year
Figures in thousand Qatar riyals
50 bp parallel
decrease
50 bp parallel
increase
59,726
64,471
(59,726)
(64,471)
67,851
50,806
(67,851)
(50,806)
Figures in thousand Qatar riyals
50 bp parallel
decrease
50 bp parallel
increase
1,432
1,770
2,107
2,379
(1,432)
(1,770)
(2,107)
(2,379)
Interest rate movements affect reported equity in the following ways:
•
•
retained earnings arising from increases or decreases in net interest income and the fair value changes reported in profit or loss; and
fair value reserves arising from increases or decreases in fair values of available-for-sale financial instruments are reported directly in
other comprehensive income.
overall non-trading interest rate risk positions are managed by Group treasury, which uses investment securities, advances to banks,
deposits from banks and derivative instruments to manage the overall position arising from the Group’s non-trading activities.
the commercial bank (P.S.Q.c.) i annual report 2017
115
4. FINANCIAL RISK MANAGEMENT (continued)
(d) Market risks (continued)
(iii) Exposure to other market risks – non-trading portfolios
Foreign currency transactions
the Group monitors any concentration risk in relation to any individual currency in regard to the translation of foreign currency transactions
and monetary assets and liabilities. the table shows the net foreign currency exposure by major currencies at the end of the reporting
period along with the sensitivities if there were to be a change in the currency exchange rate.
Net foreign currency exposure:
pounds Sterling
euro
uSd
other currencies
5% increase in currency exchange rate
pound Sterling
euro
uSd
other currencies
Increase
in profit or loss
2017
2016
8,302
(51,324)
(658,575)
196,372
(748)
374
(243,656)
225,331
Figures in thousand Qatar riyals
2016
2017
166,043
(1,026,485)
(13,171,504)
3,927,455
(14,954)
7,473
(4,873,124)
4,506,612
Figures in thousand Qatar riyals
Increase
in fair value reserve
2017
31
66
8,401
749
2016
18
48
19,733
5,727
open exchange position in other currencies represents Group’s investment in associates and a joint arrangement denominated in omr
and aed which are pegged with uSd.
Equity price risk
equity price risk is the risk that the fair value of equities decreases as a result of changes in the equity indices and individual stocks the non-
trading equity price risk exposure arises from equity securities classified as held for trading and available for sale. a 10 per cent increase
in the Qatar exchange and a 15 per cent increase in the abu dhabi Securities exchange and Saudi Stock exchange market index at 31
december 2017 would have increased equity by Qar 8 million (2016: Qar 28 million). an equivalent decrease would have resulted in an
equivalent but opposite impact.
the Group is also exposed to equity price risk and the sensitivity analysis thereof is as follows:
Increase / (decrease) in other comprehensive income:
Qatar exchange
abu dhabi Securities exchange
Saudi Stock exchange
Figures in thousand Qatar riyals
2016
2017
7,509
-
-
13,004
6,110
8,745
the above analysis has been prepared on the assumption that all other variables such as interest rate, foreign exchange rate, etc. are held
constant and is based on historical correlation of the equity securities to the relevant index. actual movement may be different from the
one stated above and is subject to impairment assessment at the end of each reporting period.
the commercial bank (P.S.Q.c.) i annual report 2017
116
Notes to the Consolidated
Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(e) Operational risks
operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group’s involvement with
financial instruments, including processes, personnel, technology and infrastructure, and from external factors other than credit, market
and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour.
the Group’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group’s reputation
with overall cost effectiveness and to avoid Control procedures that restrict initiative and creativity.
the primary responsibility for the development and implementation of controls to address operational risk is assigned to senior
management within each business unit. this responsibility is supported by the development of overall Group standards for the
management of operational risk in the following areas:
•
•
•
•
•
•
•
•
•
•
requirements for appropriate segregation of duties, including the independent authorisation of transactions;
requirements for the reconciliation and monitoring of transactions;
compliance with regulatory and other legal requirements;
documentation of controls and procedures;
requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the
risks identified;
requirements for the reporting of operational losses and proposed remedial action;
development of contingency plans;
training and professional development;
ethical and business standards; and
risk mitigation, including insurance where this is effective.
(f) Capital management
Regulatory capital
the Group’s policy is to maintain a strong capital base so as to ensure investor, creditor and market confidence and to sustain future
development of the business. the impact of the level of capital on equity holders’ return is also recognised and the Group recognises
the need to maintain a balance between the higher returns that might be possible with greater gearing and the advantages and security
afforded by a sound capital position.
the Group and its individually regulated operations have complied with all externally imposed capital requirements throughout the period.
the Capital adequacy ratio (Car) of the group is calculated in accordance with the Basel Committee guidelines as adopted by Qatar
Central Bank (QCB). From 1st January 2014 QCB adopted Basel III guidelines for CAR calculation.
the commercial bank (P.S.Q.c.) i annual report 2017
117
4. FINANCIAL RISK MANAGEMENT (continued)
(f) Capital management (continued)
the Group’s regulatory capital position under Basel III QCB regulations as at 31 december was as follows:
Common Equity Tier 1 (CET 1) Capital
Additional Tier 1 Capital
Tier 1 Capital
Tier 2 Capital
total eligible Capital
Risk Weighted Assets for Credit Risk
Risk Weighted Assets for Market Risk
risk Weighted assets for operational risk
total risk Weighted assets
-
Total Capital Ratio
Figures in thousand Qatar riyals
Basel III
2016
Basel III
2017
13,044,099
3,961,712
17,005,811
1,799,160
18,804,971
108,224,349
2,454,384
6,285,206
116,963,939
11,002,598
3,961,937
14,964,535
2,333,381
17,297,916
104,583,275
1,688,869
7,634,483
113,906,627
16.08%
15.19%
the minimum requirement for Capital adequacy ratio under Basel III as per Qatar Central bank requirements are as follows:
Minimum limit for CET 1 ratio
Minimum limit for Tier 1 capital ratio
Minimum limit for Total capital ratio
Without
Capital
Conservation
Buffer
Including
Capital
Conservation
Buffer
6%
8%
10%
2.5%
2.5%
2.5%
additional
dSIB charge
0.375%
0.375%
0.375%
ICaap
Capital
charge
0%
0%
1.0%
total
8.875%
10.875%
13.875%
The adoption of IFRS 9 on 1 January 2018 is not expected to have a material impact on the total capital adequacy ratio based on regulatory
guidance to date.
5. USE OF ESTIMATES AND JUDGMENTS
(a) Key sources of estimation uncertainty
the Group makes estimates and assumptions that affect the reported amounts of assets and liabilities. estimates and judgements are
continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to
be reasonable under the circumstances.
the commercial bank (P.S.Q.c.) i annual report 2017
118
Notes to the Consolidated
Financial Statements continued
5. USE OF ESTIMATES AND JUDGMENTS (continued)
(a) Key sources of estimation uncertainty (continued)
(i) Allowances for credit losses
assets accounted for at amortised cost are evaluated for impairment on the basis as described in the accounting policy.
the specific counterparty component of the total allowances for impairment applies to financial assets evaluated individually for impairment
and is based upon management’s best estimate of the present value of the cash flows that are expected to be received. In estimating
these cash flows, management makes judgements about counterparty’s financial situation and the net realisable value of any underlying
collateral. each impaired asset is assessed on its merits, and the workout strategy and estimate of cash flows considered recoverable are
independently approved by the Credit risk function. minimum impairment on specific counter parties is determined based on the QCB
regulations.
Collectively assessed impairment allowances cover credit losses inherent in portfolios of loans and advances to customers and investment
securities measured at amortised cost with similar credit risk characteristics when there is objective evidence to suggest that they contain
impaired financial assets, but the individual impaired items cannot yet be identified. In assessing the need for collective loss allowances,
management considers factors such as credit quality, portfolio size, concentrations and economic factors. In order to estimate the required
allowance, assumptions are made to define the way inherent losses are modelled and to determine the required input parameters, based
on historical experience and current economic conditions. the accuracy of the allowances depends on the estimates of future cash flows
for specific counterparty allowances and the model assumptions and parameters used in determining collective allowances.
the Bank reviews its loan portfolio to consolidate impairment at the end of each reporting period. In determining whether an impairment
loss should be recorded in the consolidated statement of income, the Bank makes judgements as to whether there is any observable
data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of loans before the decrease can
be identified with an individual loan in that portfolio. this evidence may include observable data indicating that there has been an adverse
change in the payment status of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the
group. management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of
impairment similar to those in the portfolio when scheduling its future cash flows. the methodology and assumptions used for estimating
both the amount and timing of future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss
experience.
(ii) Determining fair values
the determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation
techniques as described in the accounting policy. For financial instruments that trade infrequently and have little price transparency, fair
value is less objective, and requires varying degrees of judgement depending on liquidity, concentration, uncertainty of market factors,
pricing assumptions and other risks affecting the specific instrument.
Where the fair values of financial assets and financial liabilities cannot be derived from active markets, they are determined using a variety
of valuation techniques that include the use of mathematical models. the inputs to these models are taken from observable markets where
possible, but where this is not feasible, a degree of judgment is required in establishing fair values. the judgments include considerations
of liquidity and model inputs such as correlation and volatility for longer dated derivatives.
