Embracing Challenges
Navigating Innovation
2019
Annual Report
His Highness
Sheikh Tamim Bin Hamad Al Thani
Amir of the State of Qatar
His Highness
Sheikh Hamad Bin Khalifa Al Thani
Father Amir
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 2019
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
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169
Towards a Promising Future
Commercial Bank remains firmly focused on building a promising future for the State
of Qatar. Supporting Qatar’s National Vision 2030, we work to strengthen our nation’s
human, social, economic and environmental development to create a prosperous and
sustainable economy for many generations to come.
As part of our transformation change in terms of digitization, we are committed towards
developing and providing innovative banking products and services which enhance the
customer experience.
Living up to our belief that ‘everything is possible’, Commercial Bank continued to work
together in 2019 as one team to deliver on our five-year strategic plan and achieve
sustainable growth. The foundation of our strategic plan with the vision to be the ‘Best
Bank in Qatar’ are the Five Cs of Commercial Bank:
• Corporate Earnings Quality
• Creativity and Innovation
• Compliance
We are living up to each of these Five Cs by taking real action to achieve growth in the
present and position Commercial Bank for increasingly strong performance in the coming
years as we continue our transformation journey.
• Client Experience
• Culture
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, 173 ATMs and 7 cheque
book printing machines, and we also own and
operate the exclusive ‘Diners Club’ franchise
in Qatar and Turkey. 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 bonds issuances
are listed on the Irish Stock Exchange and the
Swiss Exchange (SIX).
Expanding its geographical footprint,
Commercial Bank is 100% owner of Alternatif
Bank in Turkey and has strategic partnerships
with the National Bank of Oman (S.A.O.G.) and
United Arab Bank (P.J.S.C.).
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 our alliance markets.
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 147.5 billion as at 31
December 2019 and a capital adequacy ratio of
16.4%. The Bank enjoys strong credit ratings of
(A3) 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.
6
CB Global Trading Limited. A fully owned
subsidiary incorporated in Cayman Islands, an
issuing vehicle for Derivatives.
CB 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.
United Arab Bank (P.J.S.C.) An associate entity
that operates through 11 conventional branches
in the United Arab Emirates.
Massoun Insurance Services (L.L.C.) A joint
arrangement entity that provides tailored
corporate and personal insurance products to
the Bank’s customers.
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
Alternatif Bank A fully owned subsidiary in
Turkey that operates through a network of 48
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
incorporated in Bermuda that owns an exclusive
‘Diners Club’ franchise in Turkey.
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.
7
Our Roots, Our Pride
Our Roots, Our Pride
Since day one, we have always been
holding on to our roots. Today, more than
ever, we continue operating as a Qatari
bank that takes pride in our country of
origin. In the course of time, not only has
Commercial Bank proven to be a Qatari
bank, but also the nation’s partner. Hand
in hand, we have celebrated, faced,
resisted and overcome for the sake of our
country and people. We are proud of our
accomplishments and to show the world
that together we keep on going above and
beyond.
Business at a Glance
Our voyages
1974 Commercial Bank is incorporated as Qatar’s
first private sector bank
1975 The Bank begins operations under a
management services contract with Chase
Manhattan Bank
1981 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 Global Depository
Receipts on the London Stock Exchange
2009 Commercial Bank Plaza, the new headquarters
of Commercial Bank, is opened on 13 May 2009
by H. E. Sheikh Hamad bin Jassim bin Jaber Al-
Thani, Prime Minister and Minister for Foreign
Affairs of Qatar
10
2011
Incorporates Commercial Bank Investment
Services (re-branded to Commercial Bank
Financial Services)
2013 Commercial Bank acquires 74.24% shareholding
in Alternatif Bank 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 Alternatif Bank
2017 Commercial Bank incorporates CB Innovation
Services (L.L.C.), a management operation
services captive entity that has successfully on-
shored previously outsourced activities
2018 Commercial Bank receives ‘Best Bank in Qatar’
award from Global Finance, ‘Best Remittance
Service’ and ‘Best Cash Management Bank’ in
the Middle East Awards from the Asian Banker
2019 Commercial Bank embraces a new era of
digitization by launching ‘CB Fawri’, ‘CB Wallet’,
and ‘SWIFT GPI’. Commercial Bank successfully
upgrades its Mobile App and widens its digital
infrastructure
11
Forward Looking
Statements
Net
Profit
QAR 2,021 million
Earnings
per Share
QAR 0.44
Loans and
Advances
QAR 88.0 bn
Customer
Deposits
QAR 76.3 bn
Total
Assets
QAR 147.5 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 are made in the context of the time
of publication of this report. Commercial Bank does
not undertake to update forward looking statements to
reflect any changes in Commercial Bank’s expectations
with regard to 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.
NET PROFIT (QAR MILLION)
2,021
12
Investment &
Dividend Income
Other Income
3% 2%
6%
Foreign Exchange
Income
Net Fee
Income
21%
Net Interest
Income
68%
Net Operating
Income
13
Other Liabilities
Other Borrowed
Funds
4%
14%
52%
Customer
Deposits
Shareholders’
Funds
15%
Funding
Mix
15%
Due to Banks and
Financial Institutions
Other Reserves
Risk Reserve
Retained Earnings
4%
6%
8%
45%
Legal
Reserve
Additional
Tier 1 Note
18%
Shareholders’
Equity
19%
Share Capital
14
Contracting
Other
Personal
1%
4%
7%
28%
Services
Industry
9%
Commercial
13%
Loans &
Advances
17%
Government
21%
Real Estate
Investments in
Associates
Other Assets
Loans & Advances
3%
7%
60%
Liquid Assets
12%
Investments
Securities
18%
Total
Assets
15
Financial Highlights
In QAR million, except per share
amounts and as stated otherwise
Net interest income
Net operating income
Net profit
Total assets
2019
2,963
2018
2,482
2017
2,518
2016
2,341
2015
2,534
4,347
3,508
3,529
3,578
3,949
2,021
1,674
604
501
1,434
147,536
134,928
138,449
130,380
123,421
Lending to customers
88,009
84,642
89,122
77,798
76,601
Basic/diluted earnings per share in QAR*
0.44
0.35
0.09
0.08
0.39
Dividends declared per ordinary share
including bonus shares in QAR*
Closing market price per ordinary share
in QAR (at year end)*
0.20
0.15
0.10
0.05
0.30
4.70
3.94
2.89
3.25
4.59
Book value per ordinary share in QAR*
5.38
4.91
5.25
5.91
5.30
Long-term debt (at year end)
21,568
24,451
20,908
22,495
20,523
Shareholders’ equity (at year end)
21,756
19,856
21,022
19,301
17,299
Return on average shareholders’ equity
Return on average assets
Capital adequacy ratio
9.7%
1.4%
16.4%
8.2%
1.2%
15.5%
3.0%
0.4%
16.1%
2.7%
0.4%
15.2%
8.2%
1.2%
13.5%
Full-time employees (at year end)
2,320 2,270
2,251
2,138
2,286
* 2015-2018 restated to reflect share split from QAR 10 to QAR 1 as per QFMA regulations
16
Key Highlights
20.7%
NET PROFIT OF
QAR 2,021 MILLION,
UP BY 20.7%
23.9 %
NET OPERATING
INCOME OF QAR 4,347 MILLION,
UP BY 23.9%
Other key financial highlights
• Cost to income ratio of 28.3%, reduced
• Best ‘Cash Management Bank’ in Qatar
from 33.4%.
• Net provisions QAR 654 million, down by
21.8%, NPL ratio reduced from 5.6% to
4.9% and coverage improved from 78.6%
to 82.1%.
• Total assets of QAR 147.5 billion, up by 9.3%.
• CET1 improved from 10.5% to 11.1% and total
CAR improved from 15.5% to 16.4% .
• Customer loans and advances of QAR 88.0
billion, up 4.0% led by growth in Government
and Public Sector.
award for the third year in a row, and “Best
Transaction Banking Service” in Qatar from
“The Asian Banker”.
•
‘Best Retail Bank’ in Qatar award for the
third year in a row and “Financial Technology
Innovation Award 2019” for the 60 Seconds
Online Remittance service and digital
innovations.
• “Best Corporate Governance” in Qatar 2019
award by World Finance.
17
Towards a Brighter Future
Towards a Brighter Future
In 2016 we started on our corporate
strategic path built on the Five Cs. In
2019 we moved forward with confidence,
achieving success, earning prestigious
awards and introducing innovative
technologies that play a vital role in
enhancing our customers’ experience. All
these accomplishments have paved the
way for a promising future.
Chairman’s Message
Abdulla Bin Ali Bin Jabor Al Thani
Chairman
On behalf of the Board of Directors, I am pleased to
present Commercial Bank’s Annual Report for the year
ended on 31 December 2019.
Thanks to strong leadership and prudent
macroeconomic management, Qatar’s resilient
economy continues to withstand the diplomatic
and economic blockade imposed in 2017. Qatar has
strong economic fundamentals, with a stable business
environment that is supportive of foreign investments.
This is recognised by major rating agencies and
Qatar has maintained strong sovereign ratings of Aa3,
AA- and AA- from Moody’s, S&P and Fitch respectively.
A clear indication of the confidence that international
investors have in the economy was evident when
Qatar successfully raised $12 billion from the bond
markets in March 2019, which was more than four times
oversubscribed and with lower spreads than in previous
issues.
20
Real GDP growth is expected to increase from 1.49%
last year to 1.97% in 2019, underpinned by a recovery
in hydrocarbon output and continuing robust growth of
the non-hydrocarbon sector. Qatar is blessed with deep
natural resources, and gas reserves are forecasted to
last for at least another 130 years. Qatar has competitive
strengths in LNG compared to our regional neighbours
and the lifting of the moratorium on the development of
the North Field will cement Qatar’s position as the world’s
largest LNG exporter for many years to come.
Qatar’s economy is well diversified, with nominal
non-hydrocarbon share of overall GDP forecast to be
65% in 2019, and Qatar continues to invest heavily
in strengthening the private sector to secure the
nation’s long-term financial future. Spending on major
infrastructure projects such as Hamad Port, the Special
Economic Zones, roads and logistics centres in strategic
locations across the country will boost economic
diversification. Self-sufficiency projects continue
strongly, especially in food products, with Baladna’s IPO
notable success in October 2019.
In further support of the private sector and economic
diversification, the government has introduced new
reforms designed to enhance Qatar’s attractiveness to
international businesses and to strengthen its position
as a leading investment destination within the Middle
East region. Foreign investors are permitted to invest
in all sectors of the economy up to 100% compared
to 49%, a new public-private partnership law will
accelerate infrastructure development and commercial
administration services have been streamlined.
Predictions for the global economy in 2020 are mixed,
with optimistic views contrasting against fears of a global
recession. Commentators point to trade tensions, a
slowdown in China, record levels of global debt and the
prospects of a sharp market correction as major risks.
Due to the coordinated efforts of many ministries,
organisations and companies, all under the leadership of
His Highness the Amir Sheikh Tamim Bin Hamad Al Thani,
the economic outlook for Qatar in 2020 is positive,
with the World Bank forecasting Qatar’s GDP to grow
continually up to the World Cup in 2022. Qatar will post a
budget surplus in 2019 and favourable macroeconomic
fundamentals, financial stability and large reserves will
provide an environment that enables growth. As one of
the leading financial institutions in the country, we are
committed to supporting Qatar on its economic journey.
Commercial Bank is on its own economic journey, and
we have a clear five-year strategic plan initiated in
2016 to transform the Bank. Within that plan, our key
focus areas have been taking provisions for our legacy
loan book, increasing our capital, reducing our cost to
income ratio and continuing to build the Bank’s 44-year-
old franchise in terms of new technology and innovation.
Actions taken under our five-year strategic plan are
delivering good results as demonstrated by the Bank
achieving the highest annual net profit in its history in
2019. Commercial Bank, its subsidiaries and associates
announced its financial results for the full year ended
on 31 December 2019, and the Board of Directors have
recommended, for approval at the Annual General
Assembly on 23 March 2020, a cash dividend payout of
QAR 0.2 per share.
On behalf of the Board of Directors, I would like to
express our thankfulness and gratitude for the visionary
leadership of His Highness The Amir Sheikh Tamim Bin
Hamad Al Thani. Under the leadership of His Highness,
Qatar is well-positioned to continue on its remarkable
growth trajectory, and Commercial Bank is fully aligned
with, and contributes to Qatar’s national development
objectives. I also want 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 Commerce and Industry, and His Excellency
the Governor of Qatar Central Bank.
I would like to thank the Board of Directors for their
continued guidance and all our employees for their
collective efforts towards making 2019 a successful
year for Commercial Bank, recognising that this success
would not have been achieved without the loyalty
of our customers and the continued support of our
shareholders.
We have made good progress in reshaping our business
under our five-year strategic plan, and in 2020 we
will continue on our transformation journey towards
delivering long-term sustainable growth for our
shareholders and supporting the continued growth and
prosperity of the Qatari economy.
Abdulla Bin Ali Bin Jabor Al Thani
Chairman
21
Board of Directors
22
1
4
7
2
5
8
3
6
9
1.
Sheikh Abdulla Bin Ali bin Jabor Al Thani
Chairman
2. Mr. Hussain Ibrahim Alfardan
Vice Chairman
3. HE Mr. Abdul Rahman Bin Hamad Al Attiyah
Member
4. Mr. Omar Hussain Alfardan
Managing Director
5. Sheikh Jabor Bin Ali bin Jabor Al Thani
Member
6. Sheikh Faisal Bin Fahad bin Jassim Al Thani
Member
7. Mr. Mohd Ismail Mandani Al Emadi
Member
8. HE Mr. Khalaf Ahmed Al Mannai
Member
(Representing Qatar Insurance Company)
9. HE Mr. Saleh Abdulla Mohamed Al Ibrahim Al Mannai
Member
23
One Team, One Bank
One Team, One Bank
Investing in our human capital and the
wellbeing of our employees has always
been a top priority. In 2019, we strived
to develop their skills and employ
experienced talents, while nurturing a
collaborative, cross-departmental culture
of “One Team, One Bank.”
Vice Chairman’s
Message
Mr. Hussain Ibrahim Alfardan
Vice Chairman
In 2019, Qatar’s economy went from strength to
strength, overcoming challenges of the economic
blockade and a lower-oil-price environment to record
good growth and a budget surplus. Commercial Bank
too has overcome a challenging environment to achieve
the highest net profit in the Bank’s history in the third full
year of our five-year strategic plan.
The Bank delivered a consolidated operating profit of
QAR 3,119 million and a net profit of QAR 2,021 million as
at 31 December 2019, representing a 33.6% and 20.7%
increase over the same period last year, respectively.
26
Our subsidiary Alternatif Bank reported a good set of
results despite challenging market conditions and the
depreciation of the Turkish Lira by circa 21%. The bank
reported an increase in net profit to QAR 100 million, up
10% compared to 2018. Alternatif Bank grew customer
deposits by 4% while loans and advances dropped by
3% at the end of the year, compared to the previous
year.
Our associate bank in Oman, National Bank of Oman
(NBO), performed steadily during 2019, reporting a net
profit of QAR 485 million. UAB has been reclassified
from an asset held for sale to an associate, and we have
taken a goodwill charge of QAR 414 million.
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 Amir, His
Excellency the Prime Minister and Minister of the Interior,
His Excellency the Minister of Finance, His Excellency the
Minister of Commerce and Industry, 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
Under our five-year strategic plan, our strategic intent
is to de-risk and re-shape our balance sheet. We took
the prudent decision to clean up our legacy loan book
and significant provisions have been taken since 2016.
This provisioning process is coming to an end, with net
provisions for loans and advances decreasing by 21.8% in
2019 to QAR 654 million. In terms of de-risking, the Bank
has proactively exited QAR 5.2 billion of riskier names
since 2016, up from QAR 3.7 billion in 2018. In terms
of re-shaping, the Bank’s exposure to the real-estate
sector decreased by 13% in 2019 and our exposure in
government and public sector loans increased by
47% in 2019.
Income previously associated with provisions and
de-risked loans has been substituted with high-quality
sources. Operating income increased 23.9% in 2019 to
QAR 4,347 million, supported by a 19.4% year-on-year
increase in net interest income to QAR 2,964 million
(despite the low global interest rate environment) and
strong demand for the Bank’s Transaction Banking and
cash management services.
Our strategic focus on Transaction Banking and
fee-based services such as remittances, cash
management and wealth management supports
long-term sustainable growth as it builds fee income
that is not purely based on lending. Total fees and
other income increased 34.8% to QAR 1,383 million in
2019 compared to 2018. Supported by the success of
Transaction Banking and cash management services,
low-cost deposits grew 15% during 2019 contributing
to an improvement in net interest margins. Total loans
and advances were QAR 88.0 billion in 2019, up
4% compared to 2018 and total customer deposits
increased 6.3% to QAR 76.3 billion.
In line with our strategy to drive operational efficiencies
across the business through investment in digitization
and automation, eliminating waste and reducing staff
costs while avoiding large scale redundancies, we
continued to decrease our cost to income ratio down
from 33.4% in 2018 to 28.3% in 2019.
During 2018, we implemented a one-time IFRS 9 charge
of just over QAR 1.5 billion in line with best governance
standards and a conservative approach, reducing our
CET1 capital to 10.5% as at 31 December 2018. Our
strategic intent is to maintain a minimum CET1 between
11.0 to 11.5%, and in 2019 we successfully increased CET1
to 11.1% back within our target range.
27
Group Chief Executive
Officer’s Message
Mr. Joseph Abraham
Group Chief Executive Officer
In 2019, we successfully executed the third full year of
our five-year strategic plan designed to reshape our
business, build sustainable earnings, diversify risk and
achieve growth. We are on track to deliver this plan,
achieving in 2019 the highest net profit in the history of
the Bank.
The foundation of our strategic plan with the vision
of being the “Best Bank in Qatar” are the 5 Cs of
Commercial Bank: Corporate earnings quality; Client
experience; Creativity and innovation; Culture; and
Compliance, together with a focus on best-in-class
Transaction Banking. We strongly delivered against each
of these 5 Cs in 2019.
28
Our Turkish subsidiary Alternatif Bank has delivered
positive returns and improved net profit by 10% in a
challenging macroeconomic environment and NBO
has delivered solid results. United Arab Bank (UAB) in
the U.A.E. has been reclassified from an asset held for
sale to an associate and UAB has developed a strategic
plan to improve results following the appointment of a
new CEO in 2019. We are confident that our subsidiary
and associates will make a greater contribution to
the Commercial Bank Group in the future and we are
looking forward to building on the successful recent
collaborative work undertaken with Alternatif Bank in
Turkey and NBO in Oman.
Our five-year strategic plan has not changed and our
objective for 2020 is to continue to deliver our strategy
with disciplined execution. Our committed staff have
demonstrated that “everything is possible” in 2019 and
with the support and guidance of our Board, we will
continue to innovate, invest in our business and grow
sustainably in 2020.
Joseph Abraham
Group Chief Executive Officer
Since beginning operations in 1975, Commercial Bank
has built its franchise based on innovation and customer
service. To continue this legacy, the Bank is undergoing
a transformation change in terms of investment,
digitization and building new capabilities in technology,
while at the same time controlling waste.
Corporate earnings quality was strong in 2019, with
good growth across the board. We increased our
capital to 11.1% within our minimum CET1 target range
of 11% to 11.5% and we continued to improve our cost
to income ratio, moving down from 33.4% to 28.3%
closer in line with the market. We have reshaped and
diversified our loan book by proactively exiting high risk
names, decreasing our concentration in real estate and
increasing our share of high-quality government and
public sector loans by 47% in 2019.
For the best Client experience, we revamped our brand
design for branches and opened our first Doha Metro
Rail branch at Doha Exhibition Convention Centre
metro station with a digital self-service model. Mobile,
Corporate and Internet Banking all added new digital
features and functionality. We expanded contactless
cards to over 2,590 terminals, increased remote cheque
scanning and expanded our 60-second remittance
service to over 30 countries. This has all contributed to
our strategic focus on Transaction Banking by capturing
more and more financial flows and increasing our low-
cost deposits by 15% over the year.
Creativity and innovation are linked to Client experience
and our digital transformation process. In 2019, we
expanded and enhanced our digital products and
services, while internally embedding digital into
Commercial Bank’s DNA throughout our organization.
Our “One Bank” culture emphasizes strong collaboration
across the Bank’s different departments for the benefit
of our clients and we continued to invest in our premises
and people-related activities to promote teamwork
and togetherness. Compliance is a key focus area for
the Bank and we have invested significantly in this area
to make substantial improvements over the course of
2019.
The disciplined execution of our five-year strategic plan
is delivering results and market recognition has come
in the form of numerous award wins in 2019 including
“Best Retail Bank”, “Best Cash Management Bank”, “Best
Transaction Banking Service” and “Best Mobile Banking
App” by reputable providers.
29
Limitless Ambitions
Limitless Ambitions
While shining bright in Qatar, we have
widened our accomplishments and
geographical reach to other countries
and borders. Thanks to our international
alliances with associate banks such as
Alternatif Bank in Turkey and National
Bank of Oman, we aspire to enhance
international investments between
countries and affirm Qatar’s strategic role
in the region.
Management Review
of Operations
Financial Results
In 2019, Commercial Bank delivered a net profit of QAR
2,021 million, an increase of 20.7% compared to the
QAR 1,674 million achieved in 2018.
Loans and advances to customers increased by 4.0% to
QAR 88.0 billion at 31 December 2019, compared with
QAR 84.6 billion in 2018. The increase was mainly in the
government and public sector.
Our deposits increased by 6.3%, to QAR 76.3 billion
at 31 December 2019 compared with QAR 71.8 billion
in 2018, the increase is mainly in the current and call
deposits.
Investment securities increased by 20.9% to QAR 26.8
billion as at 31 December 2019 compared with QAR 22.2
billion at the end of December 2018. The increase is
mainly in Government bonds.
Financial Results (QAR million)
Net interest income
Non-interest income
Net operating income
Operating expenses
Impairment on loans & financial
assets
Impairment on Associate
Share of results of associates
Income tax expense
Net profit for the year
Operating Expenses (QAR million)
Staff costs
General and administrative expenses
Depreciation and amortisation
Total operating expenses
2019
2,963
1,384
4,347
(1,228)
2018
2,482
1,026
3,508
(1,173)
(654)
(836)
(414)
(7)
(23)
2,021
2019
796
227
205
1,228
-
182
(7)
1,674
2018
676
313
184
1,173
32
Rehan Khan
EGM, Chief Financial Officer
Net Operating Income
Commercial Bank’s net operating income reached
QAR 4,347 million for the year ended 31 December
2019, an increase of 23.9% compared with QAR 3,508
million achieved in 2018. Net operating income for the
Bank in Qatar increased by 25.1% to QAR 3,747 million
compared to the same period in 2018.
Net interest income for the group increased by 19.4%
to QAR 2,963 for the year ended 31 December 2019
compared with QAR 2,482 in 2018. Net Interest Margin
increased to 2.5% compared to 2.1% in 2018. The
increase in margins is mainly due to lower cost of funds
and increased the proportion of high yielding assets.
Non-interest income increased by 34.8% to QAR 1,384
million for the year ended 31 December 2019 compared
with QAR 1,026 million in 2018. The overall increase
in non-interest income was due to increase in net fee
and commission based income mainly from cards and
transactional banking, foreign exchange gains and
income from investment securities.
Operating Expenses
Total operating expenses slightly increased at a
group level by 4.7% to QAR 1,228 million for the year
ended 31 December 2019 compared with QAR 1,173
million in 2018. The increase was primarily driven by
staff expenses on account of IFRS 2 accounting of its
performance rights (share options) granted to staff.
Provisions for Impairment Losses
Provisions for loans and advances for the group reduced
by 35.9% to QAR 594 million for the year ended 31
December 2019, compared to QAR 927 million provided
in 2018. The non-performing loan ratio decreased to
4.9% in December 2019 compared to 5.6% in 2018, the
loan coverage ratio increased to 82.1% as at December
2019 compared to 78.6% in December 2018.
The bank sets aside a risk reserve against its lending as
part of shareholders’ equity. At 31 December 2018, the
risk reserve was QAR 1,421 million.
In addition, the group impaired its associate United Arab
Bank by QAR 414 million in 2019, on conversion from
asset held for sale to an associate as the book value of
UAB was higher than the industry standard model used
for its valuation.
Total Assets and Funding
Commercial Bank balance sheet increased by 9.3% in
2019, with total assets at QAR 147.5 billion compared to
QAR 134.9 billion in 2018.
Balance sheet increase was driven by QAR 3.4 billion
increase in loans and advances, increase of QAR 4.6
billion in investment securities and an increase of QAR
2.9 billion in due from banks.
Customers’ deposits increased by 6.3% to QAR 76.3
billion at 31 December 2019, compared with QAR 71.8
billion in 2018, an increase of QAR 4.5 billion. Low-cost
deposits grew by 15% in 2019, contributing to the
improvement in NIMs.
Capital
Commercial Bank’s capital position remains strong,
the capital adequacy ratio increased to 16.4% as at 31
December 2019 compared to 15.5% at the end of 2018.
The capital adequacy ratio is above the Qatar Central
Bank’s required minimum level of 14.0%.
Subsidiaries
Alternatif Bank
Alternatif Bank delivered a net profit of TL 155 million for
the year ended 31 December 2019, with total assets of
TL 30.2 billion and lending of TL 18.9 billion.
Alternatif Bank provides its customers in the corporate,
commercial and retail banking segments with high
value products, services and solutions. Alternatif Bank
has 48 branches widely distributed around Turkey. In
2019, Alternatif Bank continued to work closely with its
counterparts in Commercial Bank to implement best
international practice and continue to realise synergies.
Commercial Bank Financial Services (L.L.C.)
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
2019, CBFS delivered a net profit of QAR 9.1 million.
Other Income
Foreign Exchange
Income
Investment &
Dividend Income
2%
3%
6%
68%
Net Interest
Income
Retained
Earnings
Other Reserves
Risk Reserve
4%
6%
8%
Legal
Reserve
45%
Net Fee
Income
21%
Net Operating
Income
Additional
Tier 1 Note
18%
Shareholder’s
Equity
19%
Share Capital
33
Management Review
of Operations continued
Orient 1 Limited
A fully owned subsidiary that owns and manages an
exclusive Diners Club franchise in Turkey.
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 (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.)
National Bank of Oman (NBO) achieved net profit of OMR
51 million, compared with OMR 50.6 million in 2018.
Operating income maintained at OMR 128 million.
During 2019, NBO customer deposits increased by 3%
to OMR 2.5 billion.
United Arab Bank (P.J.S.C.)
United Arab Bank (UAB) has been reclassified from an
asset held for sale to an associate, and we have taken a
goodwill charge of QAR 414 million. A new CEO for UAB
was appointed in March 2019 and we will be working
to ensure that UAB achieves improved results through
implementation of a new strategic plan..