(iii) Goodwill impairment
Goodwill is tested annually for impairment; assets are grouped together into smallest group of assets that generates cash inflows from
continuing use that is largely independent of the cash inflows of other assets or CGus. Goodwill arising from a business combination is
allocated to the CGu which is expected to benefit from the synergies of the combination.
the ‘recoverable amount’ of an asset or CGu is the greater of its value in use and its fair value less costs to sell. ‘Value in use’ is based on
the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments
of the time value of money and the risks specific to the asset or CGu.
an impairment loss is recognized if the carrying amount of an asset or CGu exceeds its recoverable amount.
Impairment losses are recognized in profit or loss. they are allocated first to reduce the carrying amount of any goodwill allocated to the
CGu, and then to reduce the carrying amounts of the other assets in the CGu on a pro rata basis.
the commercial bank (P.S.Q.c.) i annual report 2017
119
5. USE OF ESTIMATES AND JUDGMENTS (continued)
(b) Critical accounting judgements in applying the Group’s accounting policies
(i) Valuation of financial instruments
the Group’s accounting policy on fair value measurements is discussed in the significant accounting policies section.
the Group measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the
measurements.
•
•
•
Level 1: Inputs that are quoted market prices (unadjusted) in active markets for identical instruments.
Level 2: Inputs other than quoted prices included within Level1 that are observable either directly (i.e.as prices) or indirectly (i.e.
derived from prices). this category includes instruments valued using: quoted market prices in active markets for similar instruments;
quoted prices for identical or similar instruments in markets that are considered less than active; or other valuation techniques in
which all significant inputs are directly or indirectly observable from market data.
Level 3: Inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs
not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. this category
includes instruments that are value based on quoted prices for similar instruments for which significant unobservable adjustments or
assumptions are required to reflect differences between the instruments.
Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price
quotations. For all other financial instruments the Group determines fair values using valuation techniques. Valuation techniques include
net present value and discounted cash flow models and comparison to similar instruments for which market observable prices exist.
the table below analyses financial instruments measured at fair value at the end of the reporting period, by the level in the fair value
hierarchy into which the fair value measurement is categorised:
derivative assets
Investment securities
derivative liabilities
derivative assets
Investment securities
Derivative liabilities
Figures in thousand Qatar riyals
31 December 2017
Carrying
amount
Level 2
Level 1
-
2,556,279
2,556,279
462,483
16,874,981
17,337,464
462,483
19,629,246
20,091,729
-
-
355,614
355,614
355,614
355,614
31 december 2016
Carrying
amount
level 2
226,523
12,486,481
12,713,004
226,523
15,377,783
15,604,306
level 1
-
2,655,263
2,655,263
-
-
156,917
156,917
156,917
156,917
all unquoted available for sale equities and investment funds are recorded at fair value except for investments with a carrying value of
QAR 198 million (2016: QAR 236 million), which are recorded at cost since their fair value cannot be reliably estimated. There have been no
transfers between levels 1, 2 and 3 during the years 2017 and 2016.
Fair value of financial assets and liabilities not measured at fair value is approximately equal to the carrying value.
the commercial bank (P.S.Q.c.) i annual report 2017
120
Notes to the Consolidated
Financial Statements continued
5. USE OF ESTIMATES AND JUDGMENTS (continued)
(b) Critical accounting judgements in applying the Group’s accounting policies (continued)
(ii) Financial asset and liability classification
the Group’s accounting policies provide scope for assets and liabilities to be designated at inception into different accounting categories
in certain circumstances:
•
•
•
in classifying financial assets or liabilities as trading, the Group has determined that it meets the description of trading assets and
liabilities set out in the accounting policies.
in designating financial assets at fair value through profit or loss, the Group has determined that it has met one of the criteria for this
designation set out in the accounting policies.
in classifying financial assets as held-to-maturity, the Group has determined that it has both the positive intention and ability to hold
the assets until their maturity date as required by the accounting policies.
details of the Group’s classification of financial assets and liabilities are given in note 7.
(iii) Qualifying hedge relationships
In designating financial instruments in qualifying hedge relationships, the Group has determined that it expects the hedges to be highly
effective over the period of the hedging relationship.
(iv) Impairment of investments in equity and debt securities
Investments in equity and debt securities are evaluated for impairment on the basis described in the significant accounting policies section.
(v) Useful lives of property and equipment
the Group’s management determines the estimated useful life of property and equipment for calculating depreciation. this estimate is
determined after considering the expected usage of the asset, physical wear and tear, technical or commercial obsolescence.
(vi) Useful life of intangible assets
the Group’s management determines the estimated useful life of its intangible assets for calculating amortization. this estimate is
determined after considering the expected economic benefits from the use of intangible assets.
(vii) Fair value of land and buildings
the fair value of land and building is determined by valuations from an external professional real estate valuer using recognised valuation
techniques and the principles of IFrS 13 “Fair Value measurement”. these valuations entail significant estimates and assumptions about the
future. the valuation basis used is capitalization method and comparison & cost approach method.
6. OPERATING SEGMENTS
For management purposes, the Group is divided into four operating segments, which are based on business lines, together with its
associates and joint arrangement companies, as follows:
Commercial Bank:
1. Wholesale Banking provides an extensive range of conventional funded and non-funded credit facilities, demand and time deposit
services, currency exchange facilities, interest rate swaps and other derivative trading services, loan syndication and structured
financing services to corporate, commercial and multinational customers. money market funds and proprietary investment portfolio
are also managed by this operating segment.
2. Retail Banking provides personal current, savings, time and investment account services, credit card and debit card services,
consumer and vehicle loans, residential mortgage services and custodial services to retail and individual customers.
Subsidiaries:
3. ABank: a subsidiary that provides banking services through its branch network in turkey. abank also has its subsidiaries. the Group
reported abank group result under this operating segment.
4. Other principal subsidiaries:
a) Global Card Services l.l.C. provide credit card services in the Sultanate of oman.
b) Commercialbank Financial Services l.l.C. provides brokerage services in the State of Qatar.
c) CBQ Finance limited, a SpV used for debt issuance for the bank,
the commercial bank (P.S.Q.c.) i annual report 2017
121
6. OPERATING SEGMENTS (continued)
unallocated assets, liabilities and revenues are related to certain central functions and non-core business operations. (For example, Group
headquarters, staff apartments, common property & equipment, cash functions and development projects and related payables, net of
intra-group transactions).
associates and joint arrangement Companies – includes the Group’s strategic investments in the national Bank of oman in the Sultanate
of oman and massoun Insurance Services l.l.C. which operate in the State of Qatar. all associates and joint arrangement Companies are
accounted for under the equity method.
management monitors the results of the operating segments separately to make decisions about resource allocation and performance
assessment. transfer prices between operating segments are on an arm’s length basis.