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.
34
Raju 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 potentials. 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.
Business performance
In 2019, Wholesale Banking’s business represented
the growth of most of the Bank’s total loan book and
generated over half of the Bank’s total revenues. In
line with the Bank’s five-year strategic plan, Wholesale
Banking proactively initiated several new measures,
such as:
• Growing the balance sheet in line with the market,
primarily within the government and public sector;
• Strategically re-shaping the composition of the
balance sheet to reflect the market;
• Proactively de-risking the balance sheet for
sustainable growth;
• Building a strong pipeline of the right customers, with
the right risk profile and the right quality of assets;
• Focusing on Transaction Banking;
• Diversifying revenue streams;
• Working closely with Alliance banks.
Growing the government and public sector
balance sheet
Growth in the government and public sector balance
sheet during 2019 was over 53%. The growth of this
sector in Commercial Bank’s book is estimated to be
significantly faster than the market growth. We have
identified new public sector customers to focus on,
targeting cash management.
Re-shaping Wholesale Banking’s balance sheet
The composition of the balance sheet has been re-
shaped in two key areas to reflect stresses in the market
and to ensure a quality mix of assets, which are:
• Growth of government and public sector lending from
21% of Wholesale Banking’s portfolio in YTD 2018 to
29% in YTD 2019;
• Rationalisation of real estate exposure with a
reduction from 27.8% of Wholesale Banking’s
portfolio in 2018 to 27.6% in 2019 in line with the
bank’s Strategic plan.
Growth of government and public sector Lending
and rationalisation of real estate exposure remains
a strategic aim, with a five-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 certain clients with exposure to be either
partially or fully reduced to ensure Commercial Bank
does not have very large exposure towards any client. In
2019, the total amount of intentionally de-risked assets
was more than QAR 2.0 billion, with an additional target
of over QAR 1.0 billion by 2020, for an optimized balance
sheet containing high-quality customers and assets.
Growth and strong lending pipeline
Wholesale Banking’s lending book grew by approximately
11% in 2019. Wholesale Banking’s focus in 2019 was to
grow its lending book with the right risk profile and the
right quality, in conjunction with the strategic aims of
reshaping and de-risking to maintain growth and ensure
a sustainable revenue stream in the future. The lending
pipeline originating from the public sector represents
over 50% of the total lending pipeline.
Cross-selling
Diversification of the revenue, primarily an increase of
the fee income that is not lending-based, is one of the
major strategic aims of Wholesale Banking. Fee income
was above 15% 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, Alternatif
Bank and National Bank of Oman, 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,
ultrahigh net worth, government and public sector.
Domestic Corporate Banking was active in arranging
large financings in the domestic syndicated and club
loan markets, and was associated with a number of the
successful transactions in 2019, including key arterial
highways connecting stadiums being built for the 2022
World Cup, and supporting district cooling in the Lusail
area.
In 2019, 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 and
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.
35
Management Review
of Operations continued
• Updated CB Smart Trade solution that helps ease
transaction flow, faster turnaround time and real-time
status updates;
• Corporate Mobile application enriched with seamless
retrieval and approval of Salary and bulk payments
initiated on line (Corporate Internet Banking);
• Swift GPI for corporates through CIB and mobile for
online tracking customer transactions on real time basis;
• Multiple structured trade solutions for leading
automobile Dealers and other commodity traders
that assisted imports in Qatar on an extended credit
period;
• Implemented customized B2B solutions for
large public sector conglomerates engaged in
Transportation, Aviation and Exports;
• International remittances have seen significant growth
of 49% and exports share has moved up to 19% from
16%.
Transaction Banking has worked closely with
international Block Chain initiatives for Trade Finance
conducted by Voltron and MarcoPolo along with many
international banks and in 2020 will move to testing
phase from the current design phase. This would be
a significant innovation which will add value to our
customers.
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 2019, the Bank’s international
corporate lending strategy focused mostly on transport,
industry and services sectors with strong Qatari angles.
The corporate lending business maintained its strategic
drive towards diversification, targeting landmark
opportunities both on direct balance sheet transactions
and cross-selling activities such as FX and derivatives.
Commercial Bank wins two prestigious corporate
awards by Global Finance
Transaction Banking
Commercial Bank has been continuously enhancing
products and services to maintain its leadership position
in Transaction Banking in Qatar. In 2019, the Bank rolled
out new services and strengthened the product suite.
Customer adoption of digital channels has improved
substantially - 85% of payments, 98% of salaries and
50% of trade transactions are now conducted digitally.
The Bank’s efforts with regards to digitization are also
recognized by Global Finance and Bank has been
rewarded as “Best Trade Finance Services, Corporate
Digital Banking” and “Best Online Cash Management
Bank” in Qatar.
Recognizing Commercial Bank’s 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” and “Best Transaction Bank
in Qatar” at the Asian Banker Middle East and Africa
Transaction Banking Awards 2019. This is the third year in
succession after 2017 & 2018.
Some of other significant initiatives are as follows:
• Automated insurance service for trade finance
customers;
• Postdated cheque Management solution for the
benefit of Real estate sector that provides control of
data, remote submission of cheques and custody;
• Corporate Mobile App with rich features to conduct all
payments and inquiries of bank accounts;
36
Diversifying funding
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 business initiatives
Supporting major business initiatives that are relevant
to the Qatari banking sector remains a key pillar of
the International Banking business. In 2019, the Bank
sponsored and participated in several major banking
industry events and conferences. These included:
• The Annual Meetings of the International Monetary
Fund (IMF) and the Institute of International Finance
(IIF), where Commercial Bank was joined by its
subsidiary, Alternatif Bank, Alliance bank partner, and
National Bank of Oman;
• SIBOS in London, United Kingdom, a major industry
event for banks and financial institutions around 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,
the Institute of International Finance, the International
Finance Corporation, IMF, Arab Trade Finance Program,
ISDA and other development institutions.
2020 priorities
Moving forward, our strategic priorities in 2020 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, distribution, trade, and treasury
capabilities, which lead to increased cross-selling and
improve International Banking’s portfolio returns;
Fahad Badar
EGM, International Banking
Commercial Bank’s cross-border business strategy
remains cautious and focused on portfolio diversification
and revenues from trade finance flows and banks, and
strategic relationships with large corporates in the
EMEA region, Turkey, and selectively across the North
American, Asia Pacific and Sub-Saharan African markets.
The lower risk and mostly short-term trade finance
book saw reasonable activity in 2019 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 to benefit from synergistic growth across
the Commercial Bank Group.
Interests in Turkey
Turkey remains a key market for Commercial Bank,
following the acquisition of Alternatif Bank in 2013.
The International Banking department is providing
complementary support through its balance sheet
and products platform 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 focus on strengthening Alternatif Bank’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.
37
Management Review
of Operations continued
• 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 to withstand
credit event downturns;
• Support the Commercial Bank Group’s funding
initiatives and balance sheet growth by leveraging
Commercial Bank’s international corporate network.
Retail and Enterprise Banking
Commercial Bank’s Retail Banking team manages
the banking and financial solutions for individuals
and business interests of small and medium-sized
enterprise (SMEs).
Our broad spectrum of products for individual
customers includes accounts, deposits, loans, credit
cards, insurance, and wealth management solutions to
help our customers through different stages of their life
journeys.
Our Enterprise banking teams support small and
mediums sized businesses in a range of industries and
provide tailor-made solutions as required by customers.
As a business group, we are fully aligned and
committed to the Bank’s 5-year transformation strategy
underpinned by Five Cs - Corporate Earnings Quality,
Client Experience, Creativity & Innovation, Culture and
Compliance.
We are proud to have won a range of awards in 2019,
as a testimony to our commitment and innovation, that
makes it easy and convenient for our customers to bank
with us:
• “Best Retail Bank in Qatar” by The Asian Banker;
• “The Best Remittance Product and Service of the year
2019” by the Asian Bankers;
• “Best Consumer Mobile Banking App” award by
Global Finance.
38
Amit Sah
EGM, Consumer Banking
Business performance
Retail Banking continues to contribute significantly to
Commercial Bank’s overall performance.
Built on a strong franchise of customer service and
innovation, Retail Banking has delivered strong
performance in 2019 .
The Retail and Enterprise balance sheet remained
healthy with lending to customers adjusted to QAR 18.1
billion and deposits growing to QAR 23.3 billion.
Increase in fee income compared to previous years has
improved the quality and sustainability of earnings.
Coupled with careful management of net interest
margins, control of direct costs and focus on increasing
digitization, Retail Banking was able to deliver another
year of strong performance.
Our innovative services, especially in remittances and
product positioning including Wealth, have helped Retail
Banking maintain consistency in performance through
2019.
We take great pride in delivering a quality service to all
our customers, with our Private Banking and Sadara
Premium Banking services leading with exceptional
standards.
For greater convenience for our SME and corporate
customers, we have dedicated Corporate Cash Centres
and Corporate Branches at five different locations,
working extended hours.
Our branch network is supplemented by over 170 ATMs
that are strategically located around Qatar to ensure
optimum usage of the network by customers.
Customers can also conveniently do bill payments,
transfers and generate or change PINs for their cards
through our ATM network.
Retail Internet and Mobile Banking
Motivated by our continued digital success, we
maintained persistent efforts in 2019 to enhance the
range of services offered by our Internet Banking
platform and Mobile Banking App.
The CB mobile app offers greater flexibility than ever
before, greatly reducing the need to visit branches or
call our helpline whilst continuing to being safe, secure
and convenient.
Success of our 60-Seconds Remittances’ initiative
encouraged us to expand our reach to 30 countries
including India, the Philippines, Sri Lanka, Pakistan,
Nepal, Turkey, Jordan UK & Europe allowing customers
to send faster payments and reducing reliance on other
traditional methods.
Commercial Bank will be the 1st bank in Qatar to launch
its own Mobile Wallet, when in Q1 -2020 we enable
customers to use their mobile devices to perform
‘Tap n Pay’ transactions while making payments at any
contactless POS terminals and even complete remote
online e-commerce purchases via Masterpass checkout
services without exposing their credit card details.
We are proud that our CB Mobile App consistently
features as the #1 Financial App in Qatar, in both Apple
and Android App stores.
Commercial Bank opens a new branch in Ain Khaled
Commercial Bank wins “Best Consumer Mobile Banking App”
award by Global Finance
Branch and ATM networks
We continued our strategic journey of aligning presence
in emerging geographic and economic zones in Qatar
by launching the country’s 1st metro branch in DECC
station, relocating our branch from Industrial Area to
a new location in Ain Khaled and moving the Al Sadd
branch to our flagship Le Boulevard Building.
Our modern look-and-feel new breed of metro
branches offer customers increased self-service
functionality and customers can conveniently use our
branch through all opening hours of the metro station.
In addition to re-aligning our footprint, we have
transformed and enriched customer experience for key
branch services.
We continue to maintain one of the largest branch
networks amongst all the banks in the country and as
we reshape our distribution model, we will ensure fit for
purpose physical distribution to complement our string
digital banking presence.
39
Management Review
of Operations continued
Cards
Commercial Bank’s Cards and Payments business is
keeping steady strides to provide its customers the
most innovative and market best payment solutions.
Commercial Bank was one of the first banks in Qatar
to launch the comprehensive Contactless payment
ecosystem comprising Contactless Credit Cards, Debit
Cards and POS terminals in 2018. Leveraging the
contactless payment platform, Commercial Bank will
launch Qatar’s 1st digital mobile wallet, enabling Android
users to pay for goods and services.
We continue to invest in our flagship portfolio of the
Limited-Edition Cards, which contributes greatly to the
Card Business spends portfolio.
Overall, the cards business had a strong growth in spend
and balances in 2019.
The Bank has achieved market dominating numbers of
issuance of over 500,000 for Contactless Cards, rollout
of over 8,000 POS terminals and processing more than
2million Contactless POS transactions in 2019.
In 2019, we introduced another market 1st product and
changed the way customers perceive reward and loyalty,
with regards to how they spend on Commercial Bank
cards.
CB Fawri is the instant discount at POS terminals without
customer having to ask for the discount. Over 36,000
transactions and savings worth QR 1.13 million have
already been recorded.
Commercial Bank continues to play a key role in Qatar’s
merchant acquiring business and has forged ahead with
fully integrated ECR payment system with retailers.
Commercial Bank is leading the low-salary segment
keeping in line with the government’s vision for WPS
customers. Our low cost but efficient payroll card
(PayCard) business model is the market leader with an
estimated 50%+ market share of this segment.
The pace of innovation and technological change in the
payments industry is very high, and Commercial Bank is
staying at the forefront of this change.
Wealth management
Diversification requirements of our customers inspired
us to expand our product range through key alliances
and we continued increasing our investment in our
people, processes and systems.
Partnering with NBK Capital, we successfully launched
the exclusive CB Leasing and Finance Fund Ltd. product,
which seeks to achieve its investment objectives of
distributing income to investors monthly, by investing in
equipment leasing and related transactions and asset
backed and structured finance transactions.
Our focus on upskilling our people continued in
2019 with additional wealth advisors obtaining the
International Certificate in Wealth and Investment
Management (ICWIM) from the Chartered Institute for
Securities and Investment (CISI).
In 2020, our focus will be on automating operational
processes to allow customers near real-time execution
of trades and more granularity & transparency of
reporting.
Life in Qatar
Commercial Bank continues to dominate the market for
new expat arrivals into Qatar with our innovative offer
“Life in Qatar”.
Customers can have their account numbers ready as soon
as they apply, even before arriving in the country. A dedicated
team who speaks their language welcomes them the
minute they land in Qatar with their debit and credit cards.
Commercial Bank rewards 195 customers with individual gold coins
40
Tailored specifically for people moving to Qatar, it
provides ease and convenience for those relocating and
has already helped over 100,000 customers from over
144 different countries worldwide.
The “Life in Qatar” website provides necessary
information that is relevant to relocation and continues
to attract visitors daily.
The partnership with Qatar Visa Centres in selected
overseas locations also enables inbound expat
customers to resolve banking needs even before
stepping foot in the country.
Focus on Qatari Youth Customers
In 2019, we launched Sadara Youth, a digital product
designed to fit the needs and lifestyles of young Qatari
customers.
Sadara Youth
This package is exclusively for Qatari Nationals aged
between 18 and 25 years and provides a style of Banking
through a dedicated Digital App that is educational and
fun to use.
It is the 1st Mobile Banking application in Qatar that
educates and rewards young customers as they learn
to transact and acquaint themselves with day-to-day
banking services.
The Sadara Youth package also delivers another 1st in
Qatar by issuing a fashionably striking, vertical design
Credit Card.
Enterprise banking
Commercial Bank remains committed to the
development of the SME sector in line with the Qatar
National Vision 2030.
Our SME strategy in 2019 has been to dominate
Transaction Banking, drive digitization and build strong
transaction revenues while moving away from assets-
based lending.
Building upon the 360-degree view of our customers,
we have been able to improve our relationship
management and have successfully launched industry
specific cash management and digital banking solutions.
This enhancement of customer experience and led to
increased engagement.
We continue to educate and migrate our customers to
self-service digital banking services. Over two-thirds
of the total SME base is now digitally active. The digital
channels have given SMEs better control over cash flows
and provided flexibility to securely transact from the
comfort of their offices.
Parvez Khan
EGM, Treasury and Investments
Treasury and Investments
The Commercial Bank’s Treasury and Investments
Department is responsible for asset-liability
management, capital and financial market investments,
trading, and treasury sales. The 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
international debt capital markets for funding needs.
Departmental functions
Proactive management allows the Bank to manage its
funding base in a cost-efficient manner while ensuring
its balance sheet is managed in accordance with the
expectations of rating agencies, regulators, the Board of
Directors and shareholders. The department’s treasury
function has been instrumental in maintaining a stable
cost of funding, managing the duration of the Bank’s
liabilities in a volatile interest rate environment, seeking
diversification of funding channels, and maintaining key
liquidity ratios and related business regulatory ratios as
required by the Qatar Central Bank.
The department’s investments function is engaged in
managing the Bank’s investments in capital markets
to achieve superior and stable returns. It continued
to provide strong revenue generation in 2019 whilst
ensuring a liquidity buffer for the Bank by focusing on
liquid and diversified investments. It’s goal in 2020
is to maintain returns momentum in a challenging
geopolitical and monetary policy environment. The
investment emphasis remains on active portfolio
management to optimise returns and ensure effective
risk management by flexible asset allocation, hedging,
and duration management.
41
Management Review
of Operations continued
Treasury Sales
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 Investments
department continues to grow its footprint as a leading
market-maker in the regional rates, fixed income,
treasury securities and FX markets, and in providing
market access to corporates and institutions.
In 2019, Commercial Bank Treasury and Investments
expanded its capacity to support client needs by adding
digital execution capabilities and risk management
solutions, both domestically as well as cross-border,
demonstrating its ability to provide seamless client
solutions across multiple geographies.
Treasury is also actively engaged with Commercial Bank
subsidiary in Turkey – AlternatifBank to provide end-to-
end origination, structuring, negotiation and execution.
Risk Management
Managing risk is a fundamental part of Commercial
Bank’s day-to-day business activities. As part of the
overall corporate governance framework, the Board
of Directors is responsible for overseeing a strong risk
governance framework, including a strong risk culture,
a well-developed risk appetite—articulated through
the Bank’s Risk Appetite Statement – and well-defined
responsibilities for risk management and control
functions. The keystone of the Bank’s risk governance
framework is the three lines of defense, namely:
1. The first line of defense consists of frontline business
units and functions that create risk. These groups
are the Bank’s primary risk-takers, responsible
for implementing effective internal controls and
maintaining processes for identifying, assessing,
controlling, and mitigating the risks associated with
their activities, consistent with the Bank’s Risk Appetite
Statement and risk limits.
42
Paul Gossiaux
EGM, Chief Risk Officer
2. The second line of defense consists of independent
risk management, which oversees risk-taking and
assesses risks independent of frontline business
units and functions that create risk. Independent risk
management complements the frontline units’ risk-
taking activities through its monitoring and reporting
responsibilities, including compliance with the Bank’s
risk appetite, and is responsible for identifying,
measuring, monitoring, and controlling aggregate and
emerging risks enterprise-wide.
3. The third line of defense consists of internal audit,
which provides independent assurance to the Board
on the effectiveness of governance, risk management,
and internal controls. During 2019, Commercial Bank
continued to enhance its risk systems infrastructure
platforms, including introduction of an automated
retail banking provision system, improvements in
credit approval workflow, among others. The Bank
also implemented improvements in ICAAP and IRRBB,
and successfully completed its first review of Internal
Controls over Financial Reporting in accordance with
Qatar Financial Markets Authority.
In 2020, Commercial Bank will continue to employ clear
Risk management objectives and well-established
strategies through core risk management processes.
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 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 the risk of loss resulting from
inadequate or failed internal processes, people and
systems, or from external events. It includes legal risk
but excludes strategic and reputational risk.
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 ORM Department are:
• 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 several
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 that have primary
responsibility and oversight for risk are:
1. The Board Risk Committee (‘BRC’), which 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 Board of Directors or its 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.
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 Qatar Central Bank.
43
Management Review
of Operations continued
Commercial Bank celebrates National Day
Commercial Bank Lead Sponsor of the Euromoney Qatar Conference 2019
Marketing
The Marketing Department of Commercial Bank
establishes and promotes the Bank’s reputation and
brand identity to stakeholders and customers through
effective communication using both traditional and
digital media channels.
Marketing works closely with the Bank’s main business
units and supports 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.
Commercial Bank is proud of its leading position as a
digital bank. Through exemplary thought leadership in
digital marketing – alongside our proactive approach
to digital media, introduction of first-to market
technologies, quality content offering, and customer
engagement on and through social media – Commercial
Bank continues to dominate Qatar’s digital banking
spaces.
Following a national vision
Commercial Bank’s successes and achievements this
year emerged from the Bank’s commitment towards
Qatar National Vision 2030, which inspired us to achieve
results, in alignment with the country’s key strategic
messages and fulfilment of the Qatar National Vision
2030.
As part of its Qatar National Day 2019 celebrations,
Commercial Bank has organized several visits to
various entities, such as schools, hospitals, Hamad
International Airport, and centers for people with special
needs, where limited-edition souvenirs and gifts were
distributed. The bank also organized activities for its
employees to celebrate the rich heritage, culture and
history of Qatar and to reflect the love and loyalty of the
Bank’s employees towards His Highness the Amir Sheikh
Tamim bin Hamad Al Thani.
Moreover, Commercial Bank organized several pre-
and post-event activities at its branches, where people
enjoyed Arda performance, Arabian coffee and sweets,
and a limited-edition set of National Day souvenirs that
was distributed. As part of the event programme, a special
song was dedicated to Qatar, “Shofto El-Gomar”. The
exclusive operetta was performed during the National
Day celebration before the audience by the young singer
Nasser Al Kubaisi and was widely very well received.
Supporting Qatar’s economy
Commercial Bank is committed to helping support
the development of Qatar’s economy and future
sustainability in line with the goals of the economic pillar
of Qatar National Vision 2030.
To promote excellence within the country’s financial
sector, the Bank was a Lead Sponsor of the Euromoney
Qatar Conference 2019, held under the patronage of HE
Sheikh Abdullah bin Nasser bin Khalifa Al Thani, Prime
Minister and Minister of Interior.
44
Group CEO Joseph Abraham and COO Leonie
Lethbridge spoke at this major industry event, which
focused on the future of Qatar, and on how the small
but resourceful and capital-rich Qatari economy is
transforming its already sizeable role in the global
economy to meet the new demands of 21st century
business and finance. Commercial Bank has also hosted
the author and futurist Brett King for the very first time in
Qatar, who shared with the audience his thoughts about
the future of banks and the strategies banks need to
follow in order to flourish. In the future, banks will predict
customers’ needs and serve them when and where
they need them, as predicting customer experiences
with banking built into them is key. King expressed that
banks need to think technology first and be technology
savvy, as by 2025, customers should be able to receive
more advice on their money every day via their phone
than they will in one year from an employee sitting
behind their desk, as advising, distribution and banking
experiences will be digital.
Commercial Bank has been working towards developing
and enhancing the localization process of the energy
sector’s supply chain and to expand the small and
medium enterprise (SME) landscape in Qatar. In order
to achieve this goal, the bank has announced its support
of an important national initiative by QP ‘Tawteen’, a
‘Localisation Programme for Services and Industries in
the Energy Sector’ by Qatar Petroleum (QP).
Corporate Social Responsibility (CSR)
Since its inception over forty-five years ago, Commercial
Bank has been committed to supporting Qatar’s national
development by giving back to the wider community
through a comprehensive range of meaningful
corporate social responsibility programmes formulated
and implemented by the Bank’s Marketing Department.
As part of the Bank’s humanitarian and social initiatives,
Commercial Bank engaged in a range of initiatives
during the holy month of Ramadan that focused on
community engagement and social responsibility
fulfillment, including a variety of activities aiming
to spread the spirit of the holy month of Ramadan
and the values of giving in a creative and innovative
way. The Bank also launched a social media initiative
– #CastYourKindness – to encourage charity and
compassion amongst employees through volunteering
in distributing Iftar boxes every Saturday to people
around Qatar.
Hussein M Ali Al-Abdulla
EGM, Chief Marketing Officer
Additionally, as part of our support to the community,
the Bank’s team joined the Center for Empowerment
and Elderly Care (Ihsan) for a special Iftar meal. Several
employees have participated in the Bank’s initiatives
during Ramadan to demonstrate our commitment to
“One Bank” and “One Team” culture.
Sports, health, and fitness
At Commercial Bank, our people are our greatest asset,
and we are committed to invest in their wellbeing.
Improving the nation’s health is also one of the most
important parts of the human development pillar of the
Qatar National Vision 2030, and we promote sports and
wellness activities for our staff not only during National
Sports Day but throughout the year, advertising the
message that sport and physical exercise perform a
vital function for the community, promoting active and
healthy lifestyles and cultivating values of dedication,
teamwork, competition and good sportsmanship.
Since the beginning of 2019, Commercial Bank has
embarked on a series of well-organized events and
activities that showcased its commitment towards
promoting sports. The Bank’s participation in Ooredoo
Marathon was a big success, as over 130 employees and
their families have participated, confirming that Commercial
Bank is a big supporter of healthy and active lifestyle.
Additionally, Commercial Bank participated in the
celebrations of the National Sport Day with a mix of
physical activities, staff wellness and a community outreach
programme. To engage with the wider Qatari society,
volunteers from Commercial Bank distributed special
National Sports Day gifts at Qatar Society for Rehabilitation
of Special Needs, independent schools, the children’s
floor at Hamad Hospital and at Al Wakrah Hospital.
45
Management Review
of Operations continued
In the same context, Commercial Bank Staff Club prepared
an exclusive CB Olympics event for staff which turned out
to be an intense competition, spreading a positive energy
that represents the Bank’s character. The CB Olympics
event was a day full of challenges designed to promote
competition, teamwork, and boost employees’ morals.
Commercial Bank Staff Club is keen on fulfilling the
Bank’s obligation towards promoting sports and wellness
activities for our staff by providing a selection of fitness
training programmes designed and scheduled to run
throughout the year for the benefit our staff.
Commercial Bank remains committed to enhancing
Qatar’s sporting reputation by bringing the best
international competitors to Qatar annually for a golf
tournament that attracts a global audience. As a result
of this commitment, the Bank and Qatar Golf Association
(QGA) has signed a three-year sponsorship agreement
to host the Qatar Masters Golf Tournament. With this
agreement, Commercial Bank will continue to be the
official Title Sponsor for QGA’s Qatar Masters Golf
tournament until 2022. We are proud of being the title
sponsor of Qatar Masters 2019 for the 14th year in a row
which is a source of pride for Commercial Bank. It is the
live proof of the bank’s keenness on playing an active role
in spreading awareness to the public in the field sport.
Furthermore, the Bank launched an exciting and
innovative campaign to promote the Commercial
Bank Qatar Masters Golf Tournament which focused
on generating awareness about the event itself, as
well as on educating the public in Qatar about golf in
the context of the Qatari culture. Additionally, the Bank
has also hosted several educational events for over
5000 students ranging from a variety of schools and
universities in Qatar in several malls.
In its efforts to enhance awareness of key health issues
in Qatar in 2019, Commercial Bank has partnered with
Qatar Cancer Society (QCS) as a Gold Sponsor for their
‘Walk to Support’ campaign. The Bank has conducted
a variety of joint exciting awareness-raising activities
and workshops in October to support the society
within its mission to raise awareness on breast cancer.
Emphasizing on the importance of Breast Cancer
Awareness Month, Commercial Bank has launched the
remarkable ‘One Image’ campaign exclusively for its
employees. The bank’s employees got the opportunity
to attend the informative “Breast Cancer Awareness
Sessions” and enjoy exciting activities held on the side.