(a) By operating segment
Segment assets and liabilities comprise operating assets and liabilities which are directly handled by the operating segment and income or
expenses are attributed with the assets and liabilities’ ownership. the following table summarizes performance of the operating segments:
Commercial Bank
Wholesale
Banking
Total
Retail Commercial
Bank
Banking
Figures in thousand Qatar riyals
Subsidiaries
ABank
Others Unallocated
Total
2017
Net interest income
net fee, commission and
other income
Segmental revenue
Impairment loss on
investment securities
net impairment loss on loans
and advances to customers
Segmental profit
Share of results of associates
and a joint arrangement
net profit for the year
Other information
Assets
Investments in associates and
a joint arrangement
asset held for sale
Liabilities
Contingent items
1,131,817
956,485
2,088,302
493,735
3,273
(67,010)
2,518,300
486,609
1,618,426
(46,484)
427,222
1,383,707
913,831
3,002,133
21,513
515,248
19,845
23,118
55,786
(11,224)
1,010,975
3,529,275
-
(46,484)
-
-
-
(46,484)
(866,625)
(659,019)
(1,525,644)
428,962
(174,917)
49,121
3,742
10,706
-
(33,015)
(1,696,819)
455,774
147,876
603,650
85,641,936
22,749,435
108,391,371
19,830,916
316,796
5,534,711 134,073,794
-
-
76,834,256
23,921,526
-
-
-
-
22,152,153 98,986,409
24,518,629
597,103
-
-
18,258,505
4,392,507
-
-
94,092
560,945
-
-
88,527
2,088,158
2,287,100
117,427,533
- 29,472,081
Intra-group transactions are eliminated from this segmental information (assets: Qar 2,520 million and liabilities: Qar 364 million)
the commercial bank (P.S.Q.c.) i annual report 2017
122
Notes to the Consolidated
Financial Statements continued
6. OPERATING SEGMENTS (continued)
(a) By operating segment (continued)
Commercial Bank
Wholesale
Banking
retail
Banking
total
Commercial
Bank
Figures in thousand Qatar riyals
Subsidiaries
aBank
others
unallocated
total
1,138,104
881,412
2,019,516
410,007
3,458
(92,233)
2,340,748
579,517
1,717,621
(76,613)
409,715
1,291,127
989,232
3,008,748
170,130
580,137
21,021
24,479
56,712
(35,521)
1,237,095
3,577,843
-
(76,613)
-
-
-
(76,613)
(710,343)
(339,596)
(1,049,939)
674,768
(213,503)
2,602
(4,299)
305
(60)
(129,946)
(1,267,801)
547,729
(46,350)
501,379
79,707,956
22,797,898 102,505,854
17,976,836
228,663
5,368,286 126,079,639
-
72,063,791
24,829,154
-
-
22,175,505 94,239,296
1,178,298 26,007,452
-
16,680,097
3,746,483
-
16,555
571,343
-
143,066
4,300,647
111,079,014
- 30,325,278
2016
Net interest income
net fee, commission and
other income
Segmental revenue
Impairment loss on
investment securities
net impairment loss on loans
and advances to customers
Segmental profit
Share of results of associates
and a joint arrangement
Net profit for the year
other information
Assets
Investments in associates
and a joint arrangement
Liabilities
Contingent items
Intra-group transactions are eliminated from this segmental information (assets: Qar 2,358 million and liabilities: Qar 368 million)
the commercial bank (P.S.Q.c.) i annual report 2017
123
6. OPERATING SEGMENTS (continued)
(b) By geography
Consolidated statement
of financial position
Qatar
Other GCC
countries
Other
Middle East
Europe
North
America
Figures in thousand Qatar riyals
Rest of
the world
Total
2017
Cash and balances
with central banks
Due from banks
loans and advances
to customers
Investment securities
Investment in associates
and a joint arrangement
asset held for sale
property and equipment
and all other assets
Total assets
Due to banks
Customer deposits
Debt securities
Other borrowings
Other liabilities
Equity
Total liabilities
and equity
5,182,523
3,288,722
9
972,305
2,191,386
2,204,001
71,388,727
15,433,344
1,214,430
866,833
14,154,023
2,523,754
8,818
-
2,079,340
2,287,100
-
-
-
1,916,134
1,391,439
140,580
-
-
-
916,216
-
1,201,970
7,373,918
10,499,348
63
428,947
973,253
235,788
89,121,935
19,629,246
-
-
-
-
2,088,158
2,287,100
5,687,013
100,989,147
26,052
1,433,140
7,446,069 22,506,304
258,213
3,706,366
2,073
42,856
1,347,299 2,453,867
7,449,347
138,449,052
3,253,831
57,730,958
181,131
119,851
4,251,110
21,021,504
4,379,585
2,689,705
-
4,579,359
61,233
-
971,171
10,028,755
2,206,596
1,088,099
726,896
15
3,670,600
1,998,896
9,217,163
1,960,815
266,577
-
300,846
30,801
-
1,118,786
19,660
-
939,839
5,154,218
-
436,455
44,597
-
13,515,872
77,633,333
11,604,890
9,303,365
5,370,073
21,021,519
86,558,385
11,709,882
15,021,532
17,114,051
1,470,093 6,575,109
138,449,052
the commercial bank (P.S.Q.c.) i annual report 2017
124
Notes to the Consolidated
Financial Statements continued
6. OPERATING SEGMENTS (continued)
(b) By geography (continued)
Consolidated statement
of income
Qatar
Other GCC
countries
Other
Middle East
Europe
North
America
Figures in thousand Qatar riyals
Rest of
the world
Total
Year ended
31 December 2017
Net interest income
net fee, commission and
other income
Net operating income
Staff cost
Depreciation
amortization of
intangible assets
Impairment loss on
investment securities
net impairment loss on
loans and advances to
customers
Other expenses
profit before share of
results of associates and a
joint arrangement
Share of results of associates
and a joint arrangement
Profit for the year
before tax
Income tax expenses
Net profit for the year
1,882,834
(34,873)
795,558
(223,447)
(59,861)
158,089
2,518,300
995,647
2,878,481
(550,973)
(141,080)
(47,339)
(645)
(35,518)
-
-
27,324
822,882
(162,451)
(11,297)
(12,470)
(235,917)
-
-
22,861
(37,000)
-
-
(21,742)
136,347
(48)
(15)
1,010,975
3,529,275
(713,472)
(152,392)
-
(8,271)
-
-
-
(55,610)
(18,071)
(14,351)
-
(5,001)
(8,097)
(964)
(46,484)
(1,525,644)
(298,967)
3,742
-
(174,917)
(104,060)
-
-
-
-
-
(566)
(1,696,819)
(403,593)
296,407
(46,127)
361,886
(240,918)
(45,097)
134,754
460,905
3,959
143,917
-
-
-
-
147,876
300,366
-
300,366
97,790
-
97,790
361,886
(5,131)
356,755
(240,918)
-
(240,918)
(45,097)
-
(45,097)
134,754
-
134,754
608,781
(5,131)
603,650
the commercial bank (P.S.Q.c.) i annual report 2017
125
6. OPERATING SEGMENTS (continued)
(b) By geography (continued)
Consolidated statement
of financial position
2016
Cash and balances with
central bank
Due from banks
loans and advances
of customers
Investments securities
Investment in associates
and a joint arrangement
property and equipment
and all other assets
Total assets
Due to banks
Customer deposits
Debt securities
Other borrowings
Other liabilities
Equity
Total liabilities and equity
Qatar
other GCC
countries
other
middle east
europe
north
america
rest of
the world
total
Figures in thousand Qatar riyals
4,396,286
4,900,428
9
2,750,226
2,024,271
3,950,186
-
2,987,438
-
761,780
-
3,951,943
6,420,566
19,302,001
61,512,153
10,541,549
1,673,141
1,242,214
12,658,833
2,489,104
1,436,505
251,083
56,526
635,006
460,439
218,827
77,797,597
15,377,783
8,859
4,291,788
-
-
-
-
4,300,647
5,667,654
87,026,929
20,222
9,977,600
1,357,809
22,480,203
125,568
4,800,594
1,994
1,455,306
8,445
4,639,654
7,181,692
130,380,286
3,823,332
48,595,570
375,226
187,793
5,186,811
19,301,259
77,469,991
3,267,736
4,805,798
-
6,311,116
65,011
-
14,449,661
1,964,280
8,156,003
1,519,490
537,947
560,848
13
12,738,581
1,849,270
1,128,662
9,672,455
2,322,848
163,877
-
15,137,112
663,609
20,960
150,089
1,160,633
2,745
-
1,998,036
66,086
8,219,408
-
256,905
44,506
-
8,586,905
11,634,313
70,926,401
11,717,260
10,777,242
6,023,798
19,301,272
130,380,286
the commercial bank (P.S.Q.c.) i annual report 2017
126
Notes to the Consolidated
Financial Statements continued
6. OPERATING SEGMENTS (continued)
(b) By geography (continued)
Consolidated statement
of income
Year ended
31 december 2016
Net interest income
net Fee, commission and
other income
Net operating income
Staff cost
depreciation
amortization of intangible
assets
Impairment loss on
investment securities
net impairment loss on
loans and advances to
customers
Other expenses
profit before share of
results of associates and
a joint arrangement
Share of results of
associates and a joint
arrangement
Profit for the year before tax
Income tax expenses
Net profit for the year
Qatar
other GCC
countries
other
middle east
europe
north
america
rest of
the world
total
Figures in thousand Qatar riyals
2,122,466
(33,592)
528,620
(215,360)
8,112
(69,498)
2,340,748
944,906
3,067,372
(678,672)
(125,537)
(97,139)
55,367
21,775
-
-
175,941
704,561
(192,111)
(11,373)
19,934
(195,426)
-
-
-
(7,479)
(21,661)
(54,196)
-
(1,049,999)
(432,235)
(4,299)
-
(213,503)
(152,911)
27,904
36,016
-
-
-
(1,446)
29,445
(40,053)
(1,489)
(140)
-
-
1,253,497
3,594,245
(872,272)
(137,050)
(104,618)
(76,613)
-
-
-
(2,858)
(1,267,801)
(588,004)
-
690
-
-
662,129
(36,720)
127,184
(194,736)
34,570
(44,540)
547,887
4,861
666,990
-
666,990
(51,211)
(87,931)
-
(87,931)
-
127,184
(158)
127,026
-
(194,736)
-
(194,736)
-
34,570
-
34,570
-
(44,540)
-
(44,540)
(46,350)
501,537
(158)
501,379
the commercial bank (P.S.Q.c.) i annual report 2017
127
7.
FINANCIAL ASSETS AND LIABILITIES
(a) Accounting classifications and fair values
the table below sets out the carrying amounts and fair values of the Group’s financial assets and financial liabilities:
Fair value
through
income
statement
Loans and
receivables
(at amortised
cost)
Held-to-
maturity
Figures in thousand Qatar riyals
Available-
for-sale
Other
amortised
cost
Total
carrying
amount
Fair value
2017
Cash and balances
with central banks
Due from banks
derivative assets
loans and advances
to customers
Investment securities-
measured at fair value
derivative liabilities
due to banks
Customer deposits
Debt securities
Other borrowings
2016
Cash and balances with
central banks
Due from banks
derivative assets
loans and advances
to customers
Investment securities-
measured at fair value
Derivative liabilities
due to banks
Customer deposits
Debt securities
other borrowings
-
-
462,483
-
188,680
651,163
355,614
-
-
-
-
355,614
Fair value
through
income
statement
-
-
226,523
-
423,070
649,593
156,916
-
-
-
-
156,916
-
-
-
-
7,373,918
10,499,348
-
89,121,935
-
-
-
-
-
-
-
-
7,373,918
10,499,348
462,483
7,373,918
10,499,348
462,483
89,121,935
89,121,935
-
19,440,566
-
- 106,995,201 19,440,566
19,629,246
-
19,629,246
- 127,086,930 127,086,930
-
-
-
-
-
-
-
-
-
-
-
-
loans and
receivables
(at amortised
cost)
held-to-
maturity
-
-
-
13,515,872
-
77,633,333
-
11,604,890
9,303,365
-
- 112,057,460
355,614
13,515,872
77,633,333
11,604,890
9,303,365
355,614
13,515,872
77,633,333
11,782,538
9,303,365
112,413,074 112,590,722
Figures in thousand Qatar riyals
available-
for-sale
other
amortised
cost
total
carrying
amount
Fair value
-
-
-
-
-
-
-
-
-
-
-
-
6,420,566
19,302,001
-
77,797,597
-
-
-
-
-
103,520,164
14,954,713
14,954,713
-
-
-
-
-
-
6,420,566
19,302,001
226,523
6,420,566
19,302,001
226,523
77,797,597
77,797,597
15,377,783
119,124,470
15,377,783
119,124,470
-
-
-
-
-
-
-
-
-
-
-
-
-
11,634,313
70,926,401
11,717,260
10,777,242
105,055,216
156,916
11,634,313
70,926,401
11,717,260
10,777,242
105,212,132
156,916
11,634,313
70,926,401
12,051,692
10,777,242
105,546,564
the commercial bank (P.S.Q.c.) i annual report 2017
128
Notes to the Consolidated
Financial Statements continued
8. CASH AND BALANCES WITH CENTRAL BANKS
Cash
Cash reserve with central banks *
Other balances with central banks
Figures in thousand Qatar riyals
2016
2017
726,639
4,395,786
2,251,493
7,373,918
602,266
4,291,626
1,526,674
6,420,566
*the cash reserve with central banks is mandatory reserve not available for use in the Group’s day to day operations.
9. DUE FROM BANKS
Current accounts
placements
Loans to banks
10. LOANS AND ADVANCES TO CUSTOMERS
a) By type
Loans
Overdrafts
Bills discounted
Bankers acceptances
Deferred profit
allowance for impairment of loans and advances to customers
Net loans and advances to customers*
Figures in thousand Qatar riyals
2016
2017
1,760,666
6,268,824
2,469,858
10,499,348
1,085,901
13,423,046
4,793,054
19,302,001
Figures in thousand Qatar riyals
2016
2017
82,692,419
7,928,545
632,506
2,156,937
93,410,407
(14,109)
(4,274,363)
89,121,935
72,503,971
4,488,163
667,998
3,363,046
81,023,178
(19,517)
(3,206,064)
77,797,597
*The aggregate amount of non-performing loans and advances to customers amounted QAR 5,274 million which represents 5.65% of
total loans and advances to customers (2016: QAR 4,062 million 5.01% of total loans and advances to customers).
Allowance for impairment of loans and advances to customers includes QAR 549 million of interest in suspense (2016: QAR 445 million).
By internal business segment
Government and related agencies
Wholesale
Retail
net loans and advances to customers
Figures in thousand Qatar riyals
2016
2017
12,348,519
48,166,483
28,606,933
89,121,935
7,928,932
42,276,637
27,592,028
77,797,597
the commercial bank (P.S.Q.c.) i annual report 2017
129
10. LOANS AND ADVANCES TO CUSTOMERS (continued)
b) By sector
At 31 December 2017:
Loans
Overdrafts
Figures in thousand Qatar riyals
Government and related agencies
non-banking financial institutions
Industry
Commercial
Services
Contracting
Real estate
personal
Others
Less: Deferred profit
allowance for impairment of loans
and advances to customers
Net loans and advances to customers
at 31 december 2016:
Government and related agencies
Non-banking financial institutions
Industry
Commercial
Services
Contracting
Real Estate
Personal
Others
Less: Deferred profit
allowance for impairment of loans
and advances to customers
Net loans and advances to customers
7,348,152
2,347,076
8,329,504
5,637,966
21,855,330
4,921,300
24,262,392
7,210,031
780,668
82,692,419
5,000,367
76
21,059
275,875
471,829
377,230
359,274
1,370,432
52,402
7,928,544
Bills
discounted
-
37,853
12,863
120,646
256,022
161,881
-
43,012
229
632,506
Bankers
acceptances
-
-
10,846
223,107
755,054
1,167,092
174
-
665
2,156,938
Total
12,348,519
2,385,005
8,374,272
6,257,594
23,338,235
6,627,503
24,621,840
8,623,475
833,964
93,410,407
(14,109)
(4,274,363)
4,288,472
89,121,935
Figures in thousand Qatar riyals
loans
overdrafts
Bills
discounted
Bankers
acceptances
5,831,014
2,257,210
5,705,029
10,148,596
13,885,812
6,458,864
18,186,128
9,009,918
1,021,400
72,503,971
2,097,918
32,265
30,500
299,916
212,576
338,354
183,297
1,218,512
74,825
4,488,163
-
33,884
12,564
160,590
310,687
148,551
444
1,278
-
667,998
-
-
4,728
261,850
1,952,931
1,142,079
-
-
1,458
3,363,046
total
7,928,932
2,323,359
5,752,821
10,870,952
16,362,006
8,087,848
18,369,869
10,229,708
1,097,683
81,023,178
(19,517)
(3,206,064)
(3,225,581)
77,797,597
the commercial bank (P.S.Q.c.) i annual report 2017
130
Notes to the Consolidated
Financial Statements continued
10. LOANS AND ADVANCES TO CUSTOMERS (continued)
c) Movement in allowance for impairment of loans and advances to customers
Balance at 1 January
Allowance made during the year
Recoveries during the year
Net allowance for impairment during the year *
Written off / transferred during the year
Exchange differences
Balance at 31 December
Figures in thousand Qatar riyals
2016
2017
3,206,064
2,167,992
(364,497)
1,803,495
(701,577)
(33,619)
4,274,363
2,360,458
1,705,566
(253,309)
1,452,257
(504,759)
(101,892)
3,206,064
*this includes net interest suspended during the year Qar 106.7 million (2016: Qar 184.5 million) as per QCB regulations.
Further analysis is as follows:
Balance at 1 January 2017
Allowance made during the year
Recoveries during the year
Written off / transferred during the year
Exchange differences
Balance at 31 December 2017
Balance at 1 January 2016
Allowance made during the year
Recoveries during the year
Written off / transferred during the year
Exchange differences
Balance at 31 December 2016
Commercial
Bank
2,692,477
1,869,500
(237,180)
(575,667)
-
3,749,130
Abank
497,477
298,492
(123,575)
(125,910)
(33,619)
512,865
Commercial Bank
abank
1,850,106
1,340,134
(105,678)
(392,085)
-
2,692,477
498,541
359,544
(146,042)
(112,674)
(101,892)
497,477
Figures in thousand Qatar riyals
Other
subsidiaries
Total
3,206,064
2,167,992
(364,497)
(701,577)
(33,619)
4,274,363
16,110
-
(3,742)
-
-
12,368
Figures in thousand Qatar riyals
other
subsidiaries
11,811
5,888
(1,589)
-
-
16,110
total
2,360,458
1,705,566
(253,309)
(504,759)
(101,892)
3,206,064
the commercial bank (P.S.Q.c.) i annual report 2017
131
11.
INVESTMENT SECURITIES
Available-for-sale
Investment securities designated at fair value through profit or loss
Total
Figures in thousand Qatar riyals
2016
2017
19,440,566
188,680
19,629,246
14,954,713
423,070
15,377,783
The carrying value of investment securities pledged under repurchase agreements (REPO) is QAR 6,666 million (2016:QAR 3,793 million)
a) Available-for-sale
Quoted
Equities
State of Qatar debt securities
Debt and other securities*
Investment funds
Total
112,181
13,095,696
4,213,505
60,476
17,481,858
2017
Unquoted
151,248
1,681,420
71,096
54,944
1,958,708
Total
Quoted
263,429
14,777,116
4,284,601
115,420
19,440,566
247,790
2,293,530
4,257,935
107,309
6,906,564
Figures in thousand Qatar riyals
2016
unquoted
156,935
7,514,228
113,747
263,239
8,048,149
total
404,725
9,807,758
4,371,682
370,548
14,954,713
* Fixed rate securities and floating rate securities amounted to QAR 3,999 million and QAR 286 million respectively (2016: QAR 4,008
million and Qar 363 million respectively).
b)
Investment securities designated at fair value through profit or loss
debt securities
Total*
Figures in thousand Qatar riyals
2016
2017
188,680
188,680
423,070
423,070
*Fair value through profit or loss includes investments held for trading amounting to Qar 182 million as on 31 december 2017 (2016: Qar
365 million).
c) Movement in impairment loss on investment Available for sale - debt securities
Balance at 1 January
Allowance for impairment during the year
reversals during the year
Written off during the year
Total
Figures in thousand Qatar riyals
2016
2017
102,280
4,629
(3,454)
(36,400)
67,055
118,883
6,803
(15,634)
(7,772)
102,280
the Group has also recognised impairment loss for investments in equities and funds during the year amounting to Qar 41.86 million
(2016: QAR 69.8 million).
the commercial bank (P.S.Q.c.) i annual report 2017
132
Notes to the Consolidated
Financial Statements continued
12.