As part of the “One Image” campaign, Commercial
Bank’s female employees attended a workshop entitled
“Our Passion in our Health,” which was delivered by
46
Commercial Bank participates at the Education City Career Fair
Commercial Bank Staff Club presents an exclusive CB Olympics
event for staff
Commercial Bank Gold Sponsor for Qatar Cancer Society (QCS) ‘Walk to
Support’ campaign
Commercial Bank and Qatar Golf Association (QGA) signed a three-year
sponsorship agreement to host the Qatar Masters Golf Tournament
Commercial Bank participates in Ooredoo Marathon
In 2019, Commercial Bank’s National Development
Team participated at the Education City Career Fair
twice to recruit Qatari nationals as the next generation
of highly skilled banking leaders. Bringing together
representatives of leading organizations and companies
in Qatar, this initiative mainly targets high-school
students and seeks to familiarize them with the
dynamics and challenges of Qatar’s labor market.
Additionally, Commercial Bank launched the new
Nationalization Forum, which aims to introduce
the National Talent Council (NTC), its initiatives, and
upcoming programs for nationals across the bank.
In the development of a prosperous and sustainable
nationalization strategy at Commercial Bank, and in
light of the Qatar National vision 2030, the forum is a
great asset for everyone to get updates on the current
Nationalization strategy, initiatives and upcoming
programs, the forum also serves as a channel to
obtain feedback and inquiries that will give the NTC
a much greater understanding to improve and drive
Nationalization in Commercial Bank.
specialists in the Health Education Department at the
Qatar Cancer Society. The awareness campaign was
concluded by the participation of Commercial Bank’s
employees along with their families in the “Walk to
Support” initiative expressing encouragement and
compassion for those living with breast cancer.
Qatari youth
Commercial Bank takes pride in being a Qatari bank
and supporting all four pillars of the Qatar National
Vision 2030 through our activities, with a focus on
strengthening the economy through our services and
investing in Qatar’s human capital talent as one of the
largest private sector employers in the country.
The Bank’s National Development Programme invests
heavily in the skills and training of young Qataris
and we look forward to continuing to support Qatar
on its journey towards sustainable development
and prosperity, for the benefit of current and future
generations.
The Bank remains committed to a policy of attracting,
recruiting, training and developing Qatari nationals and
fostering home-grown ideas and talents. Commercial
Bank’s policy on Qatarization is to offer excellent
opportunities to young nationals embarking on a
banking career and to continually explore the market to
select and to provide exciting career opportunities for
experienced nationals.
47
Management Review
of Operations continued
In 2019, Commercial Bank was awarded:
• ‘Best Corporate Governance in Qatar 2019’ by World
Finance magazine
• ‘Best Remittance Product and Service of the Year
2019’ for 60 Seconds Remittance Service by The
Asian Banker
• ‘Best Retail Bank in Qatar 2019’ by The Asian Banker
• ‘Best Cash Management Bank in Qatar in 2019’ by The
Asian Banker
• ‘Best Transaction Banking service in Qatar in 2019’ by
The Asian Banker
• ‘Best Mobile Banking App 2019’ by Global Finance
• ‘Best Online Cash Management 2019’ by Global
Finance
• ‘Best Trade Finance Services 2019’ by Global Finance
Human Capital
In 2019, Commercial Bank continued to invest in its
entrepreneurial and performance culture. Initiatives
included:
• Reinvigorating our performance management system
and putting more focus on people, conversations and
development;
• Setting new, challenging performance standards for
our leaders and teams;
• Restructuring the Human Capital team and
introducing of HC Operations, to deliver common HC
services and proactive support to employees;
• Introducing staff clubs and gym classes, where
employees are encouraged to unleash hobbies and
lifestyle to fit with work life work balance;
• Attracting and recruiting the right talent that will
contribute further in delivering on the Bank’s strategic
plan;
Commercial Bank spreads awareness on how to protect
ourselves in a digital world
Spreading awareness on how to protect
ourselves in a digital world
As part of the Commercial Bank’s role in protecting
the interests of their customers, the Bank has held
a media round table in order spread awareness on
how to protect ourselves in a digital world, and to help
our customers and the public to act wisely to avoid
becoming a victim. This effort comes as a result to
our keenness to equip our valued customers with the
knowledge on how to act when they receive a phishing
email or a phishing SMS. A secondary audience is the
general public, as Commercial Bank plays a vital role in
spreading awareness to the public as well.
2019 Awards
In recognition of its leading digital services in the local
market, Commercial Bank has won a number of awards
from reputable bodies like Global Finance magazine, The
Asian Banker, and World Finance magazine. Commercial
Bank is committed to digital innovation to enhance the
experience of our clients, and receiving these awards
from renowned awarding bodies reflects the strength
and breadth of our best-in-class digital products
and validates our strategy of investing in innovative
technologies.
48
Initiating our talent transfer and secondment program,
enabling knowledge sharing and building experiences,
initially with Alternatif Bank. We’ve built the secondment
program to enable us and our partners to develop
and learn through exposing our talents to different
assignments and learnings.
Learning and development
We invest in making Commercial Bank a great place
for learning. We target our development resources
toward our people who are skilled in sharing knowledge
and training others through leader-led training. This
strengthens our creativity and innovation culture.
With on-demand learning portal, we have provided
all compliance courses through e-learning. With other
development initiatives, we are pursuing our study
support initiative for staff working towards full- or part-
time study programmes, focused on Qatari nationals
and endorsed by the NTC.
The Board of Directors regularly reviews compensation
and benefits to ensure we pay fairly and competitively,
reward high performers, and link incentive payments to the
overall performance of the Bank. The Board of Directors
also focuses on risk management by considering:
• The split 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 2019, building on digitization and lessening prints,
HC operations started with digitization of forms and
lessening prints, increasing efficiency and speed for
basic services and allowing comprehensive views on
effectiveness.
Newly intake in 2019, Commercial Bank has successfully
attracted skilled and competent new graduate
nationals across various strategic business units. These
employees have been able to contribute significantly
and successfully towards the Bank’s strategic goals.
Moreover, focusing on world-class and uplifting
experiences, Commercial Bank successfully attracted
global new key talents and leaders to accelerate its
strategic vision, with technology and customer focus in
mind.
Developing our nationals is one of our strategic pillars.
Through experiences and knowledge transfer, we have
promoted new national leaders from our talent pool.
49
Jassim Al Thani
Chief Human Capital Officer
• Partnering with the ministries and education
institutions; in partnership with the Ministry of Labour
to source national talent and provide them with career
opportunities within the Bank Nationalization plans,
the bank contributes to education and development
in collaboration with universities and schools through
events and training programmes;
• Restructuring concept to all nationalization themes,
from internal development initiatives, mentorship,
top talent program and enhanced development
programs to attract, retain and motivate the right
candidates;
• Newly forming Conflict Management Office CMO,
in alignment with conflict of interest declaration
policy, CMO manages and mitigates declarations
and conflicts, a new process introduced through the
digital forms in employee files, allows declarations to
be made, tracked and updated and most importantly
clarified with CMO to assure business integrity;
• Newly reintroducing e-learning approaches,
developed with the business expertise in Commercial
Bank. We’ve launched e-learning story-based
courses, built on real life sceneries and cases,
enhancing and delivering compliances and on-
demand learning.
Enhanced career experiences
In 2019, going strong with our nationalization programs,
building on inner focused development, progressing
our internal talents to higher positions and enabling
them to take significant roles in the business, from
the newly-introduced head of branches into the
development of our nationals supported by the National
Talent Committee NTC.
Management Review
of Operations continued
Operations
Banking operations have undergone rapid change over
the past few years. There is an increasing pressure to
provide more innovative product solutions that improve
client experience while simultaneously reducing the cost
to transact.
At Commercial Bank, we have a unique ability to upscale
transaction volumes efficiently, thanks to a strategic
change in our operating model and the intelligent use of
new technologies. By onboarding previously outsourced
functionalities in 2017, we centralized technology,
operations and client capabilities under one roof. This
essentially gave us control to streamline and refine our
processes, employ end-to-end digitalization and smart
technologies such as robotic process automation. It
also allowed Commercial Bank to develop a competitive
edge for customization and creativity, allowing bespoke
tailing for client solutions.
Expanding our digital footprint
At Commercial Bank, our digital conversion strategy
is at the forefront of improving client experience and
transacting at the lowest possible cost. Digital solutions
provide the customer with convenient, fast and efficient
products and services, while allowing Commercial
Bank to automate processing end-end, eradicating
manual tasks and enabling capacity to scale at low cost.
This year’s client centric advancement in technology
includes:
• Digital Account Opening, providing fast efficient
onboarding and instant card insurance;
• Digital Wallet, for smart and secure payments;
• Online Trade Portal: allowing customers an efficient,
convenient vehicle to lodge applications for trade
products.
Leonie Ruth Lethbridge
EGM, Chief Operating Officer
Our digital footprint continues to grow with active digital
users increasing 15% year on year, with an increasing
client base migrating to mobile banking. Recognizing
this customer preference, Commercial Bank has
developed a leading edge Mobile App. It is the most
competent financial mobile app in Qatar and in many
cases has 2x functionality compared to competitors’
apps. Self-service rate transactions increased to 96%
supported by continued growth in our award-winning
“60 seconds remittance” programme, mobile banking
transactions and increasing usage in cheque printing
machines and electronic forms.
Investment in key systems supporting future
technological change
This year marked some significant upgrades to key
infrastructure, including the core banking system
and the customer relationship management (CRM)
system. The core banking upgrade sets the bank up
for the future, enabling seamless integration with other
applications while the new CRM system is aligned to
our Sadara customer segment uplift, providing more
structured client coverage and allowing greater client
insights.
50
Transaction Banking continues to be at the
forefront of the banks strategy
Transaction Banking presents an opportunity to create
diversified sustainable earnings, supporting fee income,
low-cost deposits and the benefits of economies of
scale. We continued to enhance our cash management
offering providing flexible, tailored client solutions, which
were recognized by the industry by winning the “Best
Cash Management Bank in Qatar” for the third year in a
row by Asian banker.
Trade and payments have been another area of focus
with the development of the online trade portal, for
convenient fast trade applications. Our reputation for
meeting bespoke client mandates is growing, making us
win the “Best Trade Services” award by Global Finance.
Commercial Bank is a market leader for credit card
propositions in Qatar with over 51% market share (non-
govt), over 14K POS locations, and more than QAR7bn
spend from over 1 million cards. This year, we have also
launched many new products and offerings including:
• CB Fawri, the merchant loyalty platform giving
customers instant discounts, have provided
customers more than QAR 2m in POS purchases.
• First in the market to launch Metal cards for LE
customers and the Vertical card for Sadara Youth.
• More than 3 million taps made by the contactless
payment platform, which is paving the way for future
digital transactions.
Modernizing the branch network to meet customer
requirements
While digital technology is of critical importance to
Commercial Bank and we fully embrace the global
trend towards cashless transactions, our branch
continues to be the favored banking channel for many
of our customers. This year, we have introduced
SMARTBanking to the Doha Metro. Conveniently
located, the smaller sized bespoke branches feature
predominantly automated services for speedy
transactions but it also has some branch presence. We
have established new premium suites for our Private
Banking and Sadara customers that are tailored for
individual attention, access to premium services and
privacy. While our core branches are undergoing a
modern look and feel upgrade to enhance our customer
experiences. Heavy volume branches are being
modified to high volume cash, cheque and mainstream
services.
Commercial Bank wins “Best Cash
Management Bank in Qatar” by Asian Banker
Commercial Bank wins “Best Trade Services”
by Global Finance
51
Management Review
of Operations continued
Internet vs. Mobile Banking Transaction
83%
88%
56%
44%
50% 50%
57%
43%
70%
30%
2014
2015
2016
Internet
2017
Mobile
17%
12%
2018
2019
Digital vs. Branch Transactions
2013
2014
2015
2016
Customer
2017
2018
Branch
2019
Digital
2020
2021
Millions
50
45
40
35
30
25
20
15
10
5
0
Thousands
400
350
300
250
200
150
100
50
0
52
190K
185K
168K
146K
Active Digital Users
147K
75K
126K
67K
99K
57K
88K
50K
66K
44K
2014
2015
2016
Active Users
2018
2017
Mobile Users
2019
2020
44K
29K
2013
Biometric Registered Customers
69K
65K
63K
43K
59K
28K
H1 2017
H2 2017
H1 2018
H2 2018
H1 2019
H2 2019
53
Management Review
of Operations continued
Corporate Mobile Transactions
Jan
Feb
Mar
Apr
2016
May
2017
Jun
Jul
2018
Aug
2019
Sept
Oct
Nov
Dec
2020
Corporate Mobile - easy to access accounts
Jan
Feb
Mar
Apr
2016
May
2017
Jun
Jul
2018
Aug
2019
Sept
Oct
Nov
Dec
2020
10000
8000
6000
4000
2000
0
20000
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
54
Acknowledgement
Commercial Bank’s successful business performance in
2019 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 maintained 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, Amir 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,
His Excellency the Minister of Finance, the Qatar Central
Bank and the Ministry of Commerce and Industry 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 sector to prosper. 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.
55
In 2019, Commercial Bank celebrated
success and achievements that we are
proud of. We recorded the highest annual
net profit in the Bank’s history, introduced
technological innovations, launched
ground-breaking products and services,
and earned prestigious awards. With
these achievements, we are ready to rise
to the challenge and look forward to a
prosperous and successful year ahead as
we believe that “everything is possible.”
The best is yet to come
The best is yet to come
Corporate Governance
COMMERCIAL BANK’S CORPORATE GOVERNANCE
REFLECTS OUR COMMITMENT TO COMPLY WITH
LOCAL REGULATIONS AND INTERNATIONALLY
ACCEPTED STANDARDS INCLUDING TRANSPARENT
DISCLOSURE FOR THE BEST INTERESTS OF OUR
STAKEHOLDERS.
Effective governance is, at its core, simply about doing
the right things for stakeholders. It is enabled by
having the right checks and balances throughout the
organization to ensure that the right things are always
done. It comprises the processes and structures which
affect the way an organization is directed, managed
and monitored and its activities are reported, including:
the elements of internal control, ethics, various risk
functions, policies and procedures, internal audit,
external audit and formal committees that promote
greater transparency and facilitate efficient and effective
management for the best interests of stakeholders.
The Board of Directors firmly believes that good
corporate governance is fundamental in ensuring
the proper management of Commercial Bank in the
interests of all of our stakeholders. We recognise that
the way we interact with stakeholders is key for the
success of our business and the transparent disclosure
of our governance assists investors in their investment
decisions.
Corporate Governance developments
During 2019, Commercial Bank’s core governance
documents were reviewed and updated, namely the
Corporate Governance Charter, Board of Directors
Charter and Board Committees Charter.
Commercial Bank aims to be a leading ESG company in
Qatar and within its international peer group. Due to the
nature of Commercial Bank’s business, the governance
component of ESG is especially critical for the interests
of all our stakeholders, with the Bank’s corporate
governance best practices detailed in the Annual
Corporate Governance Report 2019. In 2019 the Bank
enhanced its ESG disclosure practices by participating in
the QSE’s voluntary ESG disclosure initiative. Commercial
Bank’s ESG data for 2017 to 2019 is publicly available
via the QSE’s Sustainability and ESG Dashboard. In
partnership with a local provider, in 2019 Commercial
Bank commenced recycling of paper printed in Bank
premises, with segregated bins provided for the
separation of paper, plastic and metal waste. Secure
bins are also provided for the shredding and recycling of
confidential paper waste.
Commercial Bank also received the “Best Corporate
Governance in Qatar 2019” award by World Finance
magazine based on the strength of our corporate
governance framework and how this framework
supports good governance.
58
Commercial Bank continued its progress in aligning and
developing the governance of the Group’s subsidiary,
including changes in the board and committees of
Alternatif Bank, in the context of board succession
planning at the subsidiary level.
We regularly monitor developments in corporate
governance guidelines, regulations and best practice
standards in all jurisdictions relevant to our business
operations. In 2019, the QFMA issued new investor
relations rules with mandatory requirements on listed
companies as part of the QSE’s efforts to further develop
the investor relations environment including appointing
a dedicated IRO, hosting a dedicated investor relations
section on the Bank’s website and holding quarterly
investor conference calls.
In 2019, Commercial Bank established four new internal
Management Committees involved in the day-to-
day management of the Bank due to governance
requirements and the changing nature of the Bank’s
operations. The new Management Committees are
the Operational Risk Committee, Technology Risk
Committee, Information Security Committee and
Compliance Risk Committee.
Refer to “Management Committees” section in the
Annual Corporate Governance Report for further
information.
Corporate Governance framework
The Board understands that sound corporate
governance principles and practices are fundamental
to maintaining the trust of its stakeholders, which is also
critical in business growth, sustainability and profitability.
The Board is committed to implement the corporate
governance principles of justice, equality among
stakeholders without discrimination, transparency and
disclosure, while upholding the values of corporate
social responsibility and acting in the public interest of
Commercial Bank and stakeholders over their personal
interests, as well as performing their duties, tasks and
functions in good faith, integrity, honour and sincerity.
The implementation of these principles is driven by a
qualified Board aided by a seasoned and experienced
Executive Management team. The Board ensures that
the Bank adheres to these corporate governance
principles in its day-to-day activities at all times.
Refer to “Board of Directors” section in the Annual
Corporate Governance Report for further information.
Commercial Bank’s Code of Conduct provides a clear
statement of our conduct expectations and ethical
values, supported by our conduct and ethics standards.
Refer to “Governance Framework” section in the Annual
Corporate Governance Report for further information.
59
Corporate Governance
continued
Complying with rules and regulations
We fully adhere to the principles set out in the QCB
Corporate Governance Guidelines and to the provisions
of the QFMA Corporate Governance Code as at 31
December 2019.
The detailed Annual Corporate Governance Report
2019 is an attachment to this Annual Report, forms an
integral part of it, and is presented to shareholders
for approval at the Bank’s AGM in 2020. The Annual
Corporate Governance Report 2019 can also be viewed
on Commercial Bank’s website at www.cbq.qa
Our governance includes a committee structure and
a comprehensive set of corporate policies which are
developed, reviewed and approved by the Board, the
respective Board Committees, the Group CEO, CRO,
and the board of directors of the Bank’s subsidiaries, in
accordance with their respective responsibilities and
levels of authority.
Refer to “Board of Directors” and “Board Committees”
sections in the Annual Corporate Governance Report for
further information.
The main rules, procedures and practical application
of Commercial Bank’s governance are contained in
the Bank’s Corporate Governance Charter, Board of
Directors Charter and Board Committees Charter. These
charters reflect Commercial Bank’s long-standing ethical
governance practices and the regulatory requirements
mandated by:
• guidelines and instructions issued by the Qatar
Central Bank on 26 July 2015 by virtue of Circular No.
68/2015 (QCB Corporate Governance Guidelines);
• the Commercial Companies Law promulgated by Law
No. 11 of 2015 (CCL); and
• the Governance Code for Companies and Legal
Entities Listed on the Main Market issued by Qatar
Financial Markets Authority pursuant to Decision No. 5
of 2016 (QFMA Corporate Governance Code).
These charters also follow the recommendations of
international best practice for corporate governance
developed by leading international frameworks.
60
2019
Consolidated Financial Statements
31 December 2019
61
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 consolidated financial statements of The Commercial Bank (P.S.Q.C.) (the “Bank”) and its subsidiaries
(together referred to as the “Group”), which comprise the consolidated statement of financial position as at 31 December 2019,
and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of
changes in equity and consolidated statement of cash flows for the year then ended, and notes to the consolidated financial
statements, including a summary of significant accounting policies.
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 2019, and its consolidated financial performance and its consolidated cash
flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). 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 Code of Ethics for Professional Accountants
(including International Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our
audit of the 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. For
each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated financial
statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of
procedures designed to respond to our assessment of the risks of material misstatement of the consolidated financial
statements. The results of our audit procedures, including the procedures performed to address the matters below, provide
the basis for our audit opinion on the accompanying consolidated financial statements.
62
Report on the Audit of the Consolidated Financial Statements (continued)
Key audit matters (continued)
Key audit matter
1. Impairment of loans and advances to customers
The process for estimating impairment provision on credit
risk associated with loans and advances in accordance with
IFRS 9 Financial instruments (IFRS 9) involves significant
judgement.
IFRS 9 requires use of the Expected Credit Loss (“ECL”)
model for the purposes of calculating impairment provision.
ECL model requires the Group to exercise significant
judgement using subjective assumptions when determining
both the timing and the amounts of ECL for loans and
advances. Due to the complexity of requirements under
IFRS 9, significance of judgements applied and the Group’s
exposure to loans and advances forming a major portion of
the Group’s assets, the audit of ECL for loans and advances
is a key audit matter.
As at 31 December 2019, the Group’s gross loans and
advances amounted to QR 90,923 million and the related
allowances for impairment amounted to QR 3,686 million,
comprising QR 935 million of ECL against Stage 1 and 2
exposures and QR 2,751 million against exposures classified
under Stage 3.
How our audit addressed the key audit matter
Our audit procedures in this area focused on the following
key areas:
• We assessed:
•
the Group’s IFRS 9 based impairment provisioning
policy including significant increase in credit risk
criteria with the requirements of IFRS 9;
• Group’s ECL modeling techniques and methodology
•
against the requirements of IFRS 9; and
the
theoretical soundness and
mathematical integrity of the models.
tested
the
• We obtained an understanding of the design and tested
the operating effectiveness of relevant controls over
the credit process and ECL model.
• We have also tested completeness and accuracy of the
data used and reasonableness of the management
assumptions, involving specialists where needed.
• We understood and assessed the significant modeling
assumptions for exposures.
The basis of calculation of ECL is presented in the summary
of significant accounting policies and notes 4 (b) and 10 to
the consolidated financial statements.
•
For a sample of exposures, we performed procedures
to evaluate:
• Appropriateness of exposure at default, probability
of default and loss given default (including collateral
values used) in the calculation of ECL;
• Timely identification of exposures with a significant
increase in credit risk and appropriateness of the
Group’s staging; and
• The ECL calculation.
• Assessed the impairment allowance for individually
impaired loans and advances (stage 3) in accordance
with IFRS.
63
Independent Auditor’s Report continued
Report on the Audit of the Consolidated Financial Statements (continued)
Key audit matters (continued)
Key audit matter
2. Impairment of investments in associates
The determination of recoverable amounts of the Group’s
investments in associates relies on management’s estimates
of future cash flows and their judgment with respect to the
the uncertainty of
associates’ performance. Due
forecasting and discounting future cash flows, the level of
management’s judgement involved and the significance of
the Group’s investment in associates, this audit area is
considered as a key audit matter.
to
As at 31 December 2019, the Group’s
in
associates amounted to QR 4,021 million. Refer to the
significant accounting policies and note
the
consolidated financial statements.
investment
12
to
How our audit addressed the key audit matter
Our audit procedures focused on the following key areas:
• We obtained the calculation of recoverable amounts of
the Group’s investments in associates.
• With the assistance of our own specialists, we assessed
the assumptions and compared the estimates used to
externally available industry, economic and financial
data and methodologies used by the management to
determine the recoverable amount of the investments
in associates.
• We assessed the forecasts of future cash flows prepared
by management.
• Discussions with management on the performance of
the associates and their future outlook.
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. The Bank’s 2019 Annual Report is expected to be made available to us after the date of this auditor’s
report. 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 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.
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 IFRSs and the applicable provisions of Qatar Central Bank 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.
64
Report on the Audit of the Consolidated Financial Statements (continued)
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 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 considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of user taken on the
basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism
throughout the audit. We also:
•
Identify and assess the risk 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 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 auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosure
is 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.
65
Independent Auditor’s Report continued
Report on the Audit of the Consolidated Financial Statements (continued)
Auditor’s responsibilities for the audit of the consolidated financial statements (continued)
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 disclosures 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.
Report on other legal and regulatory requirements
We have obtained all the information and explanations, which we considered necessary for the purpose of our audit. We have
read the report of the Board of Directors to be included in the Annual Report and the financial information contained therein is
in agreement with the books and records of the Bank. We confirm that we are not aware of any contraventions by the Bank of
its Articles of Association and the amendments thereto, the applicable provisions of Qatar Central Bank Law No. 13 of 2012 and
of the Qatar Commercial Companies Law No. 11 of 2015, having occurred during the financial 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 2019.
Ahmed Sayed
of Ernst & Young
Qatar Auditors Registry Number 326
Doha - State of Qatar
Date: 26 February 2020
66
Consolidated Statement of
Financial Position
As at 31 December
Notes
2019
ASSETS
Cash and balances with central banks
Due from banks
Loans and advances to customers
Investment securities
Investment in associates and a joint arrangement
Property and equipment
Intangible assets
Other assets
TOTAL ASSETS
LIABILITIES
Due to banks
Customer deposits
Debt securities
Other borrowings
Other liabilities
TOTAL LIABILITIES
8
9
10
11
12
14
15
16
17
18
19
20
21
6,075,044
12,396,433
88,009,448
26,844,226
4,021,239
2,853,712
236,377
7,100,005
147,536,484
22,530,782
76,296,592
9,524,590
12,043,167
5,385,126
125,780,257
QAR ‘000s
2018
(Restated)
6,729,798
9,474,893
84,642,464
22,206,077
4,512,940
2,718,913
283,049
4,359,615
134,927,749
13,950,459
71,785,783
16,071,746
8,379,734
4,883,568
115,071,290
EQUITY
Share capital
4,047,254
Legal reserve
9,745,152
General reserve
26,500
Risk reserve
886,151
Fair value reserve
(96,333)
Treasury shares
(179,507)
Foreign currency translation reserve
(1,816,866)
Other reserves
959,764
Revaluation reserve
1,283,920
Retained earnings
1,000,413
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE BANK
15,856,448
Non-controlling interests
11
Instruments eligible for additional capital
4,000,000
TOTAL EQUITY
19,856,459
TOTAL LIABILITIES AND EQUITY
134,927,749
The consolidated financial statements were approved by the Board of Directors on 29th January 2020 and were signed on its
behalf by:
4,047,254
9,841,333
26,500
1,421,236
600,094
(38,860)
(1,946,677)
859,893
1,283,920
1,661,524
17,756,217
10
4,000,000
21,756,227
147,536,484
22
22
22
22
22
22
22
22
22
22
Sheikh Abdulla 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 40 form an integral part of these consolidated financial statements
67
Consolidated Income Statement
For the year ended 31 December
Notes
2019
Interest income
Interest expense
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net foreign exchange gain
Net income from investment securities
Other operating income
Net operating income
Staff costs
Depreciation
Amortization of intangible assets
Net impairment reversal/(losses) on investment securities
Net impairment losses on loans and advances to customers
Net impairment (losses)/reversal on other financial assets
Impairment on Investment in an Associate
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
Earnings per share
Basic/diluted earnings per share (QAR)
25
26
27
28
29
30
31
32
14
15
10
33
12
6,795,410
(3,832,227)
2,963,183
1,289,220
(374,374)
914,846
281,045
68,993
118,578
4,346,645
(796,352)
(149,994)
(55,023)
6,797
(594,427)
(66,108)
(413,881)
(226,644)
2,051,013
(6,799)
2,044,214
(23,173)
2,021,041
2,021,040
1
2,021,041
QAR ‘000s
2018
(Restated)
6,077,322
(3,595,000)
2,482,322
1,117,965
(360,727)
757,238
202,247
(18,826)
85,576
3,508,557
(676,466)
(129,227)
(54,749)
(399)
(927,164)
92,055
-
(312,893)
1,499,714
181,483
1,681,197
(7,272)
1,673,925
1,673,924
1
1,673,925
34
0.44
0.35
The attached notes 1 to 40 form an integral part of these consolidated financial statements.