INVESTMENT IN ASSOCIATES AND A JOINT ARRANGEMENT
Balance at 1 January
Share of results -(note 22)
Cash dividend - (note 22)
Other movements
reclassified to asset held for sale- (note 13)
Balance at 31 December
Name of the Entity
Classification
2017
Amount
2016
Country
Activities
Figures in thousand Qatar riyals
2016
2017
4,300,647
147,876
(81,454)
8,189
(2,287,100)
2,088,158
4,423,172
(46,350)
(79,389)
3,214
-
4,300,647
Figures in thousand Qatar riyals
Ownership %
2016
2017
national Bank of
Oman SAOG (‘NBO’)
United Arab Bank PJSC
(‘UAB’)*
massoun Insurance
Services LLC
*refer to note 13
Associate
2,079,340
2,023,455
Oman
Banking
34.9%
34.9%
Associate
Joint venture
-
2,268,333
UAE
Banking
8,818
8,859
2,088,158 4,300,647
Qatar
Insurance brokerage
40%
50%
40%
50%
the summarised financial position and results of associates and a joint arrangement as at the end of reporting period are as follows:
total assets
Total liabilities
operating income
Net profit
Total comprehensive income
Share of results
Figures in thousand Qatar riyals
2016
2017
32,821,200
27,641,712
1,260,281
424,075
382,063
147,876
54,474,088
47,299,357
2,153,311
19,238
36,905
(46,350)
13. ASSET HELD FOR SALE
With respect to Group’s stake in one of its associate, UAB, the Group had agreed to grant a third party purchaser (the “Purchaser”) a 90
day period of exclusivity expired on 24 december 2017. during this period the parties will negotiate the terms of definitive transaction
documents’ pertaining to the potential purchase by the purchaser, subject to the satisfaction of certain conditions.the period has been
extended till 28 February 2018.
the commercial bank (P.S.Q.c.) i annual report 2017
133
14. PROPERTY AND EQUIPMENT
Cost
Balance at 1 January 2016
additions / transfers
Revaluation on land & buildings
disposals
Exchange differences
Balance at 31 December 2016
Balance at 1 January 2017
Additions / transfers
revaluation on land & buildings
Disposals
Exchange differences
Balance at 31 December 2017
Accumulated depreciation
Balance at 1 January 2016
Depreciation for the year
Revaluation on land & buildings
Disposals
exchange differences
Balance at 31 December 2016
Balance at 1 January 2017
Depreciation for the year
revaluation on land & buildings
Disposals
Exchange differences
Balance at 31 December 2017
Net carrying amounts
Balance at 31 December 2016
Balance at 31 December 2017
Land and
buildings improvements
Leasehold Furniture and
equipment
Motor
vehicles
Figures in thousand Qatar riyals
Capital
work in
progress
1,010,386
14,470
974,319
(2,118)
88
1,997,145
1,997,145
1,518
-
(193)
(11)
1,998,459
274,788
27,267
(290,475)
(620)
(2)
10,958
10,958
37,393
-
-
-
48,351
143,282
13,485
-
(10,388)
(9,675)
136,704
136,704
8,108
-
(6,008)
(3,091)
135,713
123,027
5,932
-
(8,548)
(6,128)
114,283
114,283
6,899
-
(5,977)
(1,881)
113,324
1,010,540
122,774
-
(1,321)
(16,460)
1,115,533
1,115,533
83,933
-
(9,520)
(5,142)
1,184,804
800,329
103,208
-
(1,056)
(12,220)
890,261
890,261
107,246
-
(8,206)
(3,793)
985,508
7,935
68
-
(3,416)
(27)
4,560
4,560
1,666
-
(1,364)
(37)
4,825
5,996
643
-
(3,393)
(30)
3,216
3,216
854
-
(745)
(31)
3,294
377,378
36,633
-
-
-
414,011
414,011
3,652
-
-
-
417,663
-
-
-
-
-
-
-
-
-
-
-
-
Total
2,549,521
187,430
974,319
(17,243)
(26,074)
3,667,953
3,667,953
98,877
-
(17,085)
(8,281)
3,741,464
1,204,140
137,050
(290,475)
(13,617)
(18,380)
1,018,718
1,018,718
152,392
-
(14,928)
(5,705)
1,150,477
1,986,187
1,950,108
22,421
22,389
225,272
199,296
1,344
1,531
414,011
417,663
2,649,235
2,590,987
the commercial bank (P.S.Q.c.) i annual report 2017
134
Notes to the Consolidated
Financial Statements continued
15. INTANGIBLE ASSETS
Goodwill
Brand
Customer
relationship
Core
deposit
Figures in thousand Qatar riyals
Internally
developed
software
325,824
-
-
-
(56,748)
269,076
269,076
-
-
-
(17,856)
251,220
-
-
-
49,800
-
49,800
49,800
-
-
-
-
49,800
96,391
-
6,281
-
(16,267)
86,405
86,405
6,722
-
-
(5,264)
87,863
50,665
4,168
-
-
(8,923)
45,910
45,910
3,982
-
-
(2,952)
46,940
276,238
-
-
-
3,057
279,295
279,295
-
-
-
7,184
286,479
73,788
36,894
-
-
-
110,682
110,682
36,894
-
-
-
147,576
74,315
-
-
-
(1,400)
72,915
72,915
-
-
-
963
73,878
16,646
8,323
-
-
-
24,969
24,969
8,323
-
-
-
33,292
18,029
-
6,070
-
(2,564)
21,535
21,535
7,751
-
-
(986)
28,300
11,319
5,433
-
-
(2,251)
14,501
14,501
6,411
-
-
(958)
19,954
Total
790,797
-
12,351
-
(73,922)
729,226
729,226
14,473
-
-
(15,959)
727,740
152,418
54,818
-
49,800
(11,174)
245,862
245,862
55,610
-
-
(3,910)
297,562
Cost
Balance at 1 January 2016
additions / transfers
acquisitions
disposals
Exchange differences
Balance at 31 December 2016
Balance at 1 January 2017
additions / transfers
acquisitions
disposals
Exchange differences
Balance at 31 December 2017
Amortisation and Impairment
Balance at 1 January 2016
Amortisation during the year
acquisitions
Impairment during the year
Exchange differences
Balance at 31 December 2016
Balance at 1 January 2017
Amortisation during the year
acquisitions
Impairment during the year
Exchange differences
Balance at 31 December 2017
Net carrying amounts
Balance at 31 December 2016
Balance at 31 December 2017
219,276
201,420
40,495
40,923
168,613
138,903
47,946
40,586
7,034
8,346
483,364
430,178
Impairment testing for CGU containing goodwill
For the purpose of impairment testing, goodwill is allocated to the Group’s CGU-ABank. A discount rate of 16.9% and a terminal growth rate
of 2.75 % were used to estimate the recoverable amount of ABank.
the recoverable amount for the CGu has been calculated based on the ‘Value in use method’, determined by discounting the future cash
flows expected to be generated from the continuing use of the CGu. the discount rate was a pre-tax measure based on the Government
Bonds10 year yield tl, adjusted for an equity market risk premium and equity beta.
Five years of cash flows are included in the discounted cash model. a long term growth rate into perpetuity has been determined as the
lower of the nominal Gdp rates for the country in which CGu operate and the long term compound annual profit before taxes, depreciation
and amortization growth rate estimated by the management. the key assumptions described above may change as economic and market
conditions change.
the commercial bank (P.S.Q.c.) i annual report 2017
135
15. INTANGIBLE ASSETS (continued)
No impairment loss is recognized in 2017 (2016: QAR 49.8 million) as the recoverable amount of this CGU was determined to be higher
than its carrying amount.
16. OTHER ASSETS
Interest receivable and accrued income
Prepaid expenses
Accounts receivable
Repossessed collateral*
positive fair value of derivatives (note 37)
Clearing cheques
others
Figures in thousand Qatar riyals
2016
2017
892,709
94,354
352,874
2,139,591
462,483
249,711
236,460
4,428,182
725,386
69,135
389,085
2,107,564
226,523
295,572
235,828
4,049,093
*this represents the value of the properties acquired in settlement of debts and subsequent additions, which have been stated at their
carrying value net of any allowance for impairment and credit enhancement. the estimated market values of these properties at the end
of the reporting period are not materially different from the carrying values.