68
Consolidated Statement of
Comprehensive Income
For the year ended 31 December
Notes
2019
QAR ‘000s
2018
(Restated)
Profit for the year
2,021,041
1,673,925
Other comprehensive income for the year:
Items that are, or may be subsequently reclassified to profit or loss:
Foreign currency translation differences from foreign operation
Share of other comprehensive income of investment in associates and a
joint arrangement
Net movement in cash flow hedges-effective portion of changes in fair
value
Net change in fair value of investments in debt securities designated at
FVOCI :
Net change in fair value
Net amount transferred to consolidated statement of income
Items that may not be subsequently reclassified to profit or loss:
Net change in fair value of equity investments designated at FVOCI
Share of other comprehensive income of investment in associates and a
joint arrangement
Revaluation reserve on land and buildings
Other comprehensive income /(loss) for the year
23
23
23
23
23
23
23
(129,811)
28,059
9,053
663,769
(9,091)
(34,072)
(6,008)
-
521,899
(432,940)
(24,959)
24,436
2,128
(10,001)
(19,484)
(5,423)
19,126
(447,117)
Total comprehensive income for the year
2,542,940
1,226,808
Attributable to:
Equity holders of the bank
Non-controlling interests
Total comprehensive income for the year
2,542,939
1
2,542,940
1,226,807
1
1,226,808
The attached notes 1 to 40 form an integral part of these consolidated financial statements.
69
Consolidated Statement of
Changes in Equity
For the year ended 31 December 2019
Notes
Share
capital
Legal
reserve
General
reserve
Risk
reserve
Fair value
reserve
Balance as at 1 January 2019
4,047,254
9,745,152
26,500
886,151
(96,333)
(179,507)
(1,816,866)
959,764
1,283,920
1,000,413
15,856,448
11
4,000,000
19,856,459
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transfer to legal reserve
Transfer to risk reserve
FVOCI instrument loss transferred to
Retained earnings
Dividend for instruments eligible for
additional capital
Net movement in other reserve
Provision for Sports and Social Activities
Support Fund
Movement in treasury shares
Transactions with equity holders,
recognised directly in equity
Contributions by and distributions to
equity holders of the bank:
Dividends for the year 2018
Total contributions by and distributions
to equity holders of the bank
Net movement in non-controlling interests
Balance as at 31 December 2019
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
8,803
-
-
-
-
-
87,378
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
535,085
-
-
-
-
-
-
-
651,710
651,710
-
-
44,717
-
-
-
-
-
22
22
22
24
22
22
-
-
4,047,254 9,841,333
-
-
26,500 1,421,236
-
600,094
(38,860)
(1,946,677)
859,893
1,283,920
1,661,524
17,756,217
10 4,000,000
21,756,227
Foreign
currency
translation
reserve
Treasury
shares
Other
reserves
Revaluation
reserve
Retained
earnings
QAR ‘000s
Total equity
attributable
to equity
holders of
the Bank
Instruments
eligible for
additional
Non-
controlling
interests
capital
Total equity
(240,000)
(240,000)
(99,871)
-
-
-
-
-
-
-
-
-
-
-
-
140,647
(129,811)
(129,811)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,021,040
-
2,021,040
(8,803)
(525,000)
(44,717)
99,871
(50,526)
16,334
-
-
-
-
-
-
-
-
-
-
-
-
-
2,021,040
521,899
2,542,939
10,085
(50,526)
244,359
-
-
-
-
(607,088)
(607,088)
(607,088)
(607,088)
-
(2)
1
-
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,021,041
521,899
2,542,940
10,085
-
-
(240,000)
(50,526)
244,359
(607,088)
(607,088)
(2)
The attached notes 1 to 40 form an integral part of these consolidated financial statements
70
Balance as at 1 January 2019
4,047,254
9,745,152
26,500
886,151
(96,333)
(179,507)
(1,816,866)
959,764
1,283,920
1,000,413
15,856,448
11
4,000,000
19,856,459
Foreign
currency
translation
reserve
Treasury
shares
Other
reserves
Revaluation
reserve
Retained
earnings
Total equity
attributable
to equity
holders of
the Bank
Non-
controlling
interests
Instruments
eligible for
additional
capital
QAR ‘000s
Total equity
-
-
-
-
-
-
-
-
-
140,647
-
-
-
(129,811)
(129,811)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(99,871)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,021,040
-
2,021,040
(8,803)
(525,000)
(44,717)
2,021,040
521,899
2,542,939
-
10,085
-
(240,000)
(240,000)
99,871
(50,526)
16,334
-
(50,526)
244,359
(607,088)
(607,088)
(607,088)
(607,088)
1
-
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,021,041
521,899
2,542,940
-
10,085
-
(240,000)
(50,526)
244,359
(607,088)
(607,088)
4,047,254 9,841,333
26,500 1,421,236
600,094
-
(38,860)
-
(1,946,677)
-
859,893
-
1,283,920
-
1,661,524
-
17,756,217
-
(2)
10 4,000,000
(2)
21,756,227
For the year ended 31 December 2019
Notes
Share
capital
Legal
reserve
General
reserve
Risk
reserve
Fair value
reserve
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transfer to legal reserve
Transfer to risk reserve
FVOCI instrument loss transferred to
Retained earnings
Dividend for instruments eligible for
additional capital
Net movement in other reserve
Provision for Sports and Social Activities
Support Fund
Movement in treasury shares
Transactions with equity holders,
recognised directly in equity
Contributions by and distributions to
equity holders of the bank:
Dividends for the year 2018
Total contributions by and distributions
to equity holders of the bank
Net movement in non-controlling interests
Balance as at 31 December 2019
22
22
22
24
22
22
8,803
535,085
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
87,378
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
651,710
651,710
44,717
-
-
-
-
-
-
-
-
-
The attached notes 1 to 40 form an integral part of these consolidated financial statements
71
Consolidated Statement of
Changes in Equity continued
For the year ended 31 December 2018
Notes
Share
capital
Legal
reserve
General
reserve
Risk
reserve
Fair value
reserve
(Restated)
Balance as at 1 January 2018
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
Transition adjustments on adoption of IFRS 9
on 1 January 2018 (Restated)
Balance as at 1 January 2018 (Restated)
Profit for the year (Restated)
Other comprehensive loss (Restated)
Total comprehensive income for the year
(Restated)
Transfer to legal reserve
Transfer to risk reserve
Net movement in other reserves and fair value
reserve (Restated)
Dividend for Instruments eligible for additional
capital
Provision for Sports and Social Activities
Support Fund
Transactions with equity holders, recognised
directly in equity
Contributions by and distributions to equity
holders of the bank:
Dividends for the year 2017
Total contributions by and distributions to
equity holders of the bank
Net movement in non-controlling interests
Balance as at 31 December 2018
-
-
-
(1,529,257)
(18,530)
(209,281)
4,047,254
-
-
9,742,066
-
-
26,500
-
-
-
-
-
-
-
-
-
-
-
3,086
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22
22
22
24
22
361,151
-
-
(63,030)
-
(33,303)
-
(33,303)
-
525,000
-
-
-
-
-
-
-
-
-
-
-
-
-
4,047,254
-
9,745,152
-
26,500
-
886,151
-
(96,333)
The attached notes 1 to 40 form an integral part of these consolidated financial statements
72
Foreign
currency
translation
reserve
Treasury
shares
Other
reserves
(Restated)
Revaluation
reserve
Retained
earnings
(Restated)
QAR ‘000s
Total equity
attributable
to equity
holders of
the Bank
Instruments
eligible for
additional
Non-
controlling
interests
capital
Total equity
(179,507)
(1,383,926)
854,908
1,264,794
15
4,000,000
-
-
-
-
-
-
-
-
-
-
-
-
(432,940)
(432,940)
104,856
-
-
-
-
-
-
-
-
-
-
51,510
(1,705,558)
645,736
1,673,924
-
15,315,946
1,673,924
(447,117)
1,673,924
1,226,807
19,126
19,126
(3,086)
(525,000)
(104,856)
(240,000)
(240,000)
(41,580)
(41,580)
(404,725)
(404,725)
(404,725)
(404,725)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
-
1
-
-
-
-
-
-
-
(5)
11
-
-
-
-
-
-
-
-
-
-
-
-
(1,705,558)
19,315,961
1,673,925
(447,117)
1,226,808
-
-
-
(240,000)
(41,580)
(404,725)
(404,725)
(5)
(179,507)
(1,816,866)
959,764
1,283,920
1,000,413
15,856,448
4,000,000
19,856,459
Balance as at 1 January 2018
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
Foreign
currency
translation
reserve
Treasury
shares
Other
reserves
(Restated)
Revaluation
reserve
Retained
earnings
(Restated)
Total equity
attributable
to equity
holders of
the Bank
Non-
controlling
interests
Instruments
eligible for
additional
capital
QAR ‘000s
Total equity
(1,529,257)
(18,530)
-
-
(209,281)
-
51,510
(1,705,558)
(179,507)
-
-
-
-
-
-
-
-
-
-
(1,383,926)
-
(432,940)
(432,940)
-
-
-
-
-
-
-
854,908
-
-
1,264,794
-
19,126
645,736
1,673,924
-
15,315,946
1,673,924
(447,117)
-
-
-
104,856
-
-
-
-
19,126
1,673,924
1,226,807
-
-
-
-
-
-
-
(3,086)
(525,000)
(104,856)
-
-
-
(240,000)
(240,000)
(41,580)
(41,580)
(404,725)
(404,725)
(404,725)
(404,725)
-
15
1
-
1
-
-
-
-
-
-
-
-
(1,705,558)
4,000,000
-
-
-
-
-
-
-
-
-
-
19,315,961
1,673,925
(447,117)
1,226,808
-
-
-
(240,000)
(41,580)
(404,725)
(404,725)
4,047,254
9,745,152
26,500
886,151
(96,333)
-
(179,507)
-
(1,816,866)
-
959,764
-
1,283,920
-
1,000,413
-
15,856,448
(5)
11
-
4,000,000
(5)
19,856,459
For the year ended 31 December 2018
Notes
Share
capital
Legal
reserve
General
reserve
Risk
reserve
Fair value
reserve
(Restated)
Transition adjustments on adoption of IFRS 9
on 1 January 2018 (Restated)
Balance as at 1 January 2018 (Restated)
Profit for the year (Restated)
Other comprehensive loss (Restated)
Total comprehensive income for the year
(Restated)
Transfer to legal reserve
Transfer to risk reserve
Net movement in other reserves and fair value
reserve (Restated)
Dividend for Instruments eligible for additional
capital
Support Fund
directly in equity
Provision for Sports and Social Activities
Transactions with equity holders, recognised
Contributions by and distributions to equity
holders of the bank:
Dividends for the year 2017
Total contributions by and distributions to
equity holders of the bank
Net movement in non-controlling interests
Balance as at 31 December 2018
4,047,254
9,742,066
26,500
361,151
(63,030)
3,086
525,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(33,303)
(33,303)
-
-
-
-
-
-
-
-
-
22
22
22
24
22
The attached notes 1 to 40 form an integral part of these consolidated financial statements
73
Consolidated Statement
of Cash Flows
For the year ended 31 December
Notes
2019
QAR ‘000s
2018
(Restated)
Cash flows from operating activities
Profit before tax
Adjustments for:
Net impairment losses on loans and advances to customers
Impairment (reversal) / losses on investment securities
Net impairment losses / (reversal) on other financial assets
Depreciation
Amortization of intangible assets and transaction costs
Gain on Sale of Treasury shares
Net (gain) / loss income on investment securities
Gain on disposal of property and equipment
Impairment on Investment in an Associate
Share of results of associates and a 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 flows from / (used in) operating activities
14
30
12
Cash flows from investing activities
Acquisition of investment securities
Investment in associate participating in right issue
Proceeds from sale of treasury shares
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 flows used in investing activities
12
14&15
2,044,214
1,681,197
594,427
(6,797)
66,108
149,994
90,926
(87,378)
(64,642)
3,902
413,881
6,799
3,211,434
(3,845,259)
(5,821,742)
(2,341,566)
10,167,792
5,702,956
490,037
(41,580)
7,522,072
(8,620,481)
-
228,025
93,072
4,255,059
(157,359)
6,801
(4,194,883)
927,164
399
(92,055)
129,227
97,592
-
24,131
(91)
-
(181,483)
2,586,081
908,197
(898,316)
(1,322,483)
673,265
(3,148,142)
522,206
(15,091)
(694,283)
(7,323,607)
(272,491)
-
76,627
3,977,082
(286,431)
4,184
(3,824,636)
The attached notes 1 to 40 form an integral part of these consolidated financial statements
74
Consolidated Statement
of Cash Flows continued
For the year ended 31 December
Notes
2019
Cash flows from financing activities
Proceeds from issue of debt securities
Repayment of debt securities
Repayment of other borrowings
Proceeds from other borrowings
Payment of Lease Liability
Payment on Coupon of instrument eligible for Tier 1 Capital
Dividends paid (note 16)
Net cash flows (used in) / from financing activities
Net increase / (decrease) in cash and cash equivalents
Effect of exchange rate fluctuation
Cash and cash equivalents as at 1 January
Cash and cash equivalents at the end of the year
Net cash flows from interest and dividend:
Interest paid
Interest received
Dividend received
QAR ‘000s
2018
(Restated)
9,508,091
(5,055,194)
(6,634,330)
6,583,404
-
(240,000)
(404,725)
3,757,246
(761,673)
424,784
10,321,435
9,984,546
19
19
20
20
36
3,486,978
(9,932,780)
(3,735,723)
7,793,321
(39,499)
(240,000)
(607,088)
(3,274,791)
52,398
19,027
9,984,546
10,055,971
3,829,417
6,916,197
4,350
3,455,544
5,864,966
5,305
The attached notes 1 to 40 form an integral part of these consolidated financial statements
75
Notes to the Consolidated
Financial Statements
1. REPORTING ENTITY
The Commercial Bank (P.S.Q.C.) (the “Bank”) is an entity domiciled in the State of Qatar and was incorporated in 1974 as a
public shareholding 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 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, branches
and subsidiaries.
The principal subsidiaries of the Group are as follows:
Name of subsidiary
Country of
incorporation
Capital of the
subsidiary
Activity of the
subsidiary
Percentage of
ownership
Alternatifbank A.S. (“ABank”)
Commercial Bank Financial
Services (L.L.C.)
CBQ Finance Limited
Turkey
Qatar
TRY 1,730,655,000
QAR 100,000,000
Bermuda
US$ 1,000
2019
100%
100%
2018
100%
100%
100%
100%
Banking services
Brokerage
services
Debt issuance for
the Bank
2. BASIS OF PREPARATION
(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:
•
•
•
•
•
•
derivative financial instruments;
investments measured at fair value through profit or loss (‘FVTPL’);
other financial assets designated at fair value through profit or loss (‘FVTPL’);
financial investment measured at fair value through other comprehensive income (‘FVOCI’);
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.
76
2. BASIS OF PREPARATION (continued)
(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.
3. SIGNIFICANT ACCOUNTING POLICIES
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) New standards, amendments and interpretations
New standards, amendments and interpretations effective from 1 January 2019
The following standards, amendments and interpretations, which became effective as of 1 January 2019, are relevant to
the Group:
IFRS 16 Leases
IFRIC 23 Uncertainty over Income Tax Treatment
IFRS 9 (Amendments) Prepayment Features with Negative Compensation
IFRS 9/IAS 39 and IFRS (Amendments) Interest Rate Benchmark Reform
01-Jan-19
01-Jan-19
01-Jan-19
01-Jan-19
The adoption of the above did not result in any changes to previously reported net profit or equity of the Group except as
mentioned below.
(i)
IFRS 16 Leases
IFRS 16 was issued in January 2016. It will result in almost all leases being recognized on the balance sheet by lessee,
as the distinction between operating and finance leases is removed. Under the new standard, an asset (the right to
use the leased item) and a financial liability to pay rentals are recognized. The only exception are short-term and low-
value leases.
The Group has applied the standard from its mandatory adoption date of 1 January 2019. The Group has applied the
simplified transition approach and has not restated comparative amounts, prior to the date of the standard.
77
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(a) New standards, amendments and interpretations (continued)
(i)
IFRS 16 Leases (continued)
Further the Group has used the following practical expedients on initial application:
Used the Group’s previous assessment of which existing contracts are or contain lease;
-
- Where the unexpired lease term of less than 12 months or leases are of low value (USD 5,000 or less), then the
Group has elected to use the short term lease exemption.
The Group’s activities as a lessor are not material and there is no significant impact on the financial statements.
When measuring lease liabilities, the Group discounted lease payments using its incremental borrowing rate at
1 January 2019.
The following amounts are recognised under the new standard and included in the respective headings of the
consolidated statement of financial position and consolidated statement of income:
Right of use Asset (Property & Equipment)
Lease Liability (Other Liabilities)
Depreciation charge for Right of Use Asset
Interest expense on lease liabilities
31 December
2019
132,616
133,333
1 January
2019
142,020
130,373
31 December
2019
34,220
11,149
Standards issued but not yet effective
A number of standards and amendments to standards are issued but not yet effective and the Group has not adopted
these in the preparation of these consolidated financial statements. The below standards may have a significant
impact on the Group’s consolidated financial statements, however, the Group is currently evaluating the impact of
these new standards. The Group will adopt these new standards on the respective effective dates.
Amendments to IFRS 3: Definition of a Business
Amendments to IAS 1 and IAS 8: Definition of Material
78
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) 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 acquiree 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 acquiree 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 IFRS 9 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 of any non-controlling interest and the acquisition-date fair value of any
previous equity interest 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 statement of income.
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 3, 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.
79
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(b) Basis of consolidation (continued)
(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.
(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 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.
The Bank performs impairment assessment of investment in associates on an annual basis. Impairment testing
involves calculating the value in use (VIU) by estimating the present values of future cash flows based on management’s
estimates of future earnings available to ordinary shareholders and observable market inputs. Where the carrying
amount exceeds the VIU, an impairment would be recognized in the statement of income and the carrying amount
will be reduced.
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.
Associates’ 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 38.
80
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(c) 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.
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.
(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.
(d) 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.
81
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Financial assets and financial liabilities (continued)
(ii) Classification
Financial assets
On initial recognition, a financial asset is classified as measured at: amortised cost, FVOCI or FVTPL.
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at
FVTPL:
•
•
The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
A debt instrument is measured at FVOCI only if it meets both of the following conditions and is not designated as at
FVTPL:
•
•
The asset is held within a business model whose objective is achieved by both collecting contractual cash flows
and selling financial assets; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present
subsequent changes in fair value in OCI. This election is made on an investment-by-investment basis.
All other financial assets are classified as measured at FVTPL.
In addition, on initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the
requirements to be measured at amortised cost or at FVOCI or at FVTPL if doing so eliminates or significantly reduces
an accounting mismatch that would otherwise arise.
Business model assessment
The Group makes an assessment of the objective of a business model in which an asset is held at a portfolio level
because this best reflects the way the business is managed and information is provided to management. The
information considered includes:
•
•
•
•
The stated policies and objectives for the portfolio and the operation of those policies in practice;
How the performance of the portfolio is evaluated and reported to the Group’s management;
The risks that affect the performance of the business model (and the financial assets held within that business
model) and how those risks are managed;
How managers of the business are compensated.
The frequency, volume and timing of sales in prior periods, the reasons for such sales and its expectations about
future sales activity.
82
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Financial assets and financial liabilities (continued)
(ii) Classification (continued)
Financial assets that are held for trading or managed and whose performance is evaluated on a fair value basis are
measured at FVTPL because they are neither held to collect contractual cash flows nor held both to collect contractual
cash flows and to sell financial assets.
Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition.
‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal
amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk
and administrative costs), as well as profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest (“the SPPI test”), the
Group considers the contractual terms of the instrument. This includes assessing whether the financial asset contains
a contractual term that could change the timing or amount of contractual cash flows such that it would not meet this
condition. In making the assessment, the Group considers contingent events that would change the amount and
timing of cash flows, prepayment and extension terms, terms that limit the Group’s claim to cash flows from specified
assets and features that modify consideration of the time value of money.
Reclassifications
Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Group
changes its business model for managing financial assets. The reclassification takes place from the start of the first
reporting period following the change.
Financial liabilities
The Group has classified and measured its financial liabilities at amortized cost.
(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.
Any cumulative gain/loss recognised in OCI in respect of equity investment securities designated as at FVOCI is not
recognised in the consolidated income statement on derecognition of such securities.
83
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Financial assets and financial liabilities (continued)
(iii) Derecognition (continued)
A financial asset (in whole or in part) is derecognised where:
-
-
the rights to receive cash flows from the asset have expired;
the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and either
(a) the Group has transferred substantially all the risks and rewards of ownership or (b) when it has neither
transferred or retained substantially all the risks and rewards and when it no longer has control over the financial
asset, but has transferred control of the asset.
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) Modification of financial assets and liabilities
Financial Assets
If the terms of a financial asset are modified, the Group evaluates whether the cash flows of the modified asset are
substantially different. If the cash flows are substantially different, then the contractual rights to cash flows from the
original financial asset are deemed to have expired. In this case, the original financial asset is derecognised and a new
financial asset is recognised at fair value, and recalculates a new effective interest rate for the asset. The date of
renegotiation is consequently considered to be the date of initial recognition for impairment calculation purpose,
including for the purpose of determining whether a significant increase in credit risk has occurred.
If the cash flows of the modified asset carried at amortised cost are not substantially different, then the modification
does not result in derecognition of the financial asset. In this case, the Group recalculates the gross carrying amount
of the financial asset based on the revised cash flows of the financial assets and recognises the amount arising from
adjusting the gross carrying amount as a modification gain or loss in the consolidated income statement. If such a
modification is carried out because of financial difficulties of the borrower, then the gain or loss is presented together
with impairment losses. In other cases, it is presented as interest income.
Financial Liabilities
The Group derecognises a financial liability when its terms are modified and the cash flows of the modified liability are
substantially different. In this case, a new financial liability based on the modified terms is recognised at fair value. The
difference between the carrying amount of the financial liability extinguished and the new financial liability with
modified terms is recognised in the consolidated income statement.
84
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Financial assets and financial liabilities (continued)
(v) 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.
(vi) 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 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.
85
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Financial assets and financial liabilities (continued)
(vi) Measurement principles (continued)
•
Fair value measurement (continued)
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.
(vii) Impairment
The Group recognises loss allowances for expected credit losses (ECL) on the following financial instruments that are
not measured at FVTPL:
-
-
Financial assets that are debt instruments; and
Loan commitments and financial guarantee contracts.
No impairment loss is recognised on equity investments.
The Group measures loss allowances at an amount equal to lifetime ECL, except for the following, for which they are
measured as 12-month ECL:
-
-
debt investment securities that are determined to have low credit risk at the reporting date; and
other financial instruments on which credit risk has not increased significantly since their initial recognition.
12-month ECL are the portion of ECL that result from default events on financial instruments that are possible with the
12 months after the reporting date.
The Group applies three-stage approach to measure expected credit losses (ECL) on financial assets carried at
amortised cost and debt instruments classified as FVOCI. Assets migrate through the following three stages based
on the change in credit quality since initial recognition.
Stage 1: 12 months ECL - not credit impaired Stage 1 includes financial assets on initial recognition and that do not have
a significant increase in credit risk since the initial recognition or that have low credit risk. For these assets, ECL are
recognised on the gross carrying amount of the asset based on the expected credit losses that result from default
events that are possible within 12 months after the reporting date. Interest is computed on the gross carrying amount
of the asset.
Stage 2: Lifetime ECL - not credit impaired Stage 2 includes financial assets that have had a significant increase in
credit risk (SICR) since initial recognition but that do not have objective evidence of impairment. For these assets,
lifetime ECL are recognised, but interest is still calculated on the gross carrying amount of the asset. Lifetime ECL are
the expected credit losses that result from all possible default events over the expected life of the financial instrument.
Stage 3: Lifetime ECL - credit impaired Stage 3 includes financial assets that have objective evidence of impairment at
the reporting date. For these assets, lifetime ECL are recognised.
86
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(d) Financial assets and financial liabilities (continued)
(vii) Impairment (continued)
Measurement of ECL
ECL are a probability-weighted estimate of credit losses. They are measured as follows:
-
-
-
-
Financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e.
the difference between the cash flows due to the entity in accordance with the contract and the cash flows that
the Group expects to receive);
Financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying
amount and the present value of estimated future cash flows;
Undrawn loan commitments: as the present value of the difference between the contractual cash flows that are
due to the Group if the commitment is drawn down and the cash flows that the Group expects to receive; and
Financial guarantee contracts: the expected payments to reimburse the holder less any amounts that the Group
expects to recover.
Restructured financial assets
If the terms of a financial asset are renegotiated or modified or an existing financial asset is replaced with a new one
due to financial difficulties of the borrower, then an assessment is made of whether the financial asset should be
derecognised and ECL are measured as follows:
-
-
if the expected restructuring will not result in derecognition of the existing asset, then the expected cash flows
arising from the modified financial asset are included in calculating the cash shortfalls from the existing asset;
if the expected restructuring will result in derecognition of the existing asset, then the expected fair value of the
new asset is treated as the final cash flow from the existing financial asset at the time of its derecognition. This
amount is included in calculating the cash shortfalls from the existing financial asset that are discounted from the
expected date of derecognition to the reporting date using the original effective interest rate of the existing
financial asset.
Credit-impaired financial assets
At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt financial
assets carried at FVOCI are credit impaired. A financial asset is ‘credit-impaired’ when one or more events that have a
detrimental impact on the estimated future cash flows of the financial asset have occurred.
Evidence that a financial asset is credit-impaired includes the following observable data:
-
-
-
-
-
Significant financial difficulty of the borrower or issuer;
A breach of contract such as a default or past due event;
The restructuring of a loan or advance by the Group on terms that the Group would not consider otherwise;
It is becoming probable that the borrower will enter bankruptcy or other financial reorganisation; or
the disappearance of an active market for a security because of financial difficulties.
87
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(e) 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 includes amounts due from banks and with an original maturity of 90 days or less.
(f) 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 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 rate method,
except for the financial assets which are classified to be measured at FVTPL, which are measured at fair value with changes
recognised immediately in the consolidated income statement.
(g) Investment Securities
The ‘investment securities’ include:
-
-
-
-
Debt investment securities measured at amortised cost; these are initially measured at fair value plus incremental
direct transaction costs, and subsequently at their amortised cost using the effective interest method;
Debt and equity investment securities mandatorily measured at FVTPL or designated as at FVTPL; these are at fair
value with changes recognised immediately in profit or loss;
Debt securities measured at FVOCI; and
Equity investment securities designated at FVOCI.
For debt securities measured at FVOCI, gains and losses are recognised in OCI, except for the following, which are
recognised in profit or loss in the same manner as for financial assets measured at amortised cost:
-
-
-
Interest income using the effective interest method;
Expected credit losses and reversals; and
Foreign exchange gains and losses.
When a debt security measured at FVOCI is derecognised, the cumulative gain or loss previously recognised in OCI is
reclassified from equity to consolidated income statement.
The Group elects to present in OCI changes in the fair value of certain investments in equity. The election is made on an
instrument by instrument basis on initial recognition and is irrevocable. Gains and losses on such equity instruments are
never subsequently reclassified to consolidated income statement, including on disposal. Impairment losses (and reversal
of impairment losses) are not reported separately from other changes in fair value. Dividends, when representing a return
on such investments, continue to be recognised in consolidated income statement, unless they clearly represent a
recovery of part of the cost of the investment, in which case they are recognised in OCI. Cumulative gains and losses
recognised in OCI are transferred to retained earnings on disposal of an investment.
88
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(h) 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.
The general hedge accounting requirements of IFRS 9 retain the three types of hedge accounting mechanisms in
IAS 39. However, greater flexibility has been introduced to the types of transactions eligible for hedge accounting,
specifically broadening the types of instruments that qualify as hedging instruments and the types of risk components
of non-financial items that are eligible for hedge accounting. In addition, the effectiveness test has been overhauled
and replaced with the principle of an ‘economic relationship’. Retrospective assessment of hedge effectiveness is no
longer required.
The Group has also elected to continue to apply the hedge accounting requirements of IAS 39 on adoption of IFRS 9.
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 flow hedge
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’.
89
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(h) Derivatives
(i) Derivatives held for risk management purposes and hedge accounting (continued)
Cash flow hedge (continued)
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.
(i) 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.
90
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Property and equipment (continued)
(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.
During 2019, the Group conducted a useful economic life review of the buildings, which resulted in changes in the
useful life of certain buildings.
The estimated useful lives for the current and comparative years are as follows:
Buildings
Leasehold improvements
Furniture and equipment
Motor vehicles
20 - 30 years
6 - 10 years
3 - 8 years
5 years
(vi) Right-of-use assets (Leases)
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the
right to control the use of an identified asset for a period of time in exchange for consideration.
The Group applies a single recognition and measurement approach for all leases, except for short-term leases less
than 12 months and leases of low-value assets (USD 5,000 or less). The Group recognises lease liabilities to make
lease payments and right-of-use assets representing the right to use the underlying assets.
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset
is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment
losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount
of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement
date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter
of the lease term and the estimated useful lives of the assets, as follows:
Buildings
2 - 40 years
91
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(i) Property and equipment (continued)
(vi) Right-of-use assets (Leases) (continued)
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of
lease payments to be made over the lease term. In calculating the present value of lease payments, the Group uses
its incremental borrowing rate at the lease commencement date. Right-of-use assets are subject to impairment in
line with the policy for the impairment of non-financial assets.
The carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change
in the lease payments or a change in the assessment of an option to purchase the underlying asset.
(j)
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.
(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.
The estimated useful economic life of intangible assets with finite lives are; Brand 18 to 19 years, Customer relationship
11 to 12 years, Core deposit 13 to 16 years and Internally developed software and others 5 years.
92
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(j)
Impairment of goodwill and intangible assets (continued)
(ii) Intangible assets (continued)
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.
(k) 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.
(l) 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.
(m) Financial guarantee contract and loan commitments
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.
(n) 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.
93
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(n) 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.
Alternatifbank, 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.
Share-based payments
Employees (including senior management) of the Bank receive remuneration in the form of share-based payments,
whereby employees are granted share appreciation rights, which are settled in cash (cash settled transactions).
Cash settled transactions
The cost of cash settled transactions is measured at fair value at the grant date using Black Scholes model, further details
of which are given in Note 21. The fair value is measured initially and at each reporting date up to and including the
settlement date, with changes in fair value recognised in employee benefits expense Note 32. The fair value is expensed
over the period until the vesting date with recognition of a corresponding liability.
(o) 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.
94
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(p) Interest income and expense
Interest income and expense are recognised in the consolidated income statement using the effective interest rate
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 liability (or, where appropriate, a shorter period) to the carrying amount
of the financial asset or 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.
For the financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated
by applying the effective interest rate to their amortised cost (i.e. net of the expected credit loss provision). If the asset is
no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
The calculation of the effective interest rate includes all transaction costs and fees 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
liability.
Interest income and expense include:
-
-
-
-
Interest on financial assets and financial liabilities measured at amortised cost calculated on an effective interest rate
basis;
The effective portion of fair value changes in qualifying hedging derivatives designated in cash flow hedges of
variability in interest cash flows, in the same period that the hedged cash flows affect interest income / expense;
The ineffective portion of fair value changes in qualifying hedging derivatives designated in cash flow hedges of
interest rate risk; and
Fair value changes in qualifying derivatives, including hedge ineffectiveness, and related hedged items in fair value
hedges of interest rate risk.
Interest income on investment (debt) securities measured at FVOCI and measured at amortised cost is calculated using
effective interest rate method and is also included in interest income.
(q) 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.
95
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(r)
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.
Any cumulative gain/loss recognised in OCI in respect of equity investment securities designated as at FVOCI is not
recognised in the consolidated income statement on derecognition of such securities.
(s) Dividend income
Dividend income is recognised when the right to receive dividend income is established.
(t)
Income tax expenses
Taxes are calculated based on tax laws and regulations in the countries in which the Group operates. Tax is recognized
based on an evaluation of the expected tax charge/credit. Income tax and deferred tax mainly arising from Alternatif bank
operations.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that
are expected to apply to the period when the asset is realised or the liability is settled, based on laws that have been
enacted at the reporting date.
(u) 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.
(v) 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.
(w) 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.
96
Notes to the Consolidated Financial Statements continued
3. SIGNIFICANT ACCOUNTING POLICIES (continued)
(x) 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.
(y) Comparatives
Except when a standard or an interpretation permits or requires otherwise, all amounts are reported or disclosed with
comparative information.
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.
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(d) 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.
97
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
a)
Introduction and overview (continued)
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 along with the following Board and Management
Committees:
1)
Board Risk Committee is responsible for all aspects of risk management across the Group 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 and compliance 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 responsible for compliance
& anti-money laundering which is managed through the Chief Compliance Officer.
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 (MCC) is the third highest-level authority on all Counterparty Credit Risk Exposures,
after the Board of Directors and Board Executive Committee. The MCC also is responsible 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. MCC exercises its credit authorisation 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 Bank’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 business continuity,
prevention, planning, testing, and evaluation. The CMC’s objective is to mitigate and minimize the consequences of
crisis events.
98
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk
Credit risk is defined as the potential that a borrower or counterparty will fail to meet its obligations in accordance with
agreed terms. The goal of credit risk management is to maximize the Group’s risk-adjusted rate of return by maintaining
credit risk exposure within acceptable parameters. Loans and advances are the largest sources of credit risk for the Group.
Other sources of credit risk exist throughout the activities of the Group, including in the banking book and in the trading
book, and both on and off the balance sheet. The Group also faces credit risk (or counterparty risk) in various financial
instruments other than loans, including: acceptances, interbank transactions, trade financing, foreign exchange
transactions, derivative instruments, and in the extension of commitments and guarantees, as well as the settlement of
transactions. The Group maintains well defined, written policies and procedures for identifying, measuring, monitoring,
and controlling credit risk, governing credit-granting activities in conformance with the risk appetite and limits defined by
the Board. All extensions of credit are made on an arm’s length basis in accordance with the Group’s credit-granting
approval process by a combination of authorized individuals, groups or credit committees, depending on the size and
nature of the credit, who have the experience, knowledge and background to exercise prudent judgement in assessing,
approving and managing credit risks.
(i) Credit risk measurement
1.
Loans and advances
The Group’s aim is to maintain a sound asset portfolio by optimizing its loan mix. This is being achieved through
a strategy of reducing exposure to non-core client relationships while selectively increasing the size of the
consumer portfolio comprising of consumer loans, vehicle loans, credit cards and residential mortgages. In
measuring credit risk of loan and advances to customers and to banks, 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 independently validated. 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, the probability of default changes with the migration
of ratings. 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 carrying 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. For undrawn facilities, the
Group applies credit conversion factors that are prescribed by Qatar Central Bank and are aligned to Bank of
International Settlements (BIS) guidelines.
(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.
99
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(i) Credit risk measurement (continued)
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 improve the overall asset quality, enhance yield and provide a readily available source
to meet the funding requirement.
(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;
Lending against lien marked deposits;
•
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; working capital 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.
100
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(ii) Risk limit control and mitigation policies (continued)
Credit-related commitments (continued)
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.
(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 QAR ‘000s)
2019
2018
5,250,971
12,396,433
88,009,448
26,408,148
1,690,200
133,755,200
21,353,539
1,706,950
4,287,871
27,348,360
161,103,560
6,111,773
9,474,893
84,642,464
21,436,688
1,426,928
123,092,746
22,057,901
2,148,781
4,373,836
28,580,518
151,673,264
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.
101
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
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.
2019
Qatar Other GCC
Other
Middle east
(Figures in QAR ‘000s)
Rest of
the world
Total
Balances with central banks
Due from banks
Loans and advances to customers
Investment securities - debt
Other assets
3,698,747
4,275,094
73,308,248
19,914,595
1,302,765
102,499,449
-
675,608
474,138
364,868
516
1,552,224
4,089,664
13,491,026
4,059,685
276,834
1,515,130 23,469,433
5,250,971
-
3,356,067
12,396,433
736,036 88,009,448
26,408,148
1,690,200
6,271,188 133,755,200
2,069,000
110,085
2018
Balances with central banks
Due from banks
Loans and advances to customers
Investment securities - debt
Other assets
2019
Guarantees
Letters of credit
Unutilised credit facilities
Qatar
Other GCC
Other
Middle east
Rest of
the world
Total
4,661,672
2,742,306
70,419,832
17,204,539
738,229
95,766,578
-
630,912
581,968
256,110
27,274
1,496,264
1,450,101
2,407,217
12,413,261
2,507,842
415,971
19,194,392
-
3,694,458
1,227,403
1,468,197
245,454
6,635,512
6,111,773
9,474,893
84,642,464
21,436,688
1,426,928
123,092,746
Qatar Other GCC
Other
Middle east
Rest of
the world
Total
9,723,889
1,326,800
3,179,533
14,230,222
1,303,244
463
828,211
2,131,918
253,249
-
-
253,249
10,073,157
379,687
280,127
21,353,539
1,706,950
4,287,871
10,732,971 27,348,360
102
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)
Geographical sectors (continued)
2018
Guarantees
Letters of credit
Unutilised credit facilities
Qatar
Other GCC
Other
Middle east
(Figures in QAR ‘000s)
Rest of
the world
Total
11,101,817
1,910,758
3,293,914
16,306,489
1,346,053
3,300
828,219
2,177,572
1,657,008
-
-
1,657,008
7,953,023
234,723
251,703
8,439,449
22,057,901
2,148,781
4,373,836
28,580,518
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 QAR ‘000s)
Gross exposure
2018
Gross exposure
2019
39,234,483
3,975,558
8,091,993
13,710,085
38,612,198
2,857,702
19,495,282
5,907,053
1,870,846
133,755,200
3,446,069
11,986,717
11,915,574
27,348,360
161,103,560
30,554,077
5,912,184
7,127,587
10,052,752
34,749,235
3,055,669
22,513,464
6,175,154
2,952,624
123,092,746
1,471,520
3,632,236
23,476,762
28,580,518
151,673,264
103
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(v) Credit quality
The following table sets out information about the credit quality of financial assets, commitments and financial
guarantees
Cash and Balances with Central
Banks (Excluding Cash on Hand)
and Due from Banks
Investment grade - ORR 1 to 4
Sub-investment grade - ORR 5 to 7
Substandard - ORR 8
Doubtful - ORR 9
Loss - ORR 10
Total - Gross
Loss allowance
Accrued interest
Carrying amount
2019
(Figures in QAR ‘000s)
2018
Stage 1
Stage 2
Stage 3
Total
Total
9,174,366
5,459,786
-
-
-
-
3,043,808
-
-
-
14,634,152 3,043,808
(33,037)
3,010,771
(7,515)
14,626,637
-
-
-
-
-
-
-
-
9,174,366
8,503,594
-
-
-
17,677,960
(40,552)
17,637,408
9,996
17,647,404
9,763,533
5,816,904
-
-
-
15,580,437
(13,698)
15,566,739
19,927
15,586,666
2018
Total
Loans and advances to Customers
Stage 1
Stage 2
Stage 3
Total
2019
36,969,262
34,143,968
-
-
-
110,704
15,204,195
545
-
-
71,113,230 15,315,444
(872,666)
71,051,266 14,442,778
(61,964)
-
-
962,594
1,345,136
2,179,512
37,079,966
49,348,163
963,139
1,345,136
2,179,512
4,487,242 90,915,916
(3,685,672)
(2,751,042)
1,736,200 87,230,244
779,204
12,522,973
70,134,165
1,025,370
1,902,502
1,963,246
87,548,256
(3,846,625)
83,701,631
940,833
88,009,448 84,642,464
Investment grade - ORR 1 to 4
Sub-investment grade - ORR 5 to 7
Substandard - ORR 8
Doubtful - ORR 9
Loss - ORR 10
Total - Gross
Loss allowance
Accrued Interest
Carrying amount
ORR = Obligatory Risk Rating
104
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(v) Credit quality (continued)
Investment Securities - Debt
Stage 1
Stage 2
Stage 3
2019
(Figures in QAR ‘000s)
2018
Total
Total
Investment grade - ORR 1 to 4
Sub-investment grade - ORR 5 to 7
Substandard - ORR 8
Doubtful ORR 9
Loss - ORR 10
Total - Gross
Loss allowance
Accrued interest
Carrying amount
17,397,199
6,947,653
-
-
-
24,344,852
(4,071)
24,340,781
270,761
295,715
-
-
-
566,476
-
566,476
-
-
-
-
-
-
-
-
17,667,960
7,243,368
-
-
-
24,911,328
(4,071)
24,907,257
138,199
18,102,960
2,818,337
-
-
-
20,921,297
(24,053)
20,897,244
96,238
25,045,456 20,993,482
Loan Commitments and
financial Guarantees
Stage 1
Stage 2
Stage 3
Total
2019
2018
Total
Investment grade - ORR 1 to 4
Sub-investment grade - ORR 5 to 7
Substandard - ORR 8
Doubtful ORR 9
Loss - ORR 10
Total - Gross
Loss allowance
Carrying amount
100,661
5,490,388
4,141,518
17,271,678
8,509
-
-
-
-
-
22,762,066 4,250,688
(41,764)
22,735,721 4,208,924
(26,345)
12,847,456
5,591,049
-
15,245,527
21,413,196
-
75,362
53,935
45,426
26,295
518
518
289,662
385,878
289,662
335,606 27,348,360 28,580,518
(103,972)
(27,644)
(95,753)
307,962 27,252,607
28,476,546
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 accounts which are restructured due to credit
reasons in past 12 months will be classified under stage 2.
105
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(v) Credit quality (continued)
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 loans and
advances to customers. Aggregate collateral for stage 1 as at 31 December 2019 is QAR 56,806 million (2018: QAR
61,363 million), stage 2 QAR 13,272 million (2018: QAR 21,520 million) and stage 3 QAR 3,587 million (2018: QAR
3,670 million).
(vi) 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 1,922 million (2018: QAR 450 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.
(vii) Write-off policy
The Group writes off a loan or an investment in debt security balance, and any related allowances for impairment
losses, when the relevant Credit Committees determines that the loan or security is uncollectible. QCB approval is
required for local write offs when the amount to be written off exceeds Qatari Riyal one 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 1,076 million (2018: QAR 2,863 million).
(viii) Inputs, assumptions and techniques used for estimating impairment
Significant increase in credit risk
When determining whether the risk of default on a financial instrument has increased significantly since initial
recognition, the Group considers reasonable and supportable information that is relevant and available without
undue cost or effort. This includes both quantitative and qualitative information and analysis including internal credit
risk grading system, external risk ratings, where available, delinquency status of accounts, credit judgement and,
where possible, relevant historical experience. The Group may also determine that an exposure has undergone a
significant increase in credit risk based on particular Qualitative indicators that it considers are indicative of such and
whose effect may not otherwise be fully reflected in its Quantitative analysis on a timely basis.
106
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(viii) Inputs, assumptions and techniques used for estimating impairment (continued)
In determining whether credit risk has increased significantly since initial recognition following criteria are considered:
i)
Two ‘absolute’ notches downgrade for ratings better than Rating Grade 5 at the time of origination and one
‘absolute’ notch rating downgrade for rated customers;
Facilities restructured during previous twelve months;
ii)
iii) Facilities overdue by 30 days as at the reporting date in case of Retail Products and overdue by 60 days for
corporate customers.
Credit risk grades
Credit risk grades are defined using qualitative and quantitative factors that are indicative of risk of default. These
factors vary depending on the nature of the exposure and the type of borrower. Exposures are subject to on-going
monitoring, which may result in an exposure being moved to a different credit risk grade.
Generating the term structure of Probability of Default (PD)
The Group uses its own database of default history to model estimates of PD for respective ratings that are used in
credit decision making. Yearly transition matrices are developed to capture the rating migration of borrowers and
yearly PDs are calculated over 5 years to get the through-the-cycle (TTC) PD. In order the transform the TTC PD to
point in time, a credit index for the last five historical years is calculated based upon minimizing the sum of the
squared differences between the TTC PD and Point-in-time (PIT) PD matrix elements. This analysis includes the
identification and calibration of relationships between changes in default rates and changes in key macro-economic
factors, across various geographies in which the Group has exposures.
Renegotiated financial assets
The contractual terms of a loan may be modified for a number of reasons, including changing market conditions,
customer retention and other factors not related to a current or potential credit deterioration of the customer. This
may involve extending the payment arrangements and documenting the agreement of new loan conditions.
Management continuously reviews renegotiated loans to ensure that all criteria are met and that future payments
are likely to occur.
The accounts which are restructured due to credit reasons in past 12 months will be classified under Stage 2.
Definition of default
The Group considers a financial asset to be in default when:
-
the borrower is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions
such as realising security (if any is held); or
the borrower is past due more than 90 days on any material credit obligation to the Group; or
the borrower is rated 9 (Doubtful) or 10 (Loss).
-
-
In assessing whether a borrower is in default, the Group also considers indicators that are:
-
-
quantitative – e.g. overdue status and non-payment on another obligation of the same issuer to the Group; and
based on data developed internally and obtained from external sources.
Inputs into the assessment of whether a financial instrument is in default and their significance may vary over time to
reflect changes in circumstances. The definition of default largely aligns with that applied for regulatory capital
purposes.
107
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(viii) Inputs, assumptions and techniques used for estimating impairment (continued)
Measurement of ECL
The key inputs into the measurement of ECL are the term structure of the following variables:
-
-
-
probability of default (PD);
loss given default (LGD); and
exposure at default (EAD).
These parameters are generally derived from internally developed statistical models and other historical data. They
are adjusted to reflect forward-looking information as described above.
PD estimates are estimates at a certain date, which are calculated based on statistical rating models. These statistical
models are primarily based on internally compiled data comprising both quantitative and qualitative factors.
LGD is the magnitude of the likely loss if there is a default. The Group has applied LGD factors based on the type of
collateral available and has used the LGD floors that are prescribed by QCB for certain collateral types.
LGD estimation includes:
1) Cure Rate: Defined as the ratio of accounts which have fallen to default and have managed to move backward to
the performing accounts.
2) Recovery Rate: Defined as the ratio of liquidation value to market value of the underlying collateral at the time of
default would also account for expected recovery rate from a general claim on the individual’s assets for the
unsecured portion of the exposure.
Discounting Rate: Defined as the opportunity cost of the recovery value not being realized on the day of default
adjusted for time value.
EAD represents the expected exposure in the event of a default. The Group derives the EAD from the current
exposure to the counterparty and potential changes to the current amount allowed under the contract including
amortisation. The EAD of a financial asset is its gross carrying amount.
For lending commitments and financial guarantees, the EAD includes the amount drawn, as well as potential future
amounts that may be drawn under the contract, which are estimated based on historical observations and forward-
looking forecasts.
Incorporation of forward-looking information
Incorporating forward-looking
in these
macroeconomic factors will affect the Expected Credit Loss (ECL) applicable to the stage 1 and stage 2 exposures
which are considered as performing. The methodologies and assumptions involved, including any forecasts of future
economic conditions, are reviewed periodically.
judgement as to how changes
increases the
information
level of
The assessment of Significant Increase in Credit Risk (SICR) and the calculation of ECL both incorporate forward-
looking information. The Group has performed historical analysis and identified the key economic variables impacting
credit risk and expected credit losses for each portfolio.
108
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(viii) Inputs, assumptions and techniques used for estimating impairment (continued)
Incorporation of forward-looking information (continued)
The Group employs statistical models to incorporate macro-economic factors on historical default rates. In the case
that none of the macro-economic parameters are statistically significant or the results of forecasted PDs are too
deviated from the present forecast of the economic conditions, qualitative PD overlay is used by management based
on portfolio analysis.
These economic variables and their associated impact on the PD, EAD and LGD vary by financial instrument. Expert
judgement has also been applied in this process. Forecasts of these economic variables (the ‘base economic
scenario’) are based on available information and include mean reversion approaches for long-term forecasts. The
impact of these economic variables on the PD, EAD and LGD has been determined by performing statistical regression
analysis to understand the impact changes in these variables have had historically on default rates and on the
components of LGD and EAD.
In addition to the base economic scenario, other possible scenarios are assessed along with scenario weightings.
The number of other scenarios used is set based on the analysis of each major product type to ensure non linearities
are captured. At 31 December 2019, the Group concluded that three scenarios appropriately captured non linearities
for all portfolios. The scenario weightings are determined by a combination of statistical analysis and expert credit
judgement, taking account of the range of possible outcomes each chosen scenario is representative of. The
assessment of SICR is performed using the lifetime PD under each of the base, and other scenarios, multiplied by the
associated scenario weighting, along with qualitative and backstop indicators. This determines whether the whole
financial instrument is in Stage 1, Stage 2 or Stage 3 and hence whether 12-month or lifetime ECL should be recorded.
Following this assessment, the Group measures ECL as either a probability weighted 12 month ECL (Stage 1), or a
probability weighted lifetime ECL (Stages 2 and 3).
These probability-weighted ECLs are determined by running each scenario through the relevant ECL model and
multiplying it by the appropriate scenario weighting (as opposed to weighting the inputs). As with any economic
forecasts, the projections and likelihoods of occurrence are subject to a high degree of inherent uncertainty and
therefore the actual outcomes may be significantly different to those projected. The Group considers these forecasts
to represent its best estimate of the possible outcomes.
Predicted relationships between the key indicators and default and loss rates on various portfolios of financial assets
have been developed based on analyzing historically data estimate of expected credit losses. In reality there will be
interdependencies between the various economic inputs and the exposure to sensitivity will vary across the economic
scenarios.
The most significant period end assumption used for ECL estimate as at 31 December 2019 is the oil price and
revenue (as a % of GDP) given the high level of correlation between this and other economic indicators. The scenarios
‘base’, ‘best’ and ‘worst’ were used for all portfolios The weightings assigned to each economic scenario at 31
December 2019 were base (70%), best (15%) and worst (15%).
Other forward-looking considerations not otherwise incorporated within the above scenarios, such as the impact of
any regulatory, legislative or political changes, have also been considered, but are not deemed to have a material
impact and therefore no adjustment has been made to the ECL for such factors. This is reviewed and monitored for
appropriateness on a quarterly basis.
109
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(viii) Inputs, assumptions and techniques used for estimating impairment (continued)
Movement in ECL
Opening Balance as at 1 January
2019
Stage 1
Stage 2
Stage 3
(Figures in QAR ‘000s)
2018
Total
Total
Due from banks and balances with
central banks
Loans and advances to customers
Investment Securities (Debt)
Loan Commitments and Financial
Guarantees
ECL Charge for the Period (net)
Due from banks and balances with
central banks
Loans and advances to customers
Investment Securities (Debt)
Loan Commitments and Financial
Guarantees
Write offs / Transfer
Due from banks and balances with
central banks
Loans and advances to customers
Investment Securities (Debt)
Loan Commitments and Financial
Guarantees
Exchange differences
Due from banks and balances with
central banks
Loans and advances to customers
Investment Securities (Debt)
Loan Commitments and Financial
Guarantees
619
50,382
236
25,711
13,079
952,226
23,817
76,308
-
13,698
31,632
2,844,017
-
3,846,625
24,053
5,478,995
23,654
1,953
103,972
269,339
76,948 1,065,430 2,845,970 3,988,348
5,803,620
7,019
2,750
4,041
6,122
19,958
(39,394)
(10,838)
(34,116)
-
963,815
-
67,125
26,977
927,171
(6,797)
39,131
(17,934)
1,401,477
399
(74,120)
19,932
(64,390)
1,030,940
986,482
1,309,822
-
-
-
-
-
-
-
-
-
(10,084)
-
(1,024,756)
-
(1,034,840)
-
(2,772,216)
-
-
(41,198)
(41,198)
(90,965)
(10,084) (1,065,954) (1,076,038)
(2,863,181)
(123)
8,832
-
-
(30,082)
-
(5,488)
(428)
-
(32,034)
-
(236)
(123)
(53,284)
-
(6,152)
-
(261,631)
-
(282)
3,221
(30,510)
(32,270)
(59,559)
(261,913)
110
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(b) Credit risk (continued)
(viii) Inputs, assumptions and techniques used for estimating impairment (continued)
Closing Balance as at 31 December
Stage 1
Stage 2
Stage 3
2019
(Figures in QAR ‘000s)
2018
Total
Total
Due from banks and balances with
central banks
Loans and Advances to Customers
Investment Securities (Debt)
Loan Commitments and Financial
Guarantees
7,515
61,964
4,277
26,345
33,037
872,666
12,979
41,764
-
40,552
13,698
2,751,042
-
3,685,672
17,256
3,846,625
24,053
27,644
95,753
103,972
100,101
960,446
2,778,686
3,839,233
3,988,348
Inter Bank Offered Rate (IBOR) Reforms
A fundamental review and reform of major interest rate benchmarks is being undertaken globally. There is uncertainty
as to the timing and the methods of transition for replacing existing benchmark interbank offered rates (IBORs) with
alternative rates.