17. DUE TO BANKS
Balances due to central banks
Current accounts
placements with banks
repurchase agreements with banks
18. CUSTOMER DEPOSITS
a) By type
Current and call deposits
Saving deposits
Time deposits
b) By sector
Government
Government and semi government agencies
Individuals
Corporate
Non-banking financial institutions
Figures in thousand Qatar riyals
2016
2017
281,625
811,754
6,570,486
5,852,007
13,515,872
1,083,548
488,216
7,588,404
2,474,145
11,634,313
Figures in thousand Qatar riyals
2016
2017
17,630,840
4,394,576
55,607,917
77,633,333
17,673,432
5,046,979
48,205,990
70,926,401
12,426,816
12,540,523
21,494,057
27,491,521
3,680,416
77,633,333
5,981,470
7,011,322
21,076,685
33,651,984
3,204,940
70,926,401
the commercial bank (P.S.Q.c.) i annual report 2017
136
Notes to the Consolidated
Financial Statements continued
19. DEBT SECURITIES
emtn unsecured programme – Senior unsecured notes *
Senior notes*
Subordinated Notes *
others#
Total
Figures in thousand Qatar riyals
2016
2017
5,540,548
1,130,570
3,431,969
1,501,803
11,604,890
7,238,665
1,053,348
3,425,247
-
11,717,260
* the following table provides the breakdown of the debt Securities as at close of 31 december 2017.
Instrument
Issuer
Issued amount
Issued on Maturity Coupon
EMTN - Senior notes
Subordinate notes
Senior Notes
Senior Notes
Senior Notes
CBQ Finance Ltd
CBQ Finance Ltd
CBQ Finance Ltd
CBQ Finance Ltd
ABank
ABank
ABank
ABank
ABank
EUR 25 million*
USD 750 million*
USD 750 million*
USD 600 million*
USD 297 million
USD 50 million
USD 250 million**
TL 107 million
TL 128 million
Nov-17
Jun-14
Jun-16
Nov-09
Apr-16
Jun-15
Jul-14
Aug-17
Nov-17
Nov-18
Jun-19
Jun-21
Nov-19
Apr-26
Jun-25
Jul-19
Jan-18
Apr-18
Fixed Rate 0.12%
Fixed Rate 2.875%
Fixed Rate 3.25%
Fixed Rate 7.50%
Fixed Rate 8.75%
Floating Rate LIBOR +6.00%
Fixed Rate 3.13%
Fixed Rate 11.00%
Fixed Rate 10.90%
* issued for and Guaranteed by the Bank
** Guaranteed by the Bank
# others include Commercial papers issued by the bank. these mature within 1 year.
movements in debt securities are analysed as follows:
Balance at beginning of the year
Additions
Repayments
Amortisation of discount and transaction cost
other movement
Exchange difference
Balance at 31 December
the table below shows the maturity profile of debt securities:
Up to 1 year
Between 1 and 3 years
Over 3 years
Balance at 31 December
Figures in thousand Qatar riyals
2016
2017
11,717,260
3,845,587
(3,968,148)
19,776
-
(9,585)
11,604,890
8,449,337
4,143,999
(178,298)
17,244
(475,131)
(239,891)
11,717,260
Figures in thousand Qatar riyals
2016
2017
1,837,344
5,801,290
3,966,256
11,604,890
1,968,540
4,887,784
4,860,936
11,717,260
the commercial bank (P.S.Q.c.) i annual report 2017
137
Figures in thousand Qatar riyals
2016
2017
5,065,654
4,237,711
9,303,365
6,473,878
4,303,364
10,777,242
Figures in thousand Qatar riyals
2016
2017
10,777,242
4,161,023
(5,414,984)
(37,291)
10,556
-
(193,181)
9,303,365
12,074,417
4,158,709
(5,355,178)
(37,291)
11,338
475,131
(549,884)
10,777,242
Figures in thousand Qatar riyals
2016
2017
7,029,324
935,090
1,338,951
9,303,365
4,997,563
4,636,171
1,143,508
10,777,242
20. OTHER BORROWINGS
Syndicated loans
others *
Total
*This includes the other borrowings of Abank QAR 3,033 million (2016: QAR 3,298 million).
movements in other borrowings are as follows:
Balance at beginning of the year
Additions
Repayments
Fair value adjustment on consolidation of ABank
amortisation of discount and transaction cost
other movement
Exchange difference
Balance at 31 December
the table below shows the maturity profile of other borrowings:
Up to 1 year
Between 1 and 3 years
Over 3 years
Balance at 31 December
the commercial bank (P.S.Q.c.) i annual report 2017
138
Notes to the Consolidated
Financial Statements continued
21. OTHER LIABILITIES
Interest payable
accrued expense payable
Other provisions (note i)
Negative fair value of derivatives (note 37)
Unearned income
Cash margins
Accounts payable
directors’ remuneration and meeting attendance fee
Social & sports activities support fund (“Daam”) (note 24)
Dividend payable
managers’ cheque and payment order
unclaimed balances
Due for trade acceptances
deferred tax liabilities
Income tax payable
Others
Total
(i) Other provisions
Balance at 1 January
Provision made during the year (note 32)
earnings of the fund
Provident fund – staff contribution
transferred to state retirement fund authority
Payment during the year
exchange difference
Balance at 31 December
Figures in thousand Qatar riyals
2016
2017
462,071
306,682
225,099
355,614
209,891
520,427
267,194
18,500
15,091
16,009
38,255
43,087
2,156,937
33,822
24,465
676,929
5,370,073
454,845
278,821
235,658
156,916
143,588
366,526
444,101
18,500
12,534
18,389
56,807
14,160
3,363,046
54,335
22,770
382,802
6,023,798
Provident fund
(a)
Pension fund
(b)
Figures in thousand Qatar riyals
total
2016
Total
2017
234,655
16,086
6,051
7,312
-
(39,789)
(526)
223,789
1,003
11,154
-
5,923
(16,770)
-
-
1,310
235,658
27,240
6,051
13,235
(16,770)
(39,789)
(526)
225,099
210,006
72,913
5,885
6,503
(17,563)
(40,461)
(1,625)
235,658
(a) the provident fund includes the Group’s obligations for end of service benefits to expatriate staff per Qatar labour law and the
employment contracts.
(b) pension fund contributions in respect of the national staff are paid to the State administered retirement fund at the end of each month.
the Group has no further payment obligations once the contributions have been paid. the contributions are recognized when they
are due.
the commercial bank (P.S.Q.c.) i annual report 2017
139
22. EQUITY
(a) Share capital
The issued, subscribed and paid up share capital of the Bank is QAR 4,047,253,750 (2016: QAR 3,266,292,100) divided into 404,725,375
(2016: QAR 326,629,210) ordinary shares of QAR 10 each.
In thousands of shares
On issue at the beginning of the reporting period
right issued
Bonus shares issued
In issue at 31 December
2017
2016
326,629
58,823
19,273
404,725
326,629
-
-
326,629
the extraordinary General assembly of the Bank was held on 16 november 2016 to resolve the increase of issued share capital of the
Bank from QAR 3,266,292,100 to QAR 3,854,527,390 by way of offering 58,823,529 new ordinary shares for subscription at a price of
Qar 25.50 (twenty five Qatari riyals and fifty dirhams) each (including premium per share of Qar 15.5) (the rights Issue). this resulted in
an increase in the share capital by QAR 588.24 million and legal reserve by QAR 911.76 million (share premium) and in total by QAR 1,500
million. The Rights Issue exercise was closed on 25 January 2017.
the holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
shareholders’ annual/extra-ordinary General meeting of the Bank.
(b) Legal reserve
The legal reserve of Commercial Bank and Abank are QAR 9,652 million (2016: QAR 8,740 million) and QAR 86 million (2016: QAR 85
million) respectively.
In accordance with Qatar Central Bank Law No 13 of 2012, 10% of the net profit of the Group for the year is required to be transferred to
legal reserve. Share premium collected from the issuance of new shares also transferred to legal reserve. transfer to legal reserve from
net profit is mandatory until the legal reserve equals 100% of the paid up capital. This reserve is not available for distribution except in
circumstances specified in Qatar Commercial Companies law no 11 of 2015 and is subject to pre-approval from QCB.
In accordance with the Turkish Commercial code, an entity is required to transfer 5% of net profit until the legal reserve is equal to 20% of
issued and fully paid up share capital. Rate for transfer to legal reserve goes up to 10% of net profit allocated for distribution excluding the
first 5% of the allocated profit. Share premium and proceeds from cancelled shares, if any net of related expenses are also transferred to
legal reserve.
(c) General reserve
as per the Bank’s articles of association, the general reserve may only be used in accordance with a resolution from the General assembly
upon the Board of directors recommendation and after obtaining Qatar Central Bank approval.
(d) Risk reserve
In accordance with QCB regulations, a risk reserve should be maintained created to cover contingencies on both the public and private
sector financing assets, with a minimum requirement of 2.50% of the total loans and advances of the Group inside and outside Qatar after
the exclusion of the specific provisions and interest in suspense. the finance provided to/or secured by the ministry of Finance or finance
against cash guarantees is excluded from the gross direct finance. during the year, the net transfer as approved by QCB was Qar 88 million
(2016: Qar 15 million).