As a result of these uncertainties, significant accounting judgement is involved in determining whether certain hedge
accounting relationships that hedge the variability of foreign exchange and interest rate risk due to expected changes
in IBORs continue to qualify for hedge accounting as at 31 December 2019. IBOR continues to be used as a reference
rate in financial markets and is used in the valuation of instruments with maturities that exceed the expected end date
for IBOR. Therefore, the Group believes the current market structure supports the continuation of hedge accounting
as at 31 December 2019.
(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.
111
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(c) Liquidity risk (continued)
(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 A3, Short Term P2, financial strength Ba1 and outlook Stable.
Long Term A, Short Term F1, financial strength bb+ and outlook Stable.
Long Term BBB+, Short Term A-2, financial strength bb+ and outlook stable
(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
2019
(%)
108.11
109.14
120.18
100.48
2018
(%)
106.60
105.57
111.84
95.06
112
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(c) Liquidity risk (continued)
(iii) Maturity analysis
The following table sets out the maturity profile of the Group’s assets and liabilities. The contractual 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
1-5 years
More than
5 years No Maturity
(Figures in QAR ‘000s)
2019
Cash and balances
with central banks
Due from banks
Loans and advances
to customers
Investment
securities
Investment in
associates and a
joint arrangement
Property and
equipment and all
other assets
Total
Due to banks
Customer deposits
Debt securities
Other borrowings
Other liabilities
Total
Difference
6,075,044
1,631,106
-
-
1,631,106
-
12,396,433
7,554,562
560,646
2,875,551
10,990,759
1,405,674
-
-
88,009,448
9,618,237
2,450,468
11,421,574
23,490,279
19,093,568
45,425,601
4,443,938
-
-
26,844,226
19,971
365,272
1,890,660
2,275,903
13,047,121
11,085,124
436,078
4,021,239
-
-
10,190,094
1,776,949
26,089
-
-
-
-
1,803,038
4,690,583
-
-
4,021,239
3,696,473
147,536,484 20,600,825
3,402,475
16,187,785
40,191,085 38,236,946 56,510,725
12,597,728
10,951,690
44,985,571
143,726
422,229
3,288,364
22,530,782
76,296,592
9,524,590
12,043,167
5,385,126
4,768,171
20,203,681
11,455,043
71,283,527
297,430
1,193,476
1,334,034
7,096,813
4,977,001
1,142,730
125,780,257 59,791,580 18,997,408 25,965,510 104,754,498
(64,563,413)
21,756,227 (39,190,755) (15,594,933)
4,483,820
14,842,913
752,320
5,340,550
545,907
(9,777,725)
253,384
2,073,717
-
5,013,065
1,261,225
7,069,889
-
4,946,354
-
408,125
1,514,609
19,511,150
18,725,796 54,996,116
-
-
-
-
-
-
12,597,728
113
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
More than
1-5 years
5 years No Maturity
(Figures in QAR ‘000s)
6,729,798
3,172,984
-
-
3,172,984
-
9,474,893
5,451,328
2,742,734
1,208,136
9,402,198
72,695
-
-
84,642,464
5,627,287
2,368,452
7,918,349
15,914,088
23,776,426
44,951,950
3,556,814
-
-
22,206,077
253,067
4,512,940
-
-
-
-
-
-
2,510,762
2,763,829
8,970,428
9,702,429
769,391
7,361,577
1,119,690
17,856
67,524
1,205,070
2,594,198
134,927,749
15,624,356
5,129,042
11,704,771
32,458,169
35,413,747
54,654,379
12,401,454
13,950,459
71,785,783
16,071,746
8,379,734
4,883,568
115,071,290
19,856,459
7,612,664
41,519,760
290,559
172,030
3,217,720
52,812,733
(37,188,377)
2,352,838
13,534,260
487,244
1,496,057
942,387
18,812,786
(13,683,744)
2,567,534
12,501,134
7,185,615
1,884,124
567,555
24,705,962
(13,001,191)
12,533,036
67,555,154
7,963,418
3,552,211
4,727,662
96,331,481
(63,873,312)
1,164,040
4,230,629
6,846,644
4,827,523
155,906
17,224,742
18,189,005
253,383
-
1,261,684
-
-
1,515,067
53,139,312
-
-
-
-
-
-
12,401,454
-
-
4,512,940
3,562,309
2018 (Restated)
Cash and balances
with central banks
Due from banks
Loans and advances
to customers
Investment
securities
Investment in
associates and a
joint arrangement
Property and
equipment and all
other assets
Total
Due to banks
Customer deposits
Debt securities
Other borrowings
Other liabilities
Total
Difference
114
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(c) Liquidity risk (continued)
(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.
Gross
undiscounted
cash flows
Carrying
amount
Less than
1 month
1-3 months
3 months –
1 year
1-5 years
More than
5 years
(Figures in QAR ‘000s)
11,148,211
24,001,339
22,530,782
45,794,237
77,685,628
76,296,592
155,456
11,999,211
9,524,590
12,043,167
432,450
12,639,842
120,395,131 126,326,020 57,530,354
4,851,681
11,656,175
303,258
1,481,117
2,164,738
5,542,683
5,109,472
15,125,744
7,839,350
920,432
5,255,053
5,471,222
18,292,231 27,060,081 20,368,613
294,026
-
2,780,715
-
3,074,741
Gross
undiscounted
cash flows
Carrying
amount
Less than
1 month
1-3 months
3 months –
1 year
1-5 years
More than
5 years
13,950,459
71,785,783
16,071,746
8,379,734
110,187,722
14,544,569
7,765,249
73,484,438 42,493,340
330,178
212,890
50,801,657
17,813,184
9,082,420
114,924,611
2,392,305
13,871,045
514,117
1,545,051
18,322,518
2,804,214
12,797,217
7,518,549
2,116,633
25,236,613
1,283,573
4,322,836
7,543,965
5,207,846
18,358,220
299,228
-
1,906,375
-
2,205,603
2019
Non-derivative
financial liabilities
Due to banks
Customer deposits
Debt securities
Other borrowings
Total liabilities
2018
Non-derivative
financial liabilities
Due to banks
Customer deposits
Debt securities
Other borrowings
Total liabilities
115
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.
Total
1-3 months
3 months –
1 year
(Figures in QAR ‘000s)
More than 5
years
1-5 years
(23,838,530)
23,884,092
(7,255,454)
7,327,951
(2,133,677)
2,135,873
(9,976,329)
9,947,720
(4,473,070)
4,472,548
(806,861)
826,333
(159)
1,661
(3,665)
9,207
(267,615)
279,601
(535,422)
535,864
(348,207)
304,973
(3,902)
4,506
(17,550)
14,934
(89,924)
76,081
(236,831)
209,452
(2,399,405)
2,233,481
-
-
(87,966)
15,137
(2,311,439)
2,218,344
-
-
(28,455)
15,210
(27,421,458)
27,264,089
(9,111)
5,003
(7,268,626)
7,339,121
(19,344)
10,207
-
-
(2,262,202) (12,645,307)
12,521,746
2,185,358
-
-
(5,245,323)
5,217,864
2019
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 Flow
Hedges:
Forward foreign exchange
contracts:
Outflow
Inflow
Interest rate swaps:
Outflow
Inflow
Total Outflows
Total inflows
116
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.
2018
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 Flow
Hedges:
Forward foreign exchange
contracts:
Outflow
Inflow
Interest rate swaps:
Outflow
Inflow
Total Outflows
Total inflows
Total
1-3 months
3 months –
1 year
(Figures in QAR ‘000s)
More than 5
years
1-5 years
(21,165,182)
21,422,087
(13,099,457)
13,190,695
(3,803,913)
3,903,026
(4,234,125)
4,242,510
(291,328)
322,395
(719)
1,637
(7,170)
14,915
(274,028)
295,184
(27,687)
85,856
(9,411)
10,659
(354,777)
310,303
(5,140)
5,572
(21,612)
18,132
(91,194)
77,147
(236,831)
209,452
(1,972,842)
1,691,766
-
-
(165,234)
105,719
(1,807,608)
1,586,047
-
-
(45,252)
40,968
(23,829,381)
23,787,519
(9,606)
10,133
(13,114,922)
13,208,037
(27,292)
24,152
(4,025,221)
4,065,944
(8,354)
6,683
(6,415,309)
6,207,571
-
-
(273,929)
305,967
117
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(c) Liquidity risk (continued)
(v) Off-balance sheet items
The table below summarises contractual expiry dates of the Group’s off - financial position financial instruments:
2019
Loan commitments
Guarantees and other financial facilities
Capital commitments
Total liabilities
2018
Loan commitments
Guarantees and other financial facilities
Capital commitments
Total liabilities
Below 1 Year
1,854,247
12,131,603
421,352
14,407,202
(Figures in QAR ‘000s)
Total
Above 1 Year
2,433,624
10,928,886
-
13,362,510
4,287,871
23,060,489
421,352
27,769,712
Below 1 Year
Above 1 Year
Total
1,968,142
12,816,899
157,569
14,942,610
2,405,694
11,389,783
-
13,795,477
4,373,836
24,206,682
157,569
28,738,087
(d) Market risks
The Group takes exposure to market risk, 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 soverign bond 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.
118
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(d) Market risks (continued)
(i) Management of market risks (continued)
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.
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 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.
119
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)
A summary of the Group’s interest rate gap position on non-trading balances are as follows:
Repricing in:
Carrying
amount
Less than 3
months 3-12 months
1-5 years
More than
5 years
(Figures in QAR ‘000s)
Non-
interest
sensitive
Effective
interest
rate %
6,075,044
2,392,663
-
12,396,433
8,115,209
4,281,224
-
-
-
-
3,682,381
-
88,009,448
37,268,422
43,780,437
4,785,851
705,096
1,469,642
-
3.01%
6.67%
26,844,226
1,621,866
2,895,737
11,659,216
10,231,329
436,078
4.73%
4,021,239
10,190,094
-
-
-
-
-
-
-
-
4,021,239
10,190,094
147,536,484
49,398,160
50,957,398
16,445,067
10,936,425
19,799,434
(22,530,782)
(15,918,496)
(6,612,286)
-
(76,296,592)
(44,590,651)
(15,265,298)
(5,013,065)
-
-
-
(11,427,578)
(9,524,590)
(12,043,167)
(5,385,126)
(21,756,227)
(147,536,484)
(441,156)
(2,434,614)
(97,059)
-
(63,481,976)
(1,064,513)
(9,529,003)
(30,449)
-
(32,501,549)
(6,757,695)
(79,550)
(19,197)
-
(11,869,507)
(1,261,226)
-
(65,236)
-
-
-
(5,173,185)
(21,756,227)
(1,326,462) (38,356,990)
-
-
(14,083,816)
18,455,849
4,575,560
9,609,963 (18,557,556)
(14,083,816)
4,372,033
8,947,593
18,557,556
-
-
-
-
3.61%
3.71%
3.95%
3.84%
-
-
-
-
-
2019
Cash and balances
with central banks
Due from banks
Loans and
advances to
customers
Investment
securities
Investment in
associates and a
joint arrangement
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
120
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)
A summary of the Group’s interest rate gap position on non-trading balances are as follows:
Repricing in:
Carrying
amount
Less than 3
months
3-12 months
1-5 years
More than
5 years
Non-
interest
sensitive
Effective
interest
rate %
(Figures in QAR ‘000s)
6,729,798
3,100,216
-
-
9,474,893
8,170,614
1,231,479
72,800
-
-
3,629,582
-
-
2.72%
84,642,464
39,381,081
38,914,437
4,159,870
471,349
1,715,727
6.18%
22,206,077
1,602,503
3,535,118
7,570,881
8,728,185
769,390
4.24%
4,512,940
7,361,577
-
-
-
-
-
-
-
-
4,512,940
7,361,577
134,927,749
52,254,414
43,681,034
11,803,551
9,199,534
17,989,216
(13,950,459)
(10,933,365)
(3,017,094)
-
(71,785,783) (43,626,394)
(12,501,134)
(4,230,677)
-
-
-
(11,427,578)
(16,071,746)
(8,379,734)
(4,883,568)
(19,856,459)
(134,927,749)
(229,825)
(1,768,303)
-
-
(56,557,887)
(2,395,058)
(6,134,016)
-
-
(24,047,302)
(12,185,179)
(477,415)
-
-
(16,893,271)
-
(1,261,684)
-
-
-
(4,883,568)
- (19,856,459)
(36,167,605)
(1,261,684)
-
-
(4,303,473)
19,633,732 (5,089,720)
7,937,850 (18,178,389)
(4,303,473)
15,330,259
10,240,539
18,178,389
-
-
-
-
4.47%
3.53%
2.93%
4.07%
-
-
-
-
-
2018
Cash and balances
with central banks
Due from banks
Loans and
advances to
customers
Investment
securities
Investment in
associates and a
joint arrangement
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
121
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
2019
At 31 December
Average for the year
2018
At 31 December
Average for the year
Sensitivity to reported Fair value reserve in equity of interest rate
movements
2019
At 31 December
Average for the year
2018
At 31 December
Average for the year
(Figures in QAR ‘000s)
50 bp parallel
decrease
50 bp parallel
increase
17,838
45,392
(17,838)
(45,392)
68,654
65,555
(68,654)
(65,555)
50 bp parallel
increase
50 bp parallel
decrease
344
176
9
720
(344)
(176)
(9)
(720)
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 debt securities which 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.
122
Notes to the Consolidated Financial Statements continued
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 (decrease) in
profit or loss
2019
2018
(24,938)
(16,239)
(412,063)
102,908
(7,199)
(154,874)
(625,983)
99,876
(Figures in QAR ‘000s)
2019
2018
(498,768)
(324,782)
(8,241,260)
2,058,159
(143,989)
(3,097,484)
(12,519,651)
(1,997,530)
(Figures in QAR ‘000s)
Increase (decrease) in
fair value reserve
2019
-
-
-
-
2018
-
-
307
-
Open exchange position in other currencies represents Group’s investment in subsidiary, associates and a joint
arrangement denominated in TL, OMR and AED.
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 fair value
through other comprehensive income. A 10 per cent increase in the Qatar Exchange market index at 31 December
2019 would have increased equity by QAR nil (2018: QAR Nil). An equivalent decrease would have resulted in an
equivalent but opposite impact.
123
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(d) Market risks (continued)
(iii) Exposure to other market risks – non-trading portfolios (continued)
Equity price risk (continued)
The Group is also exposed to equity price risk and the sensitivity analysis there of is as follows:
Increase / (decrease) in other comprehensive income:
Qatar Exchange
(Figures in QAR ‘000s)
2019
2018
-
-
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.
(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.
124
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(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 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 QAR ‘000s)
Basel III
2018
Basel III
2019
13,020,429
3,962,723
16,983,152
2,282,590
19,265,742
108,221,142
2,559,342
7,026,182
117,806,666
11,898,725
3,962,963
15,861,688
1,772,890
17,634,578
105,121,959
1,494,331
7,032,731
113,649,021
16.35%
15.52%
125
Notes to the Consolidated Financial Statements continued
4. FINANCIAL RISK MANAGEMENT (continued)
(f) Capital management (continued)
CET 1 ratio
Without
Capital
Conservation
buffer
CET 1 ratio
Including
Capital
Conservation
buffer
Tier 1 capital
ratio including
capital
conservation
buffer
Tier 1 and 2
capital ratio
including
capital
conservation
buffer
Total capital
including
capital
conservation
buffer and
DSIB’ buffer
Total capital
including
conservation
buffer, DSIB’
buffer and
ICAAP Pillar II
capital charge
2019
Actual
Minimum QCB limit
2018
Actual
Minimum QCB limit
11.05%
6.00%
11.05%
8.50%
14.42%
10.50%
16.35%
12.50%
16.35%
13.00%
16.35%
14.00%
10.47%
6.00%
10.47%
8.50%
13.96%
10.50%
15.52%
12.50%
15.52%
13.00%
15.52%
14.00%
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.
(i) Going concern
The Group’s management has made an assessment of the Group’s ability to continue as a going concern and is
satisfied that the Group has resources to continue in the business for the foreseeable future. Furthermore, the
management is not aware of any material uncertainties that may cast significant doubt upon the Group’s ability to
continue as a going concern. Therefore, the financial statements continue to be prepared on the going concern basis.
(ii) Allowances for credit losses
Assessment of whether credit risk on the financial assets has increased significantly since initial recognition and
incorporation of forward looking information in the measurement of ECL, refer to note 4(b)(viii).
(iii) Determing 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.
126
Notes to the Consolidated Financial Statements continued
5. USE OF ESTIMATES AND JUDGMENTS (continued)
(a) Key sources of estimation uncertainty (continued)
(iii) Determing fair values (continued)
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.
(iv) 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 Cash Generating
Units (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.
(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.
127
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)
(i) Valuation of financial instruments (continued)
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:
(Figures in QAR ‘000s)
Carrying
amount
Level 3
-
29,102
29,102
-
-
-
164,951
164,951
-
-
764,320
6,685,822
7,450,142
526,643
526,643
371,716
5,092,415
5,464,131
353,499
353,499
2019
2018
164,951
(68,340)
(16,934)
(50,575)
29,102
84,107
113,879
(23,793)
(9,242)
164,951
2019
Derivative assets
Investment securities
Derivative liabilities
2018
Derivative assets
Investment securities
Derivative liabilities
Level 1
Level 2
-
1,004,890
1,004,890
-
-
-
35,825
35,825
-
-
764,320
5,651,830
6,416,150
526,643
526,643
371,716
4,891,639
5,263,355
353,499
353,499
There have been no transfers between level 1 and level 2.
Reconciliation of level 3 investments are as follows :
Balance at 1 January
Cost movement
Profit and loss movement
Fair value reserve movement
Balance at 31 December
128
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
Assessment of the business model within which the assets are held and assessment of whether the contractual
terms of the financial asset are solely payments of principal and interest on the principal amount outstanding. Refer
to note 3 (d) (ii) for further information.
(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
Assessment of whether credit risk on the financial asset has increased significantly since initial recognition and
incorporation of forward –looking information in the measurement of ECL. Refer to note 4 (b) (viii) Inputs, assumptions
and techniques used for estimating impairment of financial assets for more information.
(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. During 2019, the Group conducted a useful economic life review of the
buildings, which resulted in changes in the useful life of certain buildings. The useful life of these identified buildings
increased from 20 years to 30 years.
(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.
(viii) Leases - Estimating the incremental borrowing rate
The Group uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the
Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an
asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what
the Group ‘would have to pay’, which requires estimation when no observable rates are available or when they need
to be adjusted to reflect the terms and conditions of the lease. The Group estimates the IBR using observable inputs
(such as market interest rates).
129
Notes to the Consolidated Financial Statements continued
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. Alternatif Bank: 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) Commercialbank Financial Services L.L.C. provides brokerage services in the State of Qatar.
b) CBQ Finance Limited, a SPV used for debt issuance for the bank,
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, United Arab bank in the United Arab Emirates 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.
130
Notes to the Consolidated Financial Statements continued
6. OPERATING SEGMENTS (continued)
(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:
2019
Commercial Bank
Subsidiaries
Wholesale
Banking
Retail
Banking
Total
Commercial
Bank
Alternatif
Bank
1,658,244
982,968
2,641,212
671,412
556,855
1,228,267
2,329,656
1,539,823
3,869,479
6,856
-
6,856
383,831
189,876
573,707
(59)
(204,912)
(240,822)
(445,734)
(214,829)
(Figures in QAR ‘000s)
Others Unallocated
Total
5,181
21,177
(67,041)
2,963,183
(55,858)
1,383,462
26,358
(122,899)
4,346,645
-
28
-
-
6,797
(660,535)
-
-
-
-
-
(413,881)
(413,881)
2,588,971
100,126
13,197
(674,454)
2,027,840
58,349,751
18,125,456 76,475,207
11,534,241
-
-
-
-
-
-
41,446,278
1,389,525 42,835,803
4,434,806
297,193
43,306,921
23,282,182 66,589,103
9,686,498
41,202,171
868,859 42,071,030
7,278,368
20,991
30,321
(6,799)
2,021,041
- 88,009,448
-
4,021,239
7,937,995 55,505,797
147,536,484
- 76,296,592
103,946 49,483,665
125,780,257
- 27,348,360
Contingent items
22,080,759
224,543 22,305,302
4,483,058
560,000
Intra-group transactions are eliminated from this segmental information (Assets: QAR 2,789 million, Liabilities:
QAR 1,262 million).
131
Net interest income
Net fee, commission and
other income
Segmental revenue
Net Impairment reversal on
investment securities
Net impairment loss on
loans and advances to
customers and other
financial assets
Impairment for investment
in an associate
Segmental profit
Share of results of
associates and a joint
arrangement
Net profit for the year
Other information
Loans and advances to
customers
Investments in associates
and a joint arrangement
Assets (other than above)
Customer deposits
Liabilities (other than
above)
Notes to the Consolidated Financial Statements continued
6. OPERATING SEGMENTS (continued)
(a) By operating segment (continued)
2018 (Restated)
Commercial Bank
Subsidiaries
Wholesale
Banking
Retail
Banking
Total
Commercial
Bank
Alternatif
Bank
Others Unallocated
Total
(Figures in QAR ‘000s)
Net interest income
Net fee, commission and
other income
Segmental revenue
Net Impairment reversal /
(losses) on investment
securities
Net impairment loss on
loans and advances to
customers and other
financial assets
Segmental profit
Share of results of
associates and a joint
arrangement
Net profit for the year
Other information
Loans and advances to
customers
Investments in associates
and a joint arrangement
Assets (other than above)
Customer deposits
Liabilities (other than
above)
1,307,822
845,913
2,153,735
390,494
5,135
(67,042)
2,482,322
299,102
575,600
874,702
89,729
1,606,924
1,421,513
3,028,437
480,223
27,405
32,540
34,399
1,026,235
(32,643)
3,508,557
(399)
-
(399)
-
-
(374,247)
(336,829)
(711,076)
(124,573)
540
-
-
(399)
(835,109)
1,441,990
90,642
13,911
(54,101)
1,492,442
181,483
1,673,925
53,187,845
19,455,991
72,643,836
11,949,749
-
-
-
-
-
-
48,879 84,642,464
-
4,512,940
32,527,616
1,292,358
33,819,974
5,868,200
273,094
5,811,077
40,858,866
21,644,591
62,503,457
9,270,185
-
12,141
45,772,345
134,927,749
71,785,783
34,638,044
777,470
35,415,514
7,372,989
38,069
458,935
43,285,507
Contingent items
23,208,775
628,245
23,837,020
4,183,497
560,001
115,071,290
28,580,518
-
Intra-group transactions are eliminated from this segmental information (Assets: QAR 2,015 million, Liabilities:
QAR 613 million).
132
Notes to the Consolidated Financial Statements continued
6. OPERATING SEGMENTS (continued)
(b) By geography
Consolidated statement
of financial position
2019
Cash and balances with
central banks
Due from banks
Loans and advances to
customers
Investment 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
Other GCC
countries
Other
Middle East
Qatar
Europe
North
America
Rest of the
world
Total
(Figures in QAR ‘000s)
4,431,379
-
1,643,665
-
-
-
6,075,044
4,275,094
675,608
4,089,664
1,364,764
838,935
1,152,368
12,396,433
73,308,248
474,138
13,491,026
596,344
-
139,692 88,009,448
19,951,886
612,636
4,060,018
231,367
594,220
1,394,099
26,844,226
7,924
4,013,315
-
-
8,798,664
15,738
1,163,612
202,962
-
-
-
4,021,239
9,118
10,190,094
110,773,195
5,791,435 24,447,985
2,395,437
1,433,155
2,695,277 147,536,484
6,865,322
54,401,976
-
501,300
4,307,492
21,756,217
1,895,718
2,225,789
-
782,157
17,250
-
2,396,674
9,516,489
1,733,336
3,062,483
642,387
10
10,799,162
1,588,987
7,791,254
3,235,029
340,816
-
-
853,982
-
2,196,931
15,154
-
573,906
7,709,369
-
2,265,267
62,027
-
22,530,782
76,296,592
9,524,590
12,043,167
5,385,126
21,756,227
87,832,307
4,920,914
17,351,379 23,755,248 3,066,067 10,610,569 147,536,484
133
Notes to the Consolidated Financial Statements continued 6. OPERATING SEGMENTS (continued)
(b) By geography (continued)
Consolidated statement
of income
Year ended
31 December 2019
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
Net impairment losses on
other financial assets
Impairment on Investment
in an Associate
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
Other GCC
countries
Other
Middle East
Qatar
Europe
North
America
(Figures in QAR ‘000s)
Rest of the
world
Total
3,464,077
(44,592)
534,091
(598,299)
(47,543)
(344,551)
2,963,183
1,054,288
4,518,365
(663,231)
(125,482)
(46,268)
6,856
68,913
24,321
-
-
-
-
228,124
762,215
(133,112)
(24,512)
(8,755)
(59)
(377,030)
28
(217,425)
(68,704)
-
2,596
-
(413,881)
-
(156,899)
-
(69,517)
10,141
(588,158)
-
-
-
21,996
1,383,462
(47,543)
-
-
(322,555) 4,346,645
(796,352)
(149,994)
(9)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(55,023)
6,797
(594,427)
(66,108)
(413,881)
(228)
(226,644)
3,087,607
(389,532)
311,431
(588,158)
(47,543)
(322,792)
2,051,013
2,571
(9,370)
-
-
-
-
(6,799)
3,090,178 (398,902)
311,431
(588,158)
(47,543)
(322,792)
2,044,214
(377)
3,089,801
-
(398,902)
(22,796)
288,635
-
(588,158)
-
(47,543)
-
(322,792)
(23,173)
2,021,041
134
Notes to the Consolidated Financial Statements continued 6. OPERATING SEGMENTS (continued)
(b) By geography (continued)
Consolidated statement of
financial position
2018 (Restated)
Cash and balances with
central banks
Due from banks
Loans and advances to
customers
Investment securities
Investment in associates
and a joint arrangement
Property and equipment
and all other assets
Total assets
Other GCC
countries
Other Middle
East
Qatar
Europe
North
America
(Figures in QAR ‘000s)
Rest of the
world
Total
5,206,929
-
1,522,869
-
-
-
6,729,798
2,742,307
630,912
2,407,217
1,217,740
1,338,149
1,138,568
9,474,893
70,419,832
581,968
12,413,262
683,061
-
544,341 84,642,464
17,321,411
736,731
2,527,474
55,933
774,792
789,736
22,206,077
12,603
4,500,337
-
-
5,984,569
10,481
1,170,600
194,000
-
-
-
4,512,940
1,927
7,361,577
101,687,651
6,460,429
20,041,422
2,150,734
2,112,941
2,474,572
134,927,749
Due to banks
Customer deposits
Debt securities
Other borrowings
Other liabilities
Equity
Total liabilities and equity
5,314,714
51,801,046
-
212,031
3,941,445
19,856,448
81,125,684
823,977
2,457,201
-
503,399
-
-
3,784,577
2,193,552
9,089,715
2,567,407
1,447,427
698,379
11
15,996,491
5,597,166
1,185,586
13,504,339
3,832,769
216,985
-
24,336,845
-
16,539
-
1,107,196
13,473
-
1,137,208
21,050 13,950,459
71,785,783
16,071,746
8,379,734
4,883,568
19,856,459
8,546,944 134,927,749
7,235,696
-
1,276,912
13,286
-
135
Notes to the Consolidated Financial Statements continued 6. OPERATING SEGMENTS (continued)
(b) By geography (continued)
Qatar
Other GCC
countries
Other Middle
East
Europe
North
America
(Figures in QAR ‘000s)
Rest of the
world
Total
2,797,758
939,302
3,737,060
(532,741)
(119,438)
(47,339)
(399)
44,576
(5,059)
39,517
-
-
-
-
387,357
93,789
481,146
(143,461)
(9,789)
(7,410)
-
(822,184)
541
(105,521)
111,108
(215,477)
-
-
(19,053)
(97,265)
(520,112)
(18,679)
(538,791)
-
-
-
-
-
-
-
(59,742)
(167,515)
2,482,322
9,174
7,708
1,026,235
(50,568)
-
-
(159,807)
(264)
-
3,508,557
(676,466)
(129,227)
(54,749)
(399)
(927,164)
92,055
-
-
-
-
(151)
(312,893)
-
-
-
-
-
2,110,590
40,058
98,647
(538,791)
(50,568)
(160,222)
1,499,714
3,785
177,698
-
-
-
-
181,483
2,114,375
(189)
2,114,186
217,756
-
217,756
98,647
(7,083)
91,564
(538,791)
-
(538,791)
(50,568)
-
(50,568)
(160,222)
-
(160,222)
1,681,197
(7,272)
1,673,925
Consolidated statement
of income
Year ended 31 December
2018 (Restated)
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
Net impairment losses on
other financial assets
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
136
Notes to the Consolidated Financial Statements continued
7. FINANCIAL ASSETS AND LIABILITIES
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:
Consolidated statement
of financial position
Fair value through
Profit & loss
Fair value through other
comprehensive income
2019
Debt
instruments
Equity
instruments
Debt
instruments
Equity
instruments
Amortised
Cost
(Figures in QAR ‘000s)
Total
carrying
amount
Fair value
Cash and balances with
central banks
Due from banks
Loans and advances to
customers
Investment securities
Due to banks
Customer deposits
Debt securities
Other borrowings
-
-
-
-
-
-
-
-
-
-
-
6,075,044
6,075,044
6,075,044
12,396,433
12,396,433
12,396,433
- 88,009,448 88,009,448
88,009,448
1,362,693
1,362,693
430,878
430,878
4,921,729
4,921,729
20,123,727
5,199
5,199 126,604,652
26,844,226
133,325,151
27,063,912
133,544,837
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
22,530,782
76,296,592
9,524,590
12,043,167
120,395,131
22,530,782
76,296,592
9,524,590
12,043,167
22,530,782
76,296,592
9,736,064
12,043,167
120,395,131 120,606,605
137
Notes to the Consolidated Financial Statements continued
7. FINANCIAL ASSETS AND LIABILITIES (continued)
Accounting classifications and fair values (continued)
The table below sets out the carrying amounts and fair values of the Group’s financial assets and financial liabilities:
Consolidated statement of
financial position
2018
Fair value through
Profit & loss
Debt
instruments
Equity
instruments
Fair value through other
comprehensive income
Debt
instruments
Equity
instruments
Amortised
Cost
Total carrying
amount
Fair value
(Figures in QAR ‘000s)
Cash and balances with
central banks
Due from banks
Loans and advances to
customers
Investment securities
Due to banks
Customer deposits
Debt securities
Other borrowings
-
-
4,619
443,206
447,825
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,729,798
6,729,798
6,729,798
9,474,893
9,474,893
9,474,893
84,637,845
84,642,464
84,642,464
658,617
658,617
3,899,727
3,899,727
110,774
110,774
17,093,753
117,936,289
22,206,077
123,053,232
22,201,752
123,048,907
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13,950,459
71,785,783
16,071,746
8,379,734
110,187,722
13,950,459
71,785,783
16,071,746
8,379,734
110,187,722
13,950,459
71,785,783
16,079,143
8,379,734
110,195,119
8. CASH AND BALANCES WITH CENTRAL BANKS
Cash
Cash reserve with central banks *
Other balances with central banks
Accrued interest
(Figures in QAR ‘000s)
2019
2018
824,073
3,619,864
1,629,546
6,073,483
1,561
6,075,044
618,025
3,531,400
2,566,633
6,716,058
13,740
6,729,798
* The cash reserve with central banks is mandatory reserve not available for use in the Group’s day to day operations.
138
Notes to the Consolidated Financial Statements continued
9. DUE FROM BANKS
Current accounts
Placements
Loans to banks
Accrued interest
Allowance for impairment of due from bank
10. LOANS AND ADVANCES TO CUSTOMERS
a) By type
Loans
Overdrafts
Bills discounted
Bankers acceptances
Deferred profit
Accrued interest
Allowance for impairment of loans and advances to customers**
ECL on loans and advances to customers
Net loans and advances to customers *
(Figures in QAR ‘000s)
2019
2018
2,009,118
6,540,135
3,879,297
12,428,550
8,435
(40,552)
12,396,433
1,794,590
5,182,478
2,505,336
9,482,404
6,187
(13,698)
9,474,893
(Figures in QAR ‘000s)
2019
2018
79,403,992
9,734,710
303,614
1,480,885
90,923,201
(7,285)
90,915,916
779,204
(2,751,042)
(934,630)
88,009,448
80,356,664
5,069,471
367,098
1,766,122
87,559,355
(11,099)
87,548,256
940,833
(2,844,016)
(1,002,609)
84,642,464
*The aggregate amount of non-performing loans and advances to customers amounted QAR 4,487 million which
represents 4.94% of total loans and advances to customers (2018: QAR 4,891 million 5.59% of total loans and advances
to customers).
**Allowance for impairment of loans and advances to customers includes QAR 711 million of interest in suspense (2018:
QAR 563 million).
139
Notes to the Consolidated Financial Statements continued
10. LOANS AND ADVANCES TO CUSTOMERS (continued)
b) By sector
2019
Loans
Overdrafts
Bills
discounted
Bankers
acceptances
Total
(Figures in QAR ‘000s)
Government and related agencies
Non-banking financial institutions
Industry
Commercial
Services
Contracting
Real estate
Personal
Others
9,194,619
847,212
8,168,393
10,488,416
23,018,547
2,710,789
18,764,910
5,006,804
1,204,302
79,403,992
5,845,271
29,475
8,015
256,924
1,257,758
666,143
237,111
1,407,199
26,814
9,734,710
-
12,618
5,510
52,223
108,689
124,574
-
-
-
303,614
4,049
-
10,423
973,560
231,998
260,232
-
-
623
1,480,885
Accrued interest
Less: Deferred profit
Allowance for impairment of loans and advances to customers
ECL on loans and advances to customers
Net loans and advances to customers
2018
Government and related agencies
Non-banking financial institutions
Industry
Commercial
Services
Contracting
Real estate
Personal
Others
Loans
Overdrafts
Bills
discounted
Bankers
acceptances
7,741,511
1,575,772
7,408,275
7,916,044
24,312,889
3,468,394
21,784,703
5,191,694
957,382
80,356,664
2,476,875
-
10,405
288,218
238,557
367,274
162,561
1,476,295
49,286
5,069,471
-
25,236
6,083
72,704
150,710
112,365
-
-
-
367,098
-
-
11,614
732,073
451,151
568,770
-
-
2,514
1,766,122
Accrued interest
Less: Deferred profit
Allowance for impairment of loans and advances to customers
ECL on loans and advances to customers
Net loans and advances to customers
15,043,939
889,305
8,192,341
11,771,123
24,616,992
3,761,738
19,002,021
6,414,003
1,231,739
90,923,201
779,204
(7,285)
(2,751,042)
(934,630)
(2,913,753)
88,009,448
Total
10,218,386
1,601,008
7,436,377
9,009,039
25,153,307
4,516,803
21,947,264
6,667,989
1,009,182
87,559,355
940,833
(11,099)
(2,844,016)
(1,002,609)
(2,916,891)
84,642,464
140
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
Transition adjustment on adoption of IFRS 9 on 1 January 2018
Allowance made during the year
Recoveries / reversals during the year
Net allowance for impairment during the year *
Written off / transferred during the year
Exchange differences
Balance at 31 December
(Figures in QAR ‘000s)
2019
2018
3,846,625
-
1,086,841
(159,670)
927,171
(1,034,840)
(53,284)
3,685,672
4,274,363
1,315,988
1,913,098
(511,621)
1,401,477
(2,883,572)
(261,631)
3,846,625
*This includes net interest suspended during the year QAR 212.6 million (2018: QAR 474.3 million) as per QCB regulations.
Net impairment losses on loans and advances to customers
Gross allowance made during the year
Less: Recoveries / reversals during the year
Less: Interest suspended during the year
Less: Recoveries on previously written off loans
(Figures in QAR ‘000s)
2019
2018
1,086,841
(159,670)
927,171
(212,595)
(120,149)
594,427
1,913,098
(511,621)
1,401,477
(474,313)
-
927,164
141
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 (continued)
Balance at 1 January 2019
Adjustment due to reclassification
between segments
Allowance made during the year
Recoveries/reversal during the year
Written off / transferred during the year
Exchange differences
Balance at 31 December 2019
Stage 1
Commercial Bank
Stage 2
Stage 3
Wholesale
Banking
Retail
Banking
Wholesale
Banking
Retail
Banking
Wholesale
Banking
Retail
Banking
Stage 1
Stage 2
Stage 3
Stage 1
Stage 2
Stage 3
Alternatif bank
Others
30,393
43,181
680,475
11,938
1,449,129 1,009,833
3,224,949
(23,192)
259,813
373,228
609,849
11,827
3,846,625
481
(481)
(41,060)
41,060
(59,756)
59,756
14,149
-
-
-
45,023
(1,762)
-
-
-
40,938
87,048
-
(10,084)
-
716,379
(9,176)
-
-
-
43,822
250,230
(4,242)
(303,257)
-
1,332,104
446,077
(72,550)
(227,189)
-
1,215,927
Stage 1
Commercial Bank
Stage 2
Stage 3
Wholesale
Banking
Retail
Banking
Wholesale
Banking
Retail
Banking
Wholesale
Banking
Retail
Banking
Balance at 1 January 2018
Transition adjustment on adoption of
IFRS 9 on 1 January 2018
Allowance made during the year
Recoveries/reversal during the year
Written off / transferred during the year
Exchange differences
Balance at 31 December 2018
-
537
29,856
-
-
-
30,393
-
-
-
2,879,220
869,910
820
890,711
42,361
-
-
-
43,181
(210,236)
-
-
-
680,475
42,105
(30,167)
-
-
-
11,938
-
-
1,201,874
(214,259)
(2,417,706)
-
557,450
(80,382)
(337,145)
-
1,449,129 1,009,833
142
54,931
(64,568)
100,991
(218,257)
3,394,193
(23,997)
8,832
(30,081)
112,466
-
-
-
-
144,353
199,975
(494,310)
(32,035)
191,211
300,275
(82,850)
(494,310)
(53,284)
279,680
Commercial
Total
Bank
786,566
(76,792)
(540,530)
-
-
Commercial
Total
Bank
3,749,130
-
-
-
Subsidiaries
Total
Alternatif
Bank
Subsidiaries
Total
Alternatif
Bank
934,173
(41,914)
423,729
-
381,815
1,591,138
(294,641)
(2,754,851)
-
122,381
(103,358)
(301)
-
3,224,949
(23,192)
23,900
(75,250)
6,919
(119,485)
259,813
175,679
(37,831)
(135,339)
(142,146)
373,228
321,960
(216,439)
(128,721)
(261,631)
609,849
(Figures in QAR ‘000s)
Total
-
1,086,841
(159,670)
(1,034,840)
(53,284)
3,685,672
(28)
11,799
(Figures in QAR ‘000s)
1,315,988
1,913,098
(511,621)
(2,883,572)
(261,631)
3,846,625
(541)
11,827
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Stage 1
Stage 2
Stage 3
Stage 1
Stage 2
Stage 3
Alternatif bank
Others
Total
-
512,865
512,865
12,368
4,274,363
Notes to the Consolidated Financial Statements continued Balance at 1 January 2019
Adjustment due to reclassification
between segments
Allowance made during the year
Recoveries/reversal during the year
Written off / transferred during the year
Exchange differences
481
14,149
(481)
(41,060)
41,060
(59,756)
59,756
(1,762)
87,048
(9,176)
(10,084)
250,230
(4,242)
(303,257)
-
446,077
(72,550)
(227,189)
-
Balance at 31 December 2019
45,023
40,938
716,379
43,822
1,332,104
1,215,927
Stage 1
Commercial Bank
Stage 2
Stage 3
Wholesale
Banking
Retail
Banking
Wholesale
Banking
Retail
Banking
Wholesale
Banking
Retail
Banking
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at 1 January 2018
Transition adjustment on adoption of
IFRS 9 on 1 January 2018
Allowance made during the year
Recoveries/reversal during the year
Written off / transferred during the year
Exchange differences
Balance at 31 December 2018
537
820
890,711
42,105
29,856
42,361
(210,236)
(30,167)
-
2,879,220
869,910
1,201,874
(214,259)
(2,417,706)
557,450
(80,382)
(337,145)
-
-
-
-
30,393
43,181
680,475
11,938
1,449,129 1,009,833
10. LOANS AND ADVANCES TO CUSTOMERS (continued)
c) Movement in allowance for impairment of loans and advances to customers (continued)
Stage 1
Commercial Bank
Stage 2
Stage 3
Wholesale
Banking
Retail
Banking
Wholesale
Banking
Retail
Banking
Wholesale
Banking
Retail
Banking
Stage 1
Stage 2
Stage 3
Stage 1
Stage 2
Stage 3
Subsidiaries
Total
Commercial
Bank
Alternatif bank
Total
Alternatif
Bank
Others
Total
(Figures in QAR ‘000s)
30,393
43,181
680,475
11,938
1,449,129 1,009,833
3,224,949
(23,192)
259,813
373,228
609,849
-
-
-
-
-
786,566
(76,792)
(540,530)
-
3,394,193
54,931
(64,568)
-
8,832
(23,997)
100,991
(218,257)
-
(30,081)
112,466
144,353
199,975
(494,310)
(32,035)
191,211
300,275
(82,850)
(494,310)
(53,284)
279,680
-
-
-
-
-
-
-
-
-
-
-
-
-
-
11,827
3,846,625
-
-
(28)
-
-
11,799
-
1,086,841
(159,670)
(1,034,840)
(53,284)
3,685,672
(Figures in QAR ‘000s)
Stage 1
Stage 2
Stage 3
Stage 1
Stage 2
Stage 3
Subsidiaries
Total
Commercial
Bank
Alternatif bank
Total
Alternatif
Bank
Others
Total
3,749,130
-
-
512,865
512,865
934,173
(41,914)
423,729
-
381,815
1,591,138
(294,641)
(2,754,851)
-
3,224,949
122,381
(103,358)
(301)
-
(23,192)
23,900
(75,250)
6,919
(119,485)
259,813
175,679
(37,831)
(135,339)
(142,146)
373,228
321,960
(216,439)
(128,721)
(261,631)
609,849
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,368
4,274,363
-
1,315,988
-
(541)
-
-
11,827
1,913,098
(511,621)
(2,883,572)
(261,631)
3,846,625
143
Notes to the Consolidated Financial Statements continued 11.
INVESTMENT SECURITIES
Fair value through other comprehensive income (FVOCI)
Fair value through profit & loss (FVTPL)
Amortised cost (AC)
Accrued interest
(Figures in QAR ‘000s)
2018
(Restated)
2019
4,899,768
1,786,054
20,012,686
26,698,508
145,718
26,844,226
3,992,624
1,099,791
17,015,392
22,107,807
98,270
22,206,077
The carrying value of investment securities pledged under repurchase agreements (REPO) is QAR 10,610 million (2018:
QAR 7,656 million).
a) Fair value through other comprehensive income
Equities
State of Qatar debt securities
Debt and other securities*
Total
Equities
State of Qatar debt securities
Debt and other securities*
Total
(Figures in QAR ‘000s)
2019
Unquoted
Total
5,198
-
53,898
59,096
2018
Unquoted
110,774
-
42,690
153,464
5,198
3,624,920
1,269,650
4,899,768
Total
110,774
2,568,724
1,313,126
3,992,624
Quoted
-
3,624,920
1,215,752
4,840,672
Quoted
-
2,568,724
1,270,436
3,839,160
* Fixed rate securities and floating rate securities amounted to QAR 1,201 million and QAR 69 million respectively (2018:
QAR 1,311 million and QAR 2 million respectively).
144
Notes to the Consolidated Financial Statements continued
11.
INVESTMENT SECURITIES (continued)
(b)
Fair value through profit & loss
Equities
State of Qatar debt securities
Debt and other securities
Investment funds
Total
Equities
State of Qatar debt securities
Debt and other securities
Investment funds
Total
c) Amortised Cost
By Issuer
State of Qatar debt securities
Debt and other securities
Total
By Interest Rate
Fixed Rate Securities
Floating Rate Securities
Total
(Figures in QAR ‘000s)
2019
Unquoted
Total
8,321
-
36,400
24,402
69,123
2018
Unquoted
26,752
-
36,400
36,101
99,253
399,039
111,000
1,244,174
31,841
1,786,054
Total
596,448
61,000
380,174
62,169
1,099,791
(Figures in QAR ‘000s)
2019
Unquoted
Total
-
281,882
281,882
15,533,030
4,479,656
20,012,686
(Figures in QAR ‘000s)
2019
Unquoted
Total
281,882
-
281,882
19,859,180
153,506
20,012,686
Quoted
390,718
111,000
1,207,774
7,439
1,716,931
Quoted
569,696
61,000
343,774
26,068
1,000,538
Quoted
15,533,030
4,197,774
19,730,804
Quoted
19,577,298
153,506
19,730,804
145
Notes to the Consolidated Financial Statements continued 11.
INVESTMENT SECURITIES (continued)
c) Amortised Cost (continued)
By Issuer
State of Qatar debt securities
Debt and other securities*
Total
By Interest Rate
Fixed Rate Securities
Floating Rate Securities
Total
(Figures in QAR ‘000s)
2018
Unquoted
Total
1,605,250
-
1,605,250
14,088,212
2,927,180
17,015,392
(Figures in QAR ‘000s)
2018
Unquoted
Total
-
-
-
16,884,538
130,854
17,015,392
Quoted
12,482,962
2,927,180
15,410,142
Quoted
16,884,538
130,854
17,015,392
* Investment in securities include an amount of Nil (2018: QAR 1.92 billion) in a subsidiary which were re-classified and
designated as amortized cost from FVOCI. The associated FVR within the statement of OCI increased by Nil (2018: QAR
202 million) with a corresponding increase in the carrying value of the investment. The profit and loss impact impact was
not material.
12. INVESTMENT IN ASSOCIATES AND A JOINT ARRANGEMENT
The Group’s investment in associates and a joint arrangement are as follows:
Balance at 1 January
Share of results -(note 22)
Cash dividend - (note 22)
Other movements
Reclassified from asset held for sale - (note 13)*
Impairment of investment in an associate
Balance at 31 December
(Figures in QAR ‘000s)
2018
(Restated)
2019
4,512,940
(6,799)
(93,072)
22,051
-
(413,881)
4,021,239
2,088,158
181,483
(76,627)
(239,665)
2,559,591
-
4,512,940
* Reclassified assets held for sale includes rights issue by UAB in 2018, amounting to QAR 272 million.
146
Notes to the Consolidated Financial Statements continued
12. INVESTMENT IN ASSOCIATES AND A JOINT ARRANGEMENT (continued)
Name of the
Entity
National Bank of
Oman SAOG
(‘NBO’)
United Arab Bank
PJSC (‘UAB’)*
Massoun
Insurance
Services L.L.C
Classification
Country Activities
2019
2018
(Restated)
%
Carrying Value and % of interest held
Price
per share
(QAR)
%
(Figures in QAR ‘000s)
Associate
Oman
Banking
2,163,815
34.9% 2,083,707
34.9%
1.74
Associate
UAE
Banking
1,849,500 40.0% 2,416,630 40.0%
0.99
Joint venture
Qatar
Insurance
brokerage
7,924 50.0%
12,603 50.0% Not listed
4,021,239
4,512,940
** Refer to note 13
The summarised financial position and results of NBO and UAB as at the end of reporting period is as follows:
Total assets
Total liabilities
Operating income
Net profit
Total comprehensive income
Share of results
(Figures in QAR ‘000s)
2018
(Restated)
2019
53,395,161
46,000,933
1,752,987
38,419
129,713
(9,370)
54,093,441
46,515,921
1,861,059
554,895
450,597
177,698
13. ASSET HELD FOR SALE
The Group had previously classified its investment in UAB as an asset held for sale as they were under advanced stages of
discussion with a third party which was not realized. The management has hence reclassified the investment to an
Investment in an Associate in fourth quarter of 2019, effective from 1 January 2019 with prior year balances restated in line
with IFRS.
147
Notes to the Consolidated Financial Statements continued
14 PROPERTY AND EQUIPMENT
Land and
buildings
Right of
use assets
Leasehold
improvements
Furniture
and
equipment
Motor
vehicles
Capital
work in
progress
Total
(Figures in QAR ‘000s)
Cost
Balance at 1 January 2018
Additions / transfers
Revaluation on land & buildings
Disposals
Exchange differences
Balance at 31 December 2018
1,998,459
177,909
21,592
(414)
(21,264)
2,176,282
-
-
-
-
-
-
Balance at 1 January 2019
Adjustment on transition to IFRS 16
Additions / transfers
Revaluation on land & buildings
Disposals
Exchange differences
Balance at 31 December 2019
2,176,282
-
6,543
-
(6)
(18,334)
2,164,485
-
142,020
28,981
-
(4,282)
(1,178)
165,541
Accumulated depreciation
Balance at 1 January 2018
Depreciation for the year
Revaluation on land & buildings
Disposals
Exchange differences
Balance at 31 December 2018
Balance at 1 January 2019
Depreciation for the year
Revaluation on land & buildings
Disposals
Exchange differences
Balance at 31 December 2019
Net carrying amounts
Balance at 31 December 2018
Balance at 31 December 2019
48,351
39,629
-
-
(211)
87,769
87,769
32,057
-
(1)
(311)
119,514
-
-
-
-
-
-
-
34,220
-
(692)
(603)
32,925
135,713
6,067
-
(11,000)
(11,820)
118,960
1,184,804
79,056
-
(12,014)
(20,282)
1,231,564
1,231,564
118,960
-
-
58,274
7,724
-
-
(5,898)
(5,729)
(3,095)
(6,192)
117,860 1,277,748
113,324
4,424
-
(7,652)
(6,711)
103,385
103,385
3,921
-
(3,444)
(1,660)
102,202
985,508
84,534
-
(11,687)
(14,018)
1,044,337
1,044,337
79,023
-
(5,296)
(3,512)
1,114,552
4,825
456
-
(905)
(217)
4,159
4,159
-
3,891
-
(38)
(231)
7,781
3,294
640
-
(901)
(168)
2,865
2,865
773
-
(31)
(46)
3,561
417,663
8,641
-
-
-
426,304
3,741,464
272,129
21,592
(24,333)
(53,583)
3,957,269
426,304
-
66,747
-
-
-
3,957,269
142,020
172,160
-
(15,953)
(29,030)
493,051 4,226,466
-
-
-
-
-
-
-
-
-
-
-
-
1,150,477
129,227
-
(20,240)
(21,108)
1,238,356
1,238,356
149,994
-
(9,464)
(6,132)
1,372,754
2,088,513
2,044,971
-
132,616
15,575
15,658
187,227
163,196
1,294
4,220
426,304
2,718,913
493,051 2,853,712
Right of use asset pertains to the following:
Land and buildings
Vehicles
148
2019
131,592
1,024
Notes to the Consolidated Financial Statements continued 15. INTANGIBLE ASSETS
Cost
Balance at 1 January 2018
Additions / transfers
Acquisitions
Disposals
Exchange differences
Balance at 31 December 2018
Balance at 1 January 2019
Additions / transfers
Acquisitions
Disposals
Exchange differences
Balance at 31 December 2019
Amortisation and Impairment
Balance at 1 January 2018
Amortisation during the year
Acquisitions
Impairment during the year
Exchange differences
Balance at 31 December 2018
Balance at 1 January 2019
Amortisation during the year
Acquisitions
Impairment during the year
Exchange differences
Balance at 31 December 2019
Net carrying amounts
Balance at 31 December 2018
Balance at 31 December 2019
Goodwill
Brand
Customer
relationship
Core
deposit
(Figures in QAR ‘000s)
Internally
developed
software
Total
251,220
-
-
-
(70,971)
180,249
180,249
-
-
-
(20,593)
159,656
49,800
-
-
-
-
49,800
49,800
-
-
-
-
49,800
87,863
5,001
-
-
(23,463)
69,401
69,401
-
3,464
-
(6,976)
65,889
46,940
3,449
-
-
(12,360)
38,029
38,029
3,414
-
-
(2,955)
38,488
286,479
-
-
-
(15,718)
270,761
270,761
-
-
-
15,488
286,249
147,576
36,894
-
-
-
184,470
184,470
36,892
-
-
-
221,362
73,878
-
-
-
(6,165)
67,713
67,713
-
-
-
2,758
70,471
33,292
8,323
-
-
-
41,615
41,615
8,323
-
-
-
49,938
28,300
9,301
-
(188)
(7,418)
29,995
727,740
14,302
-
(188)
(123,735)
618,119
618,119
29,995
-
-
14,180
10,716
-
-
(11,754)
(2,431)
38,280 620,545
19,954
6,083
-
-
(4,881)
21,156
21,156
6,394
-
-
(2,970)
24,580
297,562
54,749
-
-
(17,241)
335,070
335,070
55,023
-
-
(5,925)
384,168
130,449
109,856
31,372
27,401
86,291
64,887
26,098
20,533
8,839
13,700
283,049
236,377
149
Notes to the Consolidated Financial Statements continued 15. INTANGIBLE ASSETS (continued)
Impairment testing for CGU containing goodwill
For the purpose of impairment testing, goodwill is allocated to the Group’s CGU-Alternatifbank. A cost of equity of 24.7%
and a terminal growth rate of 2.5 % were used to estimate the recoverable amount of Alternatifbank.