(e) Fair value reserve
the fair value reserve arises from the revaluation of the available-for-sale investments and change of post acquisition fair value reserve of
its associates and a joint arrangement.
(f) Treasury shares
treasury shares represent ordinary shares of the Commercial Bank (p.S.Q.C) with nominal value of Qar 10 each. these shares are carried
at cost of Qar 27.47 each. treasury shares are presented as a deduction from equity.
the commercial bank (P.S.Q.c.) i annual report 2017
140
Notes to the Consolidated
Financial Statements continued
22. EQUITY (continued)
(g) Foreign currency translation reserve
the translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of foreign
operations.
(h) Other reserves
this includes the Group’s share of profit from investment in associates and a joint arrangement and non-distributable profit of subsidiaries,
net of cash dividend received, as required by QCB regulations as follows:
Balance as at 1 January
Share of result of associates and a joint arrangement (note 12)
Dividend from associates and a joint arrangement (note 12)
transferred from retained earning and other movement
net movement
Balance as at 31 December
Figures in thousand Qatar riyals
2016
2017
997,767
147,876
(81,454)
66,422
-
66,422
1,064,189
1,139,887
(46,350)
(79,389)
(125,739)
(16,381)
(142,120)
997,767
(i) Proposed dividend
The Board of Directors has proposed a cash dividend of 10% for the year 2017 (2016: 5% bonus shares). This proposal is subject to
approval at the annual General assembly.
(j) Dividends
A bonus share issue of 5% or 1 bonus share for every 20 shares held for the year 2016 (2015: 30% cash dividend), was approved at the
annual General assembly held on 4 april 2017 and distributed to shareholders.
(k) Revaluation reserve
this represents the surplus on revaluation of land and buildings that are used in Group’s operations and is not avaliable for distribution until
the related assets have been disposed off or used.
(l)
Instruments eligible for additional capital
In december 2013 the Bank raised tier 1 capital by issuing unsecured perpetual non-cumulative unlisted tier 1 notes for an amount of
QAR 2 billion. The distributions (i.e. coupon payments) are discretionary and non-cumulative and priced at a fixed rate of 6% per annum,
payable annually until the first call date (i.e. 30 December 2019), and thereafter to be reset at a prevailing sixth year mid-swap rate plus
margin every sixth year.
In February 2016 the Bank raised additional tier 1 capital by issuing unsecured perpetual non-cumulative unlisted tier 1 notes for an amount
of QAR 2 billion. The distributions (i.e. coupon payments) are discretionary and non-cumulative and priced at a fixed rate of 6% per annum,
payable annually until the first call date (i.e. 27 February 2022), and thereafter to be reset at a prevailing sixth year mid-swap rate plus
margin every sixth year.
the notes are ranked junior to the Bank’s existing unsubordinated obligations including existing subordinated debt and depositors, pari
passu to all current and future subordinated obligations and senior to the ordinary shares issued by the Bank.
the notes have no fixed redemption date and the Bank can only redeem the notes in the limited circumstance as mentioned in the term
sheet i.e. regulatory / tax redemption and other general redemption conditions solely at the Bank’s discretion. the Bank might be required
to write-off the proposed Capital issue, if a “loss absorption” event is triggered and the Bank has non-discretionary obligation to deliver
cash or financial assets. these notes have been classified under equity.
the commercial bank (P.S.Q.c.) i annual report 2017
141
23. OTHER COMPREHENSIVE INCOME
available-for-sale investments:
Positive change in fair value
negative change in fair value
Net change in fair value
net amount transferred to profit or loss*
167,125
Foreign currency translation differences for foreign operation
Share of other comprehensive income of associates and a joint arrangement
Revaluation reserve on land and buildings (net)
Total other comprehensive income
Figures in thousand Qatar riyals
2016
2017
261,900
(48,163)
213,737
(46,612)
(173,843)
(124,119)
8,190
-
51,196
135,472
(247,764)
(112,292)
(61,551)
(262,104)
11,612
1,264,794
840,459
*net amount transferred to profit or loss includes a positive change in fair value of Qar 50 million (2016: Qar 66 million) and a negative
change in fair value of Qar 4 million (2016: Qar 4 million).
24. CONTRIBUTION TO SOCIAL AND SPORTS ACTIVITIES SUPPORT FUND (“DAAM”)
pursuant to law no. 13 of 2008, the Bank made an appropriation of Qar 15.1 million (2016: Qar 12.5 million) from retained earnings for its
contribution to the Social and Sports Activities Support Fund (“Daam”) of Qatar. This amount represents 2.5% of the net profit of the Group
for the year ended 31 december 2017.
25. INTEREST INCOME
Loans and advances to customers
Debt securities
Amounts deposited with banks
Amounts deposited with central banks
26. INTEREST EXPENSE
Customer deposits
debt securities
Other borrowings
Amount deposited by central banks and other banks
27. FEE AND COMMISSION INCOME
Loans and advances
Credit and debit card fees
Indirect credit facilities
Banking and other operations
Investment activities for customers
Figures in thousand Qatar riyals
2016
2017
4,163,011
670,313
277,739
27,858
5,138,921
3,699,520
597,308
249,776
15,985
4,562,589
Figures in thousand Qatar riyals
2016
2017
1,689,441
436,558
293,660
200,962
2,620,621
1,395,747
425,682
282,256
118,156
2,221,841
Figures in thousand Qatar riyals
2016
2017
314,412
406,628
151,380
113,750
43,163
1,029,333
379,651
371,381
148,938
95,489
45,697
1,041,156
the commercial bank (P.S.Q.c.) i annual report 2017
142
Notes to the Consolidated
Financial Statements continued
28. FEE AND COMMISSION EXPENSE
Credit and debit card fees
Brokerage services
others
29. NET FOREIGN EXCHANGE GAIN
dealing in foreign currencies & revaluation of spot assets
30. INCOME FROM INVESTMENT SECURITIES
Net gain on disposal of available-for-sale securities
Dividend income
loss on investment securities at fair value through income statement
31. OTHER INCOME
rental and other income
32. STAFF COSTS
Salary and allowances
health care and medical insurance expenses
Staff end of services and pension fund contribution (note 21 (i))
Training and education
33. OTHER EXPENSES
Marketing and advertisement
Professional fees
Communication, utilities and insurance
Board of directors’ remuneration
occupancy, It consumables and maintenance
Travel and related costs
Printing and stationery
Outsourcing service costs
others
Figures in thousand Qatar riyals
2016
2017
245,560
3,344
60,081
308,985
234,424
9,753
60,336
304,513
Figures in thousand Qatar riyals
2016
2017
162,641
245,314
Figures in thousand Qatar riyals
2016
2017
39,339
11,986
(2,635)
48,690
152,433
16,969
(6,383)
163,019
Figures in thousand Qatar riyals
2016
2017
79,296
92,119
Figures in thousand Qatar riyals
2016
2017
664,902
17,132
27,240
4,198
713,472
772,236
20,863
72,913
6,260
872,272
Figures in thousand Qatar riyals
2016
2017
32,126
44,509
59,430
18,500
103,005
1,970
8,185
98,830
37,038
403,593
59,143
132,884
63,894
18,500
133,657
1,794
9,697
109,022
43,011
571,602
the commercial bank (P.S.Q.c.) i annual report 2017
143
34. EARNINGS PER SHARE
earnings per share of the Bank is calculated by dividing profit for the year attributable to the equity holders of the Bank by the weighted
average number of ordinary shares in issue during the year:
profit for the year attributable to the equity holders of the Bank
less: dividend on instruments eligible for additional capital
profit for epS calculation
Weighted average number of outstanding ordinary shares in thousands
Earnings per share (QAR)
the weighted average number of ordinary shares in thousands have been calculated as follows:
Qualifying ordinary shares at the beginning of the period
Effect of bonus share issue
Effect of right issue
Weighted average number of ordinary shares for the period
35. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
a) Contingent liabilities
Unutilized credit facilities
Guarantees
letters of credit
Total
b) Capital commitments
Total
Figures in thousand Qatar riyals
2016
2017
603,648
(240,000)
363,648
402,066
0.90
500,750
(220,000)
280,750
358,499
0.78
Figures in thousand Qatar riyals
2016
2017
326,629
19,273
56,164
402,066
326,629
19,273
12,597
358,499
Figures in thousand Qatar riyals
2016
2017
5,948,621
20,823,314
2,700,146
29,472,081
6,175,191
21,644,329
2,505,758
30,325,278
178,472
168,074
Unused facilities
Commitments to extend credit represent contractual commitments to make loans and revolving credits. the total contractual amounts do
not necessarily represent future cash requirements, since commitments may expire without being drawn upon.
Guarantees and Letters of credit
Guarantees and letters of credit commit the group to make payments on behalf of customers in the event of a specific event. Guarantees
and standby letters of credit carry the same credit risk as loans.
Lease commitments
the Group leases a number of branches and office premises under operating leases. lease rentals are payable as follows:
Figures in thousand Qatar riyals
2016
2017
Less than one year
Between one and five years
More than five years
5,967
22,077
1,299
29,343
4,080
27,938
1,269
33,287
the commercial bank (P.S.Q.c.) i annual report 2017
144
Notes to the Consolidated
Financial Statements continued
36 CASH AND CASH EQUIVALENTS
Cash and balances with central banks *
Due from banks up to 90 days
*Cash and balances with central banks exclude the mandatory cash reserve.
37. DERIVATIVES
Figures in thousand Qatar riyals
2016
2017
2,978,132
7,343,303
10,321,435
2,128,940
12,186,926
14,315,866
Positive
fair value
Negative
fair value
Notional / expected amount by term to maturity
1-5
years
within
3 months
3 - 12
months
Notional
amount
More than
5 years
Figures in thousand Qatar riyals
At 31 December 2017:
Derivatives held for
trading:
Interest rate swaps
Forward foreign exchange
contracts and others
Derivatives held for
fair value hedges:
Interest rate swaps
Total
at 31 december 2016:
derivatives held for
trading:
Interest rate swaps
Forward foreign exchange
contracts and others
derivatives held for
fair value hedges:
Interest rate swaps
Total
282,479
174,367
7,888,900
68,185
251,668
4,036,997
3,532,050
178,437
160,427
35,902,206
22,337,907
7,410,907
6,019,374
134,018
1,567
462,483
20,820
-
3,090,986
355,614 46,882,092 22,406,092
-
7,662,575
105,646
10,162,017
2,985,340
6,651,408
positive
fair value
negative
fair value
notional
amount
within
3 months
3 - 12
months
1-5
years
more than
5 years
notional / expected amount by term to maturity
Figures in thousand Qatar riyals
156,602
73,291
4,596,153
342,813
447,315
2,178,675
1,627,350
69,921
72,491
36,699,867
23,205,306
6,901,949
5,590,121
1,002,491
-
226,523
11,134
156,916
1,500,310
42,796,330
113,155
23,661,274
-
7,349,264
113,155
7,881,951
1,274,000
3,903,841
the bank maintains strict control limits on net open derivative positions, i.e. the difference between purchase and sale contracts, by both
amount and term. at any one time the amount subject to credit risk is limited to the current fair value of instruments that are favourable to
the bank (i.e. assets) which in relation to derivatives is only a small fraction of the contract or notional values used to express the volume of
instruments outstanding. this credit risk exposure is managed as part of the overall lending limits with customers, together with potential
exposures from market movements. Collateral or other security is not usually obtained for credit risk exposures on these instruments,
except where the bank requires margin deposits from counter-parties.
the commercial bank (P.S.Q.c.) i annual report 2017
145
38. FUND MANAGEMENT
as at the end of the reporting date, the Group holds Qar 314 million (2016: Qar 286 million) worth of international investment securities on
behalf of its customers. out of this amount, investment securities with a value of Qar 258 million (2016: Qar 223 million) are held with an
international custody and settlement house. the remaining investment securities are held with the financial institutions through whom the
securities were purchased. these financial institutions are industry leaders in their respective fields. the Group has established maximum
limits for such holding with each financial institution according to its risk management policy
39. RELATED PARTIES
the Group carries out various transactions with subsidiaries, associates and joint arrangement companies, members of the Board of
directors and the executive management or companies in which they have significant interest or any other parties of important influence
in the Group’s financial or operations decisions. the balances at the year end with these accounts were as follows:
Interest and fee income
Interest paid on deposits accounts of board members
Loans, advances and financing activities (a)
Board members of the bank
-
- Deposits
- Contingent liabilities and other commitments
-
-
- remuneration
Associates and joint arrangement companies
Due from banks
due to banks
deposits
Contingent liabilities
Interest earned from associates
-
-
Interest paid to associates
Senior management of the bank
- Remuneration and other benefits
-
loans and advances
Figures in thousand Qatar riyals
2016
2017
2,712,220
933,329
110,139
25,625
12,433
18,500
91,000
31,353
10,663
766,360
3,049
2,424
46,925
5,286
2,246,419
545,357
111,807
9,441
5,873
18,500
436,996
2,625
10,327
780,153
2,583
440
55,920
5,481
(a) a significant portion of the loans, advances and financing activities’ balance at 31 december 2017 and 31 december 2016 with the
members of the Board and the companies in which they have significant influence are secured against tangible collateral or personal
guarantees. moreover, the loans, advances and financing activities’ are performing satisfactorily honouring all obligations.
the commercial bank (P.S.Q.c.) i annual report 2017
146
Notes to the Consolidated
Financial Statements continued
40. CASH FLOW MOVEMENT IN LIABILITIES AND EQUITY
Additional disclosure for IAS 7
Cash Flow statement on liabilities and equity arising from Financing activities
Liabilities
Debt
Securities
11,717,260
Other
Borrowings
10,777,242
Equity
Legal
Reserve
8,828,240
Share Capital
3,266,292
3,845,587
4,161,023
(3,968,148)
(5,414,984)
19,776
-
(9,585)
-
-
-
-
-
-
-
10,556
(37,291)
(193,181)
-
-
-
-
-
-
-
-
-
-
-
-
588,235
192,727
-
-
-
-
-
-
-
-
-
-
911,764
-
-
2,062
-
-
-
Figures in thousand Qatar riyals
Treasury
Shares
-
Retained
Earnings
594,980
-
-
-
-
-
-
-
-
-
-
-
-
-
(179,507)
-
(321,513)
-
-
(192,727)
603,648
(2,062)
(88,100)
-
-
Total
35,184,014
8,006,610
(9,383,132)
30,332
(358,804)
(202,766)
1,499,999
-
603,648
-
(88,100)
-
(179,507)
11,604,890 9,303,365
4,047,254 9,742,066
(179,507)
594,226
35,112,294
Balance at 1 January 2017
proceeds from issue of
debt securities/borrowings
repayment of debt
securities/borrowings
amortization of discount
and transaction costs on
securities/other borrowings
Other movements
Exchange differences
Proceeds from rights issue
Bonus share issue
profit for the year
transfer to legal reserve
transfer to risk reserve
dividend paid
Treasury shares
Balance at
31 December 2017
41. COMPARATIVES
the comparative figures have been reclassified where necessary to preserve consistency with the current period. however, such
reclassification did not have any effect on the consolidated net profit or equity for the comparative period
Supplementary Information -
Parent
a. Statement of Financial Position – Parent
as at 31 december
ASSETS
Cash and balances with central bank
Due from banks
Loans and advances to customers
Investment securities
Investment in associates and a joint arrangement and subsidiaries
asset held for sale
Property and equipment
other assets
TOTAL ASSETS
LIABILITIES
Due to banks
Customer deposits
Debt securities
Other borrowings
Other liabilities
TOTAL LIABILITIES
EQUITY
Share capital
Legal reserve
General reserve
risk reserve
Fair value reserves
Treasury shares
Revaluation reserve
Retained earnings
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE BANK
Instrument eligible for additional capital
TOTAL EQUITY
the commercial bank (P.S.Q.c.) i annual report 2017
147
Figures in thousand Qatar riyals
2016
2017
5,182,523
10,252,481
75,481,794
17,173,445
4,257,008
2,184,802
2,554,001
3,502,271
120,588,325
12,576,417
67,561,058
9,217,163
5,438,849
4,646,300
99,439,787
4,047,254
9,652,129
26,500
1,573,600
15,430
(179,507)
1,264,794
748,338
17,148,538
4,000,000
21,148,538
4,396,286
18,648,899
65,910,284
12,987,755
6,530,129
-
2,611,494
3,226,727
114,311,574
10,434,092
62,759,898
9,409,101
6,684,951
5,459,343
94,747,385
3,266,292
8,740,365
26,500
1,502,500
(29,592)
-
1,264,794
793,330
15,564,189
4,000,000
19,564,189
TOTAL LIABILITIES AND EQUITY
120,588,325
114,311,574
the commercial bank (P.S.Q.c.) i annual report 2017
148
Supplementary Information -
Parent continued
b.
Income Statement – Parent
For the year ended 31 december
Interest income
Interest expense
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Foreign exchange gain
Income from investment securities
Other operating income
Net operating income
Staff costs
depreciation
Amortization and impairment of intangible assets
Impairment loss on investment securities
Net impairment loss on loans and advances to customers
Other expenses
Profit for the year
Figures in thousand Qatar riyals
2016
2017
3,737,021
(1,715,729)
2,021,292
894,560
(273,587)
620,973
213,360
58,309
76,975
2,990,909
(542,469)
(141,080)
(47,339)
(46,484)
(1,525,644)
(291,946)
395,947
3,276,847
(1,349,564)
1,927,283
897,134
(259,397)
637,737
196,771
131,713
96,125
2,989,629
(672,086)
(125,537)
(97,139)
(76,613)
(1,049,999)
(423,433)
544,822
www.cbq.qa
Commercial Bank was incorporated in 1974, as
Qatar’s first private sector bank. Today, we offer
a complete range of banking services, including:
current and savings accounts, loans, credit cards,
insurance, brokerage and investment services.
We are committed to delivering excellent service
and innovation that makes banking easy and
gives you greater flexibility over the way you
.manage your money
).The Commercial Bank )P.S.Q.C
PO Box 3232
Doha, State of Qatar