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 Bonds 10 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.
No impairment loss is recognized in 2019 nil (2018: nil) as the recoverable amount of this CGU was determined to be
higher than its carrying amount.
16. OTHER ASSETS
Accrued income
Prepaid expenses
Accounts receivable
Repossessed collateral*
Positive fair value of derivatives (note 37)
Clearing cheques
Others
(Figures in QAR ‘000s)
2019
2018
69,973
56,441
615,812
4,531,182
764,320
240,094
822,183
7,100,005
68,481
60,366
392,869
2,605,213
371,716
218,861
642,109
4,359,615
*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
Placement with banks
Repurchase agreements with banks
Accrued interest
Total
150
(Figures in QAR ‘000s)
2019
2018
1,193,687
844,499
11,107,326
9,223,815
161,455
22,530,782
561,311
323,873
6,773,721
6,161,638
129,916
13,950,459
Notes to the Consolidated Financial Statements continued
18. CUSTOMER DEPOSITS
Current and call deposits
Saving deposits
Time deposits
Accrued interest
Total
Government
Government and semi government agencies
Individuals
Corporate
Non-banking financial institutions
Accrued interest
19. DEBT SECURITIES
EMTN unsecured Programme – Senior unsecured notes *
Senior Notes*
Subordinated Notes *
Others#
Accrued interest
Total
(Figures in QAR ‘000s)
2019
2018
18,712,151
4,746,766
52,381,708
75,840,625
455,967
76,296,592
16,310,290
4,389,075
50,622,085
71,321,450
464,333
71,785,783
(Figures in QAR ‘000s)
2019
2018
6,788,520
12,286,077
24,049,009
28,516,188
4,200,831
75,840,625
455,967
76,296,592
10,610,571
8,641,978
22,064,871
26,865,471
3,138,559
71,321,450
464,333
71,785,783
(Figures in QAR ‘000s)
2019
2018
7,038,935
466,805
1,261,225
727,556
30,069
9,524,590
7,809,032
2,888,175
3,441,222
1,860,110
73,207
16,071,746
* The following table provides the breakdown of the Debt Securities as at close of 31 December 2019.
151
Notes to the Consolidated Financial Statements continued
19. DEBT SECURITIES (continued)
Instrument
Issuer
Issued amount
Issued on Maturity
Coupon
Senior Notes
Subordinated Notes
EMTN - Senior notes
CBQ Finance Ltd
CBQ Finance Ltd
CBQ Finance Ltd
CBQ Finance Ltd
CBQ Finance Ltd
CBQ Finance Ltd
CBQ Finance Ltd
CBQ Finance Ltd
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
Alternatifbank
* Issued for and Guaranteed by the Bank
# Others include Commercial Papers and certificate of deposits issued by the bank.
USD 750 million *
USD 500 million *
CHF 335 million *
CHF 150 million *
CHF 100 million *
USD 36 million *
USD 25 million *
USD 24.9 million *
USD 297 million
USD 50 million
TL 50 million
TL 30 million
TL 87 million
TL 9 million
TL 113 million
TL 59 million
TL 26 million
TL 51 million
TL 40 million
TL 35 million
TL 43 million
TL 8 million
TL 93 million
TL 115 million
TL 13 million
TL 8 million
Jun-16
May-18
Mar-18
Oct-19
Oct-18
Feb-19
Sep-19
Nov-19
Apr-16
Jun-15
Aug-19
Nov-19
Nov-19
Nov-19
Nov-19
Nov-19
Nov-19
Nov-19
Nov-19
Dec-19
Dec-19
Dec-19
Dec-19
Dec-19
Dec-19
Dec-19
Jun-21
May-23
Mar-21
Oct-23
Oct-22
Feb-24
Sep-22
Nov-21
Apr-26
Jun-25
Aug-21
Jan-20
Feb-20
Jan-20
Jan-20
Jan-20
Jan-20
Feb-20
Feb-20
Feb-20
Feb-20
Mar-20
Mar-20
Mar-20
Mar-20
Mar-20
Fixed Rate 3.25%
Fixed Rate 5.00%
Fixed Rate 0.697%
Fixed Rate 0.38%
Fixed Rate 1.115%
LIBOR + 1.95%
LIBOR + 1.15%
LIBOR + 1%
Fixed Rate 8.75%
LIBOR +6.00%
Fixed Rate 14.29%
Fixed Rate 13.13%
Fixed Rate 12.50%
Fixed Rate 12.61%
Fixed Rate 12.94%
Fixed Rate 12.50%
Fixed Rate 12.23%
Fixed Rate 12.28%
Fixed Rate 11.60%
Fixed Rate 11.62%
Fixed Rate 11.71%
Fixed Rate 10.58%
Fixed Rate 10.86%
Fixed Rate 10.72%
Fixed Rate 10.44%
Fixed Rate 10.25%
152
Notes to the Consolidated Financial Statements continued
19. DEBT SECURITIES (continued)
Movement in debt securities are analysed as follows:
Balance at 1 January
Additions
Repayments
Amortisation of discount and transaction cost
Accrued interest
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
Total
20. OTHER BORROWINGS
Bilateral loans
Syndicated loans
Others
Accrued interest
Total
(Figures in QAR ‘000s)
2019
2018
16,071,746
3,486,978
(9,932,780)
23,826
(43,138)
(82,042)
9,524,590
11,604,890
9,508,091
(5,055,194)
29,119
73,207
(88,367)
16,071,746
(Figures in QAR ‘000s)
2019
2018
1,193,838
4,568,449
3,762,303
9,524,590
7,958,305
4,679,586
3,433,855
16,071,746
(Figures in QAR ‘000s)
2019
2018
180,559
4,616,940
7,144,995
100,673
12,043,167
-
4,848,032
3,453,796
77,906
8,379,734
153
Notes to the Consolidated Financial Statements continued
20. OTHER BORROWINGS (continued)
Movements in other borrowings are as follows:
Balance at 1 January
Additions
Repayments
Fair value adjustment on consolidation of Abank
Amortisation of discount and transaction cost
Accrued interest
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
Total
(Figures in QAR ‘000s)
2019
2018
8,379,734
7,793,321
(3,735,723)
-
12,077
22,767
(429,009)
12,043,167
9,303,365
6,583,404
(6,634,330)
(37,291)
13,724
77,906
(927,044)
8,379,734
(Figures in QAR ‘000s)
2019
2018
7,102,050
4,134,116
807,001
12,043,167
3,526,421
4,096,190
757,123
8,379,734
154
Notes to the Consolidated Financial Statements continued
21. OTHER LIABILITIES
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
Provision for sports and social activities support fund (“Daam”) (note 24)
Dividend payable
Managers’ cheque and payment order
Unclaimed balances
Due for trade acceptances
Deferred tax liabilities
Lease liabilities (Note ii)
Employees’ benefit liability (Note32 and Note iii)
Income tax payable
Others
Net impairment losses on loan commitments and financial guarantees
Total
(Figures in QAR ‘000s)
2019
2018
148,459
194,270
526,643
231,416
663,044
650,715
18,500
50,526
23,373
46,841
12,609
1,480,885
649
133,333
117,462
25,596
965,052
95,753
5,385,126
127,238
215,723
353,499
228,529
652,083
443,407
18,500
41,580
19,640
28,164
11,010
1,766,122
12,123
-
-
26,634
835,344
103,972
4,883,568
(i) Other provisions
Provident
fund (a)
Pension
fund (b)
(Figures in QAR ‘000s)
Total
Total
2019
2018
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
213,005
13,327
5,530
5,627
-
(43,117)
(503)
193,869
2,701
9,156
-
4,801
(16,247)
(10)
-
401
215,706
22,483
5,530
10,428
(16,247)
(43,127)
(503)
194,270
225,099
19,368
5,968
12,802
(15,460)
(29,838)
(2,216)
215,723
(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.
155
Notes to the Consolidated Financial Statements continued
21. OTHER LIABILITIES (continued)
(ii) Lease liabilities
The table below shows the maturity profile of lease liabilities:
Up to 1 year
Above 1 year
Total
2019
2018
26,534
106,799
133,333
-
-
-
(iii) Employees’ benefit liability
The Bank has granted performance rights to employees including senior management. Performance rights represent a
contingent right to receive a cash payment by referencing to the value of Bank shares during a specified period of time.
These performance rights do not provide any entitlement to receive Bank shares, voting rights or dividends associated
with them. The fair value at the grant date was estimated using the Black Scholes model, considering the terms and
conditions upon which the performance rights were granted. Performance rights will be settled
in cash.
The following tables list the inputs to the model used for plan for the year ended 31 Dec 2019:
Expected volatility (%)
Dividend yield (%)
Risk - free int. rate (%)
Number of performance rights
Vesting period
Share price (QAR)
Average strike price (QAR)
Max
Min
30.88%
9.92%
3.05%
26.78%
3.28%
2.43%
180.7 million
3 years
4.7
3.56
156
Notes to the Consolidated Financial Statements continued
22. EQUITY
(a) Share capital
The issued, subscribed and paid up share capital of the Bank is QAR 4,047,253,750 (2018: QAR 4,047,253,750) divided
into 4,047,253,750 (2018: 404,725,375) ordinary shares of QAR 1 each (2018: QAR 10 each).
Authorised number of ordinary shares
Nominal value of ordinary shares (QAR)
Issued and paid up capital (in thousands of Qatar Riyals)
(Figures in QAR ‘000s)
2019
2018
4,047,253,750
1
4,047,254
404,725,375
10
4,047,254
On 20 March 2019, the Extraordinary General Meeting of the Bank, shareholders approved the par value of the ordinary
share to be QAR 1 instead of QAR 10, as per the instructions of Qatar Financial Markets Authority, and amendment of the
related Articles of Association. The share split was implemented on 09 June 2019 and the total number of shares were
increased from 404,725,375 to 4,047,253,750 ordinary shares. Consequently, Earnings per share for comparative
periods has been restated to reflect this.
At 31 December 2019, the authorised share capital comprised 4,047,254 thousand ordinary share (2018: 404,725
thousand).
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 Alternatifbank are QAR 9,740 million (2018: QAR 9,652 million) and QAR 96
million (2018: QAR 89 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 and sale of treasury shares is 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.
157
Notes to the Consolidated Financial Statements continued
22. EQUITY (continued)
(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 credit impairment losses 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. On 1st January 2018, after QCB approval QAR 1,529 millions was appropriated from risk reserve for transition
adjustment on adoption of IFRS 9. During the year QAR 535 million (2018: QAR 525 million) was transferred to the risk
reserve account as per QCB approval.
(e) Fair value reserve
The fair value reserve arises from the revaluation of the investment securities through FVOCI, cash flow hedges and
change of post acquisition fair value reserve of its associates and a joint arrangement.
Fair value reserve
Balance as at 1 January
Changes due to adoption of IFRS 9:
Transfer to Amortised cost
Transfer from retained earnings
Restated balance at beginning of the year
Impact of revaluation (IFRS 9) :
- on equity securities
- on debt securities
Net amount Transferred to Income statement
Net movement in effective portion of Cash Flow hedges
Net change in fair value of investment in associates
FVOCI instrument loss transferred to Retained earnings
Net movement during the year
Balance as at 31 December
(Figures in QAR ‘000s)
2018
(Restated)
2019
(96,333)
(44,500)
-
-
(96,333)
(34,072)
663,769
(9,091)
9,053
22,051
44,717
696,427
600,094
32,980
(51,510)
(63,030)
(19,484)
2,355
(10,228)
24,436
(30,382)
-
(33,303)
(96,333)
(f) Treasury shares
Treasury shares represents ordinary shares of The Commercial Bank (P.S.Q.C) with nominal value of QAR 1 each. These
shares are carried at cost of QAR 2.747 each. Treasury shares are presented as a deduction from equity.
(g) Foreign currency translation reserve
The translation reserve comprises all foreign exchange differences arising from the translation of the financial statements
of foreign operations.
158
Notes to the Consolidated Financial Statements continued
22. EQUITY (continued)
(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:
(Figures in QAR ‘000s)
2018
(Restated)
2019
Balance as at 1 January
Transition adjustments on adoption of IFRS 9 on 1 January 2018
Share of result of associates and a joint arrangement (note 12)
Dividend from associates and a joint arrangement (note 12)
Net movement
Balance as at 31 December
959,764
-
(6,799)
(93,072)
(99,871)
859,893
1,064,189
(209,281)
181,483
(76,627)
104,856
959,764
(i) Proposed dividend
The Board of Directors has proposed a cash dividend of 20% for the year 2019 (2018: 15% cash dividend). This proposal
is subject to approval at the Annual General Assembly.
(j) Dividends
A cash dividend of 15% for the year 2018 (2017: 10% cash dividend), was approved at the Annual General Assembly held
on 20 March 2019 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 available for
distribution until the related assets have been disposed off or used.
(l)
Instruments eligible for additional capital
In December 2013; the Bank raised regulatory tier 1 capital of QAR 2 billion by issuing unsecured perpetual non-cumulative
unlisted Tier 1 notes. The coupon payments are discretionary and non-cumulative. On the first call date of 30 December
2019, the interest rates on the notes have been agreed at 5.15% (previous rate 6%) and thereafter to be reset at a
prevailing sixth year mid-swap rate plus margin every sixth year which will be at 30 December 2025.
In February 2016, the Bank raised additional regulatory tier 1 capital of QAR 2 billion by issuing unsecured perpetual non-
cumulative unlisted Tier 1 notes. The coupon payments are discretionary and non-cumulative and priced at a fixed rate of
6% per annum, payable annually until the first call date and thereafter to be reset at a prevailing sixth year mid-swap rate
plus margin every sixth year. As per amendments required by Qatar Central Bank the first call date was amended from 27
February 2022 to 31 December 2021.
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.
159
Notes to the Consolidated Financial Statements continued
22. EQUITY (continued)
(l)
Instruments eligible for additional capital (continued)
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.
23. OTHER COMPREHENSIVE INCOME
Changes in fair value of investments in debt securities designated at FVOCI (IFRS 9):
Positive change in fair value
Negative change in fair value
Net change in fair value
Net amount transferred to profit or loss*
Foreign currency translation differences for foreign operation
Share of other comprehensive income of associates and a joint arrangement
Net changes in FV of Cash Flow hedges
Net changes in fair value of equity investments designated at FVOCI (IFRS 9):
Net changes in FV of equity investments – FVOCI
Share of other comprehensive income of associates and a joint arrangement
Revaluation Reserve
Total other comprehensive income
(Figures in QAR ‘000s)
2018
(Restated)
2019
666,739
(2,970)
663,769
(9,091)
(129,811)
28,059
9,053
561,979
(34,072)
(6,008)
-
521,899
68,543
(66,415)
2,128
(10,001)
(432,940)
(24,959)
24,436
(441,336)
(19,484)
(5,423)
19,126
(447,117)
*Net amount transferred to profit or loss includes a positive change in fair value of QAR 9.7 million (2018: QAR 10.4 million)
and a negative change in fair value of QAR 0.6 million (2018: QAR 0.4 million).
24. CONTRIBUTION TO PROVISION FOR SPORTS AND SOCIAL ACTIVITIES SUPPORT FUND (“DAAM”)
Pursuant to Law No. 13 of 2008, the Bank made an appropriation of QAR 50.5 million (2018: QAR 41.6 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 2019.
160
Notes to the Consolidated Financial Statements continued
25. INTEREST INCOME
Loans and advances to customers
Debt securities
Amounts deposited with banks
Amounts deposited with central bank
(Figures in QAR ‘000s)
2019
2018
5,220,424
1,148,964
375,151
50,871
6,795,410
4,811,277
895,035
321,830
49,180
6,077,322
The amounts reported above include interest income, calculated using the effective interest method, that relate to, at
amortized cost QAR 6,459 million (2018 : QAR 5,763 million) and at fair value QAR 336 million (2018: QAR 314 million).
26. INTEREST EXPENSE
Customer deposits
Debt securities
Other borrowings
Interest expense on lease liabilities
Amount deposited by central banks and other banks
(Figures in QAR ‘000s)
2019
2018
2,348,258
644,014
393,231
11,149
435,575
3,832,227
2,291,014
591,718
364,976
-
347,292
3,595,000
The amounts reported above include interest expense, calculated using the effective interest method, on financial
liabilities at amortised cost.
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 QAR ‘000s)
2019
2018
366,114
458,963
168,011
251,633
44,499
1,289,220
327,352
438,709
180,091
137,962
33,851
1,117,965
161
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
(Figures in QAR ‘000s)
2019
2018
288,162
11,391
74,821
374,374
269,986
23,805
66,936
360,727
(Figures in QAR ‘000s)
2019
2018
Dealing in foreign currencies & revaluation of spot assets
281,045
202,247
30. INCOME FROM INVESTMENT SECURITIES
Net gain on disposal of investment securities measured at fair value
Net Change in Fair-value of Investment securities
Dividend income
31. OTHER INCOME
Rental and other income
32. STAFF COSTS
Salary and benefits (Note)
Health care and medical insurance expenses
Staff end of services and pension fund contribution (note 21 (i))
Training and education
Note: Salary and benefits include performance rights charge of QAR 117.5 million.
162
(Figures in QAR ‘000s)
2019
2018
25,237
39,405
4,351
68,993
10,267
(34,398)
5,305
(18,826)
(Figures in QAR ‘000s)
2019
2018
118,578
85,576
(Figures in QAR ‘000s)
2019
2018
754,687
17,028
22,483
2,154
796,352
637,954
16,997
19,368
2,147
676,466
Notes to the Consolidated Financial Statements continued
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 QAR ‘000s)
2019
2018
26,842
16,325
46,914
18,500
41,486
1,684
4,376
38,158
32,359
226,644
38,021
25,671
50,232
18,500
68,328
1,800
6,498
46,361
57,482
312,893
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:
Basic and diluted
Profit for the year attributable to the equity holders of the Bank
Less: Dividend on Instrument eligible for additional capital
Profit for EPS calculation
(Figures in QAR ‘000s)
2018
(Restated)
2019
2,021,040
(240,000)
1,781,040
1,673,924
(240,000)
1,433,924
Weighted average number of outstanding shares in thousands (Note 22 (a))
Basic and diluted earnings per share (QAR)
4,047,254
0.44
4,047,254
0.35
163
Notes to the Consolidated Financial Statements continued
35. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
a) Contingent liabilities
Unutilized credit facilities
Guarantees
Letters of credit
Total
b) Capital commitments
Total
(Figures in QAR ‘000s)
2019
2018
4,287,871
21,353,539
1,706,950
27,348,360
4,373,836
22,057,901
2,148,781
28,580,518
421,352
157,569
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 make the group liable 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.
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.
(Figures in QAR ‘000s)
2019
2018
2,453,619
7,602,352
10,055,971
3,184,658
6,799,888
9,984,546
164
Notes to the Consolidated Financial Statements continued
37. DERIVATIVES
Positive
fair value
Negative
fair value
Notional
amount
within
3 months
3 - 12
months
(Figures in QAR ‘000s)
More than
5 years
1-5 years
At 31 December 2019
Derivatives held for
trading:
Interest rate swaps
Forward foreign exchange
contracts and others
Derivatives held for
fair value hedges:
Interest rate swaps
Derivatives held for
cash flow hedges:
Forward foreign exchange
contracts & others
Interest rate swaps
Total
At 31 December 2018
Derivatives held for trading:
Interest rate swaps
Forward foreign exchange
contracts & others
Derivatives held for fair value
hedges:
Interest rate swaps
Derivatives held for cash flow
hedges:
Forward foreign exchange
contracts & others
Interest rate swaps
Total
439,654
333,780 12,540,390
30,599
1,936,671
4,004,935
6,568,185
237,389
113,847
47,722,621
14,873,925
3,979,028
19,924,049
8,945,619
86,578
8,086
3,713,772
-
62,289
4,426,448
-
-
-
-
1,092,122
2,621,650
4,426,448
-
699
764,320
210,529
147,758
8,641
-
526,643 68,929,415 14,904,524 6,282,804 29,606,633 18,135,454
159,079
526,184
367,105
-
119,502
6,905,474
66,489
271,270
3,647,959
2,919,756
158,232 42,587,267
26,254,574
7,742,516
8,476,634
113,543
13,309
625
3,857,446
-
-
168,379
1,239,795
2,449,272
92,094
1,303,797
-
72,371
1,395,891
120
-
371,716
2,769
353,499
413,065
-
55,159,143 26,321,063
-
8,274,259
413,065
15,081,250
-
5,482,571
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.
165
Notes to the Consolidated Financial Statements continued
37. DERIVATIVES (continued)
At 31 December 2019, the Group held the following derivatives as hedging instruments:
Cash Flow Hedges:
Hedged item
Description
Currency
Notional in
currency
Average
Rate
Hedging instrument
Interest Rate Swaps
Cross Currency Swaps
Customer Deposits
Bond Issuance
Fixed for floating
CHF to USD
TRY
USD
CHF
860,000,000
610,905,560
585,000,000
22.90%
3.96%
0.69%
Hedging instrument
Fair value Hedges:
Hedged item
Description
Currency
Notional in
currency
Average
Rate
Interest Rate Swaps
Govt Bonds
Fixed for floating
USD
260,000,000
2.79%
38. FUND MANAGEMENT
As at the end of the reporting date, the Group holds QAR 392 million (2018: QAR 357 million) worth of international
investment securities on behalf of its customers. Out of this amount, investment securities with a value of QAR 338 million
(2018: QAR 306 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
Board members of the bank
- Loans, advances and financing activities (a)
- Deposits
- Contingent liabilities and other commitments
- Interest and fee income
- Interest paid on deposits accounts of board members
- Remuneration
Associates and joint arrangement companies
Due from banks
Due to banks
Deposits
Contingent liabilities
- Interest earned from associates
- Interest paid to associates
166
(Figures in QAR ‘000s)
2019
2018
1,176,839
798,857
3,722
25,835
8,532
18,500
309,400
10,610
9,951
745,942
-
4,725
1,604,135
729,255
13,307
36,683
12,017
18,500
436,800
24,333
14,602
782,138
26
2,271
Notes to the Consolidated Financial Statements continued
39. RELATED PARTIES (continued)
Senior management of the bank
- Remuneration and other benefits*
- Loans and advances
2019
110,941
5,156
2018
46,710
4,636
* Remuneration and other benefits include cost for performance rights amounting to QAR 71.7 million.
(a)
A significant portion of the loans, advances and financing activities’ balance at 31 December 2019 and 31 December
2018 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.
40. COMPARATIVES FIGURES
The comparative figures presented have been reclassified where necessary to preserve consistency with current period
figures.
The below reclassifications did not have any impact on the consolidated net profit or the total consolidated equity for the
comparative period. Accrued interest receivable amounting to QAR 1,059 million and accrued interest payable amounting
to QAR 745 million as at 31 December 2018 have been reclassified to each of the respective account balances.
Particulars
Assets
Cash and balances with central banks
Due from banks
Loans and advances to customers
Investment securities
Other assets
Total
Liabilities
Due to banks
Customer deposits
Debt securities
Other borrowings
Other liabilities
Total
2018
(Previously
reported)
6,716,058
9,468,706
83,701,631
22,107,807
5,418,645
13,820,543
71,321,450
15,998,539
8,301,828
5,628,930
(Figures in QAR ‘000s)
Reclassification
2018
(Reclassified)
13,740
6,187
940,833
98,270
(1,059,030)
-
129,916
464,333
73,207
77,906
(745,362)
-
6,729,798
9,474,893
84,642,464
22,206,077
4,359,615
13,950,459
71,785,783
16,071,746
8,379,734
4,883,568
167
Notes to the Consolidated Financial Statements continued
40. COMPARATIVES FIGURES (continued)
In addition to the above, due to the reclassification of assets held for sale to investment in associates and a joint
arrangement, comparative figures have been represented for the carrying value of investment and adjustment of share
of results in associate in line with IFRS 5. The net impact is as follows:
(Figures in QAR ‘000s)
Particulars
Assets
Investment in associates and a joint arrangement
Asset held for sale
Total
Equity
Fair value reserve
Other reserve*
Total
2018
(Previously
reported)
2,096,310
2,559,591
(73,466)
1,079,858
Reclassification
and adjustment
2018
(Restated)
2,416,630
(2,559,591)
(142,961)
(22,867)
(120,094)
(142,961)
4,512,940
-
(96,333)
959,764
INCOME STATEMENT
Share of results of associates and a joint arrangement
Profit for the year
170,738
1,663,180
10,745
10,745
181,483
1,673,925
* includes QAR 130 million related to IFRS 9 opening adjustment
168
Notes to the Consolidated Financial Statements continued
Supplementary Information - Parent
FINANCIAL STATEMENTS OF THE PARENT
(a) Statement of Financial Position – Parent
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 and subsidiaries
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 reserve
Treasury shares
Foreign currency translation reserve
Other reserves
Revaluation reserve
Retained earnings
TOTAL EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE BANK
Instruments eligible for additional capital
TOTAL EQUITY
TOTAL LIABILITIES AND EQUITY
2019
QAR ‘000s
2018
(Restated)
4,431,379
11,767,481
76,475,207
24,407,811
5,445,227
2,639,085
6,403,778
131,569,968
23,348,968
66,854,395
7,791,254
7,256,184
4,779,148
110,029,949
4,047,254
9,739,507
26,500
1,486,994
619,393
(38,860)
(1,982,124)
809,892
1,264,794
1,566,669
17,540,019
4,000,000
21,540,019
131,569,968
5,206,929
8,934,975
72,643,836
19,811,384
6,052,484
2,523,835
3,678,728
118,852,171
13,569,153
62,738,014
13,504,339
4,991,906
4,201,614
99,005,026
4,047,254
9,652,129
26,500
951,909
(63,951)
(179,507)
(1,771,821)
909,764
1,264,794
1,010,074
15,847,145
4,000,000
19,847,145
118,852,171
169
Supplementary Information - Parent continued
FINANCIAL STATEMENTS OF THE 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
Net foreign exchange gain
Net income from investment securities
Other operating income
Net operating income
Staff costs
Depreciation
Amortization and impairment of intangible assets
Net impairment (losses)/reversal on investment securities
Net impairment losses on loans and advances to customers
Net impairment losses on other financial assets
Impairment on Investment in an Associate
Other expenses
Profit for the year
2019
5,047,785
(2,473,614)
2,574,171
1,118,382
(333,812)
784,570
189,832
69,955
128,052
3,746,580
(592,298)
(118,921)
(46,268)
6,856
(377,030)
(68,704)
(413,881)
(221,817)
1,914,517
QAR ‘000s
2018
4,348,781
(2,262,088)
2,086,693
967,658
(311,412)
656,246
171,946
(6,599)
87,508
2,995,794
(494,179)
(118,874)
(47,339)
(399)
(822,184)
111,108
-
(236,041)
1,387,886
170
